Cross-Selling Performance in Complex Selling Contexts
CHICAGO, June 17, 2014 /PRNewswire-USNewswire/ -- A new study shows what firms can do to close the large gap between cross selling potential and what firms actually realize from cross selling activities.
Firms can gain 10 times more revenue from increasing share of wallet from existing customers through cross-selling than through customer retention; however, 75% of cross selling initiatives fail due to sales force related issues and on average, firms realize only about one third of their customers' cross buying potential. The authors analyze both company records and data from a survey of 259 salespeople and 55 of their sales managers at a large biotech firm. They find that in complex selling contexts, cross-selling performance is highest when the firm employs strong transformational leadership strategy—highlighting the opportunities for cross-selling without providing specific direction on how to go about achieving cross-selling potential--but does not provide specific incentives for achieving cross-selling goals or quotas.
The analysis appears in the May 2014 issue of the American Marketing Association's Journal of Marketing and focuses on leadership behaviors and monetary incentives as primary levers for firms. Sales management could use a carrot-and-stick approach—telling the salesforce in detail what, when and how to do cross-selling with their customers, closely monitoring them and publicly highlighting their performance. The findings shows that such transactional leadership behavior actually leads to lower cross-selling performance. Sales management could also employ transformational leadership behavior, explaining the opportunities associated with cross-selling, to raise salespeople's motivation, to encourage their creativity to uncover solutions to additional customer needs, and to give them the freedom to decide how and when to do cross-selling with the customers. The findings show that such transformational leadership behavior will take advantage of salespeople's intrinsic motivation and lead to enhanced cross selling performance.
According to author Christian Schmitz, "We were surprised that the introduction of monetary incentives to reward desired cross-selling behaviors – one of the main forms of control applied in sales management—had neither a positive nor a neutral effect but actually had a negative effect. This finding should be a red flag for sales managers looking to increase cross selling, that the incentives they are most likely to choose to encourage that behavior are likely to backfire"
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SOURCE American Marketing Association