Study Unit 3 Cross-Selling and Up-Selling

Study Unit 3

Cross-Selling and Up-Selling

ANL 309 | Business Analytics Applications

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Introduction

? Cross-selling and up-selling ? Role of business analytics in cross-selling and

up-selling ? Deliverables of cross-selling business analytics

modeling ? Some examples of cross-selling and up-selling

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Cross-Selling and Up-Selling

Cross-selling: The process by which a company offers existing customers new products and services related to their current purchases. Up-selling: The process by which a company offers existing customers premium products that are functionally similar to those purchased by the customers.

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Why Cross-Sell?

? Kumar, Shah and Venkatesan (2006) If the cross-selling of customer with high customer lifetime value (CLV) is increased by 15%, their CLV increases by 20%. That is, if the customer purchases from more product categories from the businesses, the future profitability of the customer will be enhanced.

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Differences Between Cross-Selling and Up-Selling

Definition Expected Outcomes

Cross-selling

Expansion of the customer relationship across categories of products or services.

Up-selling

Expansion of the customer relationship in terms of larger or additional orders.

Sales of new products or services for customer

A higher volume or premium for each sales transaction.

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Cross-Selling BA Models

? Cross-selling models predict the probability of a current customer purchasing a different category from the company's product or service range.

? In general, cross-sell models attempt to predict the willingness of a given customer to purchase products or services from across categories. The model is based on customer demographics and behaviour on other products, and the results of the test campaign.

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Deliverables of cross-selling business analytics modeling

? A single database ? Data visualisation for important dimensions affecting response. ? Model equation of variables for customers' propensity to

respond. ? Validation of model

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Example: Cross-selling and BA in a Bank

? A cross-sell model may be built to predict the propensity of a customer to respond to a credit card offer.

? Dependent variable: response form the test campaign. ? Independent variables: demographic data, information on current

products and services purchased and shopping behaviour. ? The cross-sell model is then deployed to identify customers with

cross-selling potential and target them with the right offer.

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