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Q: Statistics on ECommerce Cross Selling Effectiveness ( Answered,   0 Comments )
Question  
Subject: Statistics on ECommerce Cross Selling Effectiveness
Category: Business and Money > eCommerce
Asked by: hankjc-ga
List Price: $20.00
Posted: 16 Jul 2002 12:27 PDT
Expires: 15 Aug 2002 12:27 PDT
Question ID: 40208
Many major e-commerce websites have instituted some version of cross
selling.  Product description pages and checkout pages typical have
sections titled "Customers who have bought X have also purchased Y" or
"May we suggest Product Z".

Can anyone present any before and after statistics that attest to the
effectiveness of these types of cross-selling activities?

I am looking to find the average order size percentage (or dollar)
increase and/or the average increase in multi-line (more than one
product) orders.  Ideally the information would also present which of
the various e-commerce cross selling activities are the most
effective.
Answer  
Subject: Re: Statistics on ECommerce Cross Selling Effectiveness
Answered By: umiat-ga on 30 Jul 2002 23:45 PDT
 
Hello, hankjc-ga

  Mention cross-selling and Amazon.com comes to mind. Amazon is
considered the innovator in internet cross-selling, and the company
continues to hone it’s skills at seducing customers to buy new
products based on a historical database of what they have purchased in
the past. In fact, in a recent speech at the Annual Catalog
Conference, Amazon CEO Jeff Bezos highlighted four key strategies he
considers integral to Amazon’s success. Among them,  the almost $8
million spent on high tech which has enabled the company “to hone its
cross- selling and upselling capabilities as well as to keep its focus
on the customer and constantly give them more.” Read “Live from the
ACC: Bezos Spills the Beans on Amazon” by Shayn Ferriolo. Catalog Age
(6/12/2002) http://catalogagemag.com/ar/marketing_live_acc_bezos/
  Amazon.com has definitely seen an increase in profits since
implementing it’s customer personalization software. According to
Sofmap, the Japanese IT and software company that analyzed Amazon’s
database of 2 million customers and designed the “recommendation
engine” for the company, “profits rose 300 per cent in the month
following the engine's implementation compared to the previous year.”
Read “A Key Technology for Online Profitability”by Edwin Colyer.
Financial Times.com (4/2/2002)
http://specials.ft.com/ftit/FT38F5U0HZC.html

  There are various types of cross-selling, aside from the traditional
shopping cart recommendations.
 T he more successful methods are mentioned below.

Cross-selling with complementary products
   Expedia.com has raced to the front of the online travel industry
pack by expanding it’s travel business to more than just airline
fares. Instead, the company now sells bundled vacation packages,
including airfare and  hotels, and recently announced a partnership
with USA Interactive to include theatre tickets and other
entertainment products in it’s online offerings for virtual “one stop
vacation planning.” And the effect of Expedia’s strategy of product
cross-selling on company profits?
  “The strategy's impact on Expedia's numbers has been striking.
Revenues rose 103% in the first quarter, to $116 million, on more than
$1 billion worth of travel sold. The most dramatic part of that was
the fourfold increase, to $57 million, in the "merchant business."
“This growth was the afterburner Expedia needed to lift it into
profitability. Earnings before interest, taxes, depreciation, and
amortization jumped to $34 million, from about $4 million a year
earlier. Expedia says it'll make almost $140 million this year before
these charges. Under formal accounting rules, it made a $5.7 million
net first-quarter profit, even after a $4.6 million accounting
allowance for taxes Barton says Expedia doesn't yet owe and a $10
million one-time charge for expenses related to USA Interactive's
purchase of Microsoft's Expedia shares.”
Read “Expedia’s Excellent Adventure” by Tim Mullaney,
BusinessWeekOnline (6/24/2002)
http://www.businessweek.com/magazine/content/02_25/b3788726.htm

Cross-selling with a central Internet Site
  The arrival of Andale Stores is a new concept in cross-selling.
Andale Stores can now drive the millions of customers from online
auction sites such as Ebay to a seller’s own online store, “combining
auction wins with fixed price purchases in one, universal sales
transaction” that “will be better positioned to tap into the estimated
$6 billion dollars in "relationship shopping" or off market sales.”
This type of concept is successful because it builds on “relationship
trust”, which is an integral part of maintaining customer loyalty.
"Small businesses differentiate themselves based on the relationships
they’ve built with their customers to establish an increased level of
trust," said Munjal Shah, CEO of Andale. "Buyers and sellers have
always and will always maintain direct relationships... even in the
Internet era. The issue is now how to easily convert those successful
auction purchases into continued, repeat sales on other channels, and
how to maintain long term relationships with customers online."
  The owners of eGalleriaMall.com have seen their online store profits
increase after linking with Andale Stores. Joan and David use a
multi-channel sales approach, making $20,000 a month on Internet
auction sites while additional revenue each month comes from sales
directly on their online store. Andale helps them manage their
business on Internet auction sites, and soon their online store
business as well. "We couldn't do business online at auction without
Andale; it helps us keep track of everything and has enabled us to
more than double our online auction sales," said Joan Valente, owner
of eGalleriaMall.com. "Now with the new Andale Stores product, we will
be able to see the same growth on our store. The ability to drive
auction buyers to our store to shop for additional fixed price items
and also finalize their auction wins in one transaction is a real
plus. With Andale, we have a new level of control over our business."
The entire article, “Andale Taps $6 Billion “Off E-Bay” Market – Gives
Businesses the Freedom to Sell Anywhere With New Stores Product.”
(1/21/2001) can be found at
http://www.andale.com/corp/us/press_offebay_2-21-2001.jsp


Cross-selling at call centers
 Identifying individual parameters of customers as they call a company
service center, and then suggesting personalized product offerings,
has been a successful method of cross-selling. One example is
Spaarbeleg, one of Holland’s largest financial institutions.
Spaarlberg wanted to transform the approximately 2 million customer
phone calls received each year from mere service tasks into sales
opportunities. The company implemented software from DataDistilleries
which identifies call center customers, pulling up historical data and
formulating a customer profile in two-seconds, allowing agents to
receive a product recommendation on a pop-up screen, a recommended
sentence to start the sales conversation and suggestions to counteract
arguments. Since implementing the DD series software, Spaarbeleg sales
have “increased by up to Euro 10 million on 2 million calls; profits
increased by several million Euros,” due to targeted cross-selling and
up-selling. The entire article, “Customer Success
Story....Spaarbeleg,” DataDistilleries (2001) can be read at
http://www.eccs.uk.com/suppliers/vend_cs/pdfs/spaarbeleg_uk.pdf
  Sibson Consulting Company also highlights the effective strategy of
call-center cross-selling in a recent article, citing the example of a
property and casualty company which realized that their call-center
was far more effective in meeting customer buying criteria than the
in-house agents. “This insight and knowledge of the channel cost
differential (approximately 12% of revenues) compelled the firm to
shift business to the call center away from agents, and implement a
cross-selling strategy using the lower cost call center channel.”
Refer to “Selling in Tough Times,” by Thomas Knight. Perspectives
(3/27/2002) at http://www.imakenews.com/sibson/e_article000060157.cfm
  Training call-center personnel in the art of cross-selling can “can
contribute to profit in two significant ways,” according to author
Gary Goodman. “A simple way to calculate profit is to think of it as
what's left over after you take in revenue and deduct costs. There are
at least two ways to boost profits: raise revenues or lower costs. By
cross-selling, you do BOTH. When customers accept your offers, they
spend more, which increases revenues. Because your only investment is
your effort and your time, your financial outlay for the increased
revenue is minimal. No wonder senior managers are sold on
cross-selling!” See “Should Customer Care Reps Sell.” Customer Care
Network (5/13/2001) 
http://www.customercare.com/library/publications/cc_updates/ccupdate05_13_02.htm

Cross-selling within company divisions
  FTI Consulting, in a 1999 report, attributed their increased
revenues to cross-selling among their divisions. “We are increasing
and intensifying our cross-selling efforts to maximize the client
relationships of each of our divisions for services to be provided by
the other divisions.  We expect future results of operations to
reflect additional benefits from those activities.  We have
experienced revenue improvements in all three divisions compared with
the third quarter of 1998,” FTI President Stewart Kahn said.
“Litigation Services was up 35 percent to $7.0 million based on
internal growth.  Applied Sciences rose 51 percent to $9.5 million,
and Expert Financial Services increased 110 percent to $4.4 million
due to significant acquisitions in each division occurring during the
third quarter of last year.” FTI Consulting, Inc. Reports Higher Third
Quarter Revenues, Profits and EBITDA” (10/27/1999)
http://www.fticonsulting.com/press_releases/fti3qtr.html
 The Sage Group, an international supplier of accounting and business
management software solutions, has also seen increased profits from
divisional cross-selling. The following excerpt from a recent article
highlights the benefit of the Sage Group’s cross-selling techniques:
“Successful up-selling and cross-selling initiatives have enabled our
Mid-market and Speciality divisions to perform well. In the Mid-market
division, 31% of new licence sales of the MAS90 product came from the
Peachtree customer base, whilst in the Speciality division, 21% of FAS
(Fixed Asset Management) new licence sales were made to customers from
our Mid-market division. Organisational changes and further additions
to our US management team place us in a strong position to reap
significant future benefits from these up-selling and cross-selling
initiatives.”  Read “Sage Interim Financial Results 2002” at
http://www.sage.com/investors/anreports/2002int.asp
  NetBank, an online banking survivor amidst a host of fallen
comrades, attributes part of it’s continued success to cross-selling
to mortgage customers. “One of the problems with Internet-only banks
is the high marketing costs required to attract new customers. But
last year, NetBank cut that expense by 55% from the previous year,
while its application volume increased by 6%. It achieved that by
taking advantage of lower costs for online banner ads, signing up
marketing partners, including Federated Department Stores and Six
Continent Hotels, and cross-selling to its mortgage customers.” Read
“An Online Bank That Could – And Is,” by Jeffrey Smith. BusinessWeek
Online (3/19/2002) http://www.businessweek.com/technology/content/mar2002/tc20020319_2987.htm
 

Cross-selling with Mobile Platforms
  A recent article in Wireless considers mobile to be the best
potential cross-selling advertising platform when trying to reach new
consumers, especially in Asia. “It is no mystery that the best target
for advertisements now is our mobile phones.” Right now, the best
potential lies in the Asia-Pacific region, which is predicted to have
50% of the world’s mobile phone customers by 2010.
  According to the managing director of Portelco (Asia) Limited, “With
mobile marketing, personalized automatic messages can be sent to
individual consumers, or broadcast to thousands of consumers within
minutes. In addition, messages can be adapted mid-campaign in response
to customers’ behavior. Mobile marketing messages are fast to create,
so you shorten the selling cycle while marketing executives can record
a voice message and send it to a database of thousands of potential
customers within days. The cost of deployment is also much cheaper
than alternative forms of direct marketing.”
  Marketers are warned, however, that while they may see mobile
advertising as a potential success, consumers may complain about the
intrusion. Thus, advertisers should send “unobtrusive, relevant and
interactive messages” and “spend time on research as to what or which
database to use and target which specific groups of mobile phone users
for what particular product.”
  Portelco has highlighted some of their cross-selling success rates.
“One of its customers in the banking and finance sector in Asia has
managed to generate a 14 percent response rate via a cross-selling
campaign through their customers' mobile phones. A mutual fund company
promoting a new fund has also achieved 12 percent response rate, while
a client in the travel industry managed to get a response rate of
between 12 percent and 26 percent........Although the response rate
may not seem that impressive at first glance, every one of them counts
in this competitive market as they can be translated into actual
sales.”
  Read the entire article, “Hit Them With the Right Stuff” by Seng Li
Peng, Wired(3/19/2002) at
http://www.internetnews.com/wireless/article.php/993991

 
  
Cross-selling ,customer retention and increased profits
  According to Eastbiz.net, the typical U.S. corporation realizes a
loss of 50% of it’s customers every five years. Utilizing techniques
like cross-selling can allow for increased profits. “In fact,
according to Frederick Reichheld in The Loyalty Effect, a 5%
improvement in a company’s customer attrition rate can push that
company’s profits up to 75% higher.”  Read “How Can Loyalty Marketing
Affect My Company” at http://www.eastbiz.com/info/text/info.htm
  Express Scripts touted the success of cross-selling in their 2000
annual report.” Adding additional services to our clients' pharmacy
programs, or cross-selling, is also a key strategy for Express Scripts
because we have the scale and capacity to expand the number of
services each member uses without significantly increasing overhead.
Cross-selling not only fuels our revenue growth, it enhances
profitability and increases the value we deliver to plan sponsors and
their members as they use multiple services -advanced formulary
services, retail pharmacy network management and mail pharmacy. In
2000, we cross-sold additional services to approximately 6 million
members, and the opportunity exists to cross-sell additional services
in the future. Mail pharmacy offers us a particularly strong
opportunity to increase value to our clients because mail service
costs less, provides increased formulary compliance and is more
convenient for our members. Also, when our mail service pharmacists or
the retail drugstore substitutes a generic drug for a branded drug,
with the physician's approval, it is a win-win situation. Costs are
reduced for our plan sponsors and our members and Express Scripts
earns slightly more profit per prescription. Over the past three
years, we have increased gross profit per average member by 22%
through cross-selling and integration synergies”.
http://media.corporate-ir.net/media_files/nsd/esrx/reports/ar00/letter/letter.html
  Harvard Business School Publishing implemented cross-selling when
looking for new ways to increase average order size on their internet
site. With the help of Molecular, an internet solutions provider, HBSP
added cross-selling and upselling funcions to their website. The goal
for the enhanced website was to “implement an up-selling
functionality, replacing an item in the shopping cart with another
item of greater value based on the users initial purchase, and
cross-selling functionality, recommending additional products similar
to what the customer is already purchasing. The desired result was
better service and an increase in online revenue.” HBSP reports that
the investment paid for itself in seven months with increased
revenues. Though the article does not cite previous order figures, the
increase in profits is stated as follows:
      35% of all up-sell opportunities are accepted by the customer.
      The conversion rate of accepted up-sells is 80%.
      The investment in this functionality paid for itself in just
seven     months and continues to drive a positive return on
investment.
  Read the article “Cross-Selling Solution for Harvard Business School
Publishing Dramatically Increases Online Sales,” Molecular (2002) at
http://www.molecular.com/Clients/CaseStudies/hbsp.asp

  Which cross-selling method is most successful? I suppose that answer
lies with what works best within a particular industry. However, the
bottom line on the importance of cross-selling can be summed up this
way:
  “Make sure you have a profitable add on sale for everything you
sell.  If you're not upselling and cross selling at the point of sale
and 30 days later, you're missing a major profit pie for yourself.”
“Top Seven Massive Intelligent Profit Actions You Can Take” by 
Christopher Knight. (2001)
http://top7business.com/archives/wealth/073198.html

  I hope this information helps to answer your question. Research was
lengthy as information on statistics relating to increased profits
after implementing a cross-selling approach were scarce. However, this
should be a good start and give you some valuable numbers and ideas to
work with.

umiat-ga

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