Cross-selling - selling additional products or services to existing customers - has
become a very popular revenue-generating strategy for businesses. A survey undertaken by
SAP estimates that 60% of banks have growth strategies that rely primarily on
cross-selling products to existing
customers. In another survey, the Gartner Group reports that
74% of financial companies used cross-selling
strategies.
(Note: Up-selling - selling enhanced features of a solution - is also a
revenue-generating strategy for companies and, for the purposes of this paper, will be
included under the general heading of
cross-selling). However, cross-selling effectively isn't
simple, and there is a level of risk involved. Do
it right and increase the bottom line. Do it wrong and you risk damaging
fragile relationships with existing customers.
One of the primary reasons for the increasing popularity of cross-selling lies in its
enormous revenue potential. Take personal
insurance, for example; the wide range of product
lines offered by most personal insurance companies provide ample opportunities
for cross-selling. A single customer might have property, auto, and life insurance, each
with multiple riders and additions. For a
diversified insurance and financial services company
with five million customers, an increase of only one product for every 20 customers
could result in nearly $140 mn in additional
annual revenue and almost $20 mn more in annual
profits. As an added benefit,
cross-selling can result in a 5% improvement in
retention, which, modest as it sounds, can
translate into a profitability improvement of 50%
over the life of the customer. |
