What Are The Benefits Of Cross Selling?

Transcript

Hi there, this is a Blair from BravaTrak.

The benefits of cross selling

I've been thinking about why service centers would want to explore cross-selling. An obvious reason is revenue generation. If we take inbound contact centers, for instance, historically they've been cost centers. Yet it's possible to transform them into revenue generators, and even into profit centers by increasing cross-selling.

More than that, the profitability from cross-selling is extremely high. In general terms with cross-selling, gross profit equals net profit. Let me explain.

What is an example of cross-selling?

Let's take a simple example of a person buying a new jacket. For the sake of simplicity, we'll ignore any relevant taxes.

Let's imagine the jacket costs the customer $330 to purchase. And let's imagine further that the cost of the jacket to the retailer was $165, so their gross profit is also $165. From that, we must deduct all their related expenses. Rent, insurance, power, advertising, sales persons' wages and so on. Let's say they're left with roughly 10% net profit. let's call it $35. I.e.

$330 (sales price)
-$165 (cost of goods)
=$165 (gross profit)

$165 (gross profit)
-$130 (operating expenses)
=$35 (net profit)

Now let's imagine the sales person cross-sells a shirt to go with the jacket. The cost of the shirt to the customer is $149, and let's imagine the gross profit for the retailer is $70. Yet for this sale, all the related expenses have already been paid for by the sale of the jacket. I.e.

$149 (sales price)
-$79 (cost of goods)
=$70 (gross profit)

$70 (gross profit)
-$0 (operating expenses) ($0 since they’re already included in the sale of the jacket)
=$70 (net profit)

That means the net profit from the jacket was $35, and the net profit from the shirt was $70. So in this particular instance, the retailer's profit from the total transaction has been increased by 200%.

That's the power of cross-selling.

But there's another reason why you'd want to place a greater emphasis on cross-selling. It increases customer retention and lifetime value.

If you sell an ongoing service of any type, the more products and services a customer has with you, the stickier they are. That is, the less likely they are to cancel their services with you and move to a competitor. Unless they're extremely dissatisfied with your service, it's just too much hassle.

So cross-selling enables you to boost profitability and increase customer engagement and retention.

What's not to like?

That's my take. What do you think?