5 Benefits of Cross-Selling to Boost Customer ROI

Businesses across all industries can benefit from cross-selling. This tactic, of suggesting people add on additional products or services to their original order, is a tried-and-true way of increasing average order value (and ultimately revenue). 

Just look at the data: McKinsey found that cross-selling can increase a business’s revenue by 20% and its profitability by 30%. And if that wasn’t enough to convince you of cross-selling’s benefits, we laid out five different ways that it can help boost your customer ROI. 

1. Boosts Customer Lifetime Value (CLV)

Boosting customer lifetime value is just one of the ways that cross-selling can contribute to a higher ROI. 

For a quick refresher, customer lifetime value (CLV) refers to the revenue a customer is estimated to bring in over the course of their relationship with your business. The importance of CLV goes beyond profitability – this metric can also signify the strength of your customer relationships and identify brand advocates or high-spenders.

You may be wondering how cross-selling relates to lifetime value. Put simply, when a company effectively cross-sells, they secure a higher sale from a customer, which translates to more revenue for the business. 

Dollar Shave Club is a great example of a company using cross-selling to their advantage. They operate on a subscription model, mailing razors and shaving products to members on a monthly basis. But before monthly packages are sent out, Dollar Shave Club will send a reminder email to customers that showcases a few related products. Customers then have the option to add these items to their next shipment – increasing their order value in the process. 

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2. Increases revenue without more marketing spend

Acquiring a new customer is expensive. In the past few years alone, customer acquisition costs have risen up to 50%. And as we saw in early stages of the Covid-19 pandemic, advertising and marketing spend are often the first to tighten their belts in tumultuous times. 

Being able to generate more revenue without having to acquire new customers, and increase marketing expenditure, is a golden opportunity for businesses. 

Enter, cross-selling. 

As with all customer communications, what often makes cross-selling most effective is its relevance and timing. Cross-selling should come after you have a customer’s interest and consideration – and now want to maximize their conversion. 

Online retailers have been doing this more frequently with their “Shop the Outfit” carousels, which populate the bottom of product pages. Abercrombie & Fitch is one out of many using this strategy – showcasing how to style their products in the hopes that shoppers opt to buy the entire look.

Abercrombie & Fitch includes these carousels at the bottom of product pages to encourage cross-selling. 

This type of cross-selling can actually create a more convenient customer experience. Just look at Target: when a customer views a product that’s part of a larger set (in this instance, a patio table and chairs), those other items are displayed at the bottom of the page for a simpler checkout.

3. Creates a more personalized customer journey

Effective cross-selling should also demonstrate how well you know your customers. 

It’s no secret that personalization is now considered table stakes. In our annual State of Personalization report, we saw just how much impact personalization had on a business’s ROI. 80% of businesses said personalization could increase customer spending by 34%, on average. While 62% of consumers said a lack of personalization would send them to a competitor. 

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But what does personalized cross-selling look like? For e-commerce companies, this can be recommended products based on a user’s browsing or purchase history (something Amazon is famous for). Or for a SaaS company, it could be promoting different add-on features to users depending on their job title and responsibilities. 

While this all sounds simple in theory, putting personalization into effect can be challenging – especially at scale. For it to work, it’s important to have unified customer profiles that consolidate user events and attributes in real time. This recipe is great for financial institutions looking to do just that for better cross-selling. Or if you’re in e-commerce, learn how the Norwegian retailer Norrøna built a powerful product recommendation engine with Segment.

5. Helps customers better utilize your product suite

For SaaS or PaaS (platform as a service) companies, it’s essential for customers to see the continuous value of your product. Cross-selling can actually help in that endeavor, promoting specific features or add-ons that could make customers’ lives easier.

This kind of cross-selling can come in the form of in-app notifications highlighting new features, or by showing “locked” features in your interface. For instance, the social media management tool, Sprout Social, offers social listening as an add-on to their scheduling and reporting capabilities. If a user doesn’t have this feature in their current plan, they’re shown the following pop-up when they try to access it in the Sprout Social UI. 

Sprout Social locks add-on features in their platform to stoke interest and encourage a cross-sell. 

At Segment, when we launch a new product or feature, we leverage customer profiles to determine buy-in among our existing users. We can then create different audiences to separate early-adopters from non-adopters, and personalize our campaigns accordingly. (You can learn more about how we do this here.)