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Perils of Cross-selling

On: September 11th, 2014 in Business by Think@iQG

Are you one of those that make a fixed expense budget for every month?

Are you one of those that buy stuff on-line exceeding your budget and often end up returning merchandize once you see your credit card bill because you actually couldn’t afford it in the first place!

You actually got lured by the targeted cross-selling campaign of retailers/sellers, didn’t you?

If you’re in any of the above 2 categories, you’re part of that puzzling group of cross-selling customers that marketers are trying to figure out, but due to lack of statistical power cannot detect you early in your relationship cycle – retailer and cross-buyer. You are the cross-seller’s nightmare if you fall into any one of the above categories (at the time of going to press, I discovered there are a few more of you out there, but I will classify you later)

Most companies want to sell you more of their products because you’re already their customer, right? Most marketers feel that since you bought something from them, let me sell them this as well. Cross-selling happens mostly in the financial services, IT services, retail banking and on-line catalogue retailing areas. Based on research conducted , most cross-buying customers generate incremental absolute average more profit than the non-cross-buyers. But this same research also suggests that 1 out 5 cross –buying customers is not profitable. These 1 in 5 cross-buying non-profitable customers account for between 45 to 70% of total loss-making customers across different verticals listed above. Most marketing pundits prophesize, that if this sub-set threshold exceeds 70%, cross-sellers start to look for new buyers- their blue ocean- and the reason being that, the effects start to cascade and eat into the healthy portion of the pie.

Never has it been more so important for marketers to know who fall into this subset and not cross-sell to them, but also how to predict who may become non-profitable cross –buyers. What are the parameters and method by which a marketer can identify these buyers?

The answer lies in analytics!

And to be precise customized advanced analytics – because through the use of this  statistical power, marketers can easily sift through reams of data and information to give them a vast spectrum of parameters – to tell them buying patterns,service-hungry clients, “returns” specialists and others. Advanced analytics can predict whether customer A is more likely to “cross” the border than customer B. This power to predict is a reality that many are adopting to remain competitive. The analytical competitor is using advanced analytics to compete more efficiently and ruthlessly than ever before!

With unique geographical advantage lost in todays global competition, protective regulation gone, proprietary technologies copied rapidly and innovation difficult to achieve, what’s left to compete on is your ability to execute your business with maximum efficiency and effectiveness and to make the smartest business decisions possible from the options you have at your disposal. Marketers that compete on analytics squeeze every avenue of value from their business processes to make the optimal strategic decision – do I sell or not to this cross-buyer. All possible because analytics gives them the power to do so.

By leveraging the ability to predict non-profitable customers, marketers create your problem profile, and the best route for them is to derive maximum profit from these cross-buyers by positioning only those goods that are above a set profit threshold.

A lot of new-age cross-selling employs predictive analytics modeling to know who is more likely to be a problem profile.

The focus of cross-sellers is moving from selling increased number of goods/services to more amount of revenue extraction from cross-buyers.

Creating the “problem child” customer profile is an exciting and intriguing journey and with todays analytical solutions, I believe todays marketer has the “crystal ball” in his hands to know who should not be my cross-buyer.

Thank you Analytics – you saved my cross-selling dollars!!