Chapter 7

Cross-Selling

Killing two birds with one stone

The pattern

Cross-Selling involves offering complementary products and services beyond a company’s basic product and service range, with the aim of exploiting existing customer relationships to sell more goods. Cross-Selling also offers an opportunity to leverage existing resources and competencies, such as sales and marketing (HOW?, VALUE?).

For customers, the primary benefit of Cross-Selling lies in deriving more value from a single source, thus saving on the cost of searching for additional products (WHAT?). A further important advantage of the Cross-Selling pattern is the sense of security it instils: customers who already have a good relationship with a business will not feel they’re taking a risk trusting it again –something that cannot be said for new businesses (WHAT?). When offering additional products and services, it is important to maintain customer satisfaction to ensure that dissatisfied customers do not move away from the original product as well. This demands careful planning and execution of the company’s product portfolio.

The origins

Cross-Selling was already used by merchants in the ancient Middle Eastern bazaars. A modern example of its use is afforded by the oil and gas giant Royal Dutch Shell (Shell), which successfully launched an innovative business model based on the Cross-Selling pattern. Shell uses its network of petrol stations to sell a range of goods that are quite unrelated to the oil business, such as groceries and other everyday items. Legend has it that the practice started when a clever Kentucky Fried Chicken (KFC) franchisee opened a KFC restaurant in a Shell petrol station. Soon customers were refuelling not only their cars but also their bodies, sparking the idea of Cross-Selling at Shell. In fact, the combination of food and petrol was so successful that Shell rapidly applied the Cross-Selling concept to other areas of its business.

The innovators

The Swedish company IKEA is the world’s largest furniture retailer. The company manufactures ready-to-assemble furniture, appliances and home accessories. To complement its furniture sales, IKEA employs the Cross-Selling concept by offering a wide variety of additional services and products such as interior equipment, home decoration, in-store restaurants and car rental services, all of which significantly increase the company’s profits.

Food discounter Aldi also successfully implemented the Cross-Selling business model. For many customers, Aldi is no longer just a place to buy cheap groceries, but a central point of contact for many everyday needs. To promote Cross-Selling even more, Aldi is successfully offering new items every week such as laptops, clothing, sports or gardening equipment and holiday trips in limited promotional campaigns.

A good example that shows the potential of Cross-Selling in online trading is the shopping platform Zalando. Founded in 2008, Zalando is Europe’s leading online platform for fashion and lifestyle. It brings head-to-toe fashion to more than 26 million active customers across 17 markets, offering clothing, footwear, accessories and beauty from around 2,000 brands. Cross-Selling plays a crucial role in Zalando’s business model: whenever customers add a product to their wish list, the option ‘Combine with’ appears as a call-to-action button. By choosing this option, for instance, for a dress, Zalando will suggest matching shoes, a handbag and earrings under the heading ‘Complete the look’. Zalando even aims at cross-selling items to customers who do not have a Zalando account: whenever someone just considers an item on the platform, Zalando will suggest accessories under the description ‘Matching – you might like it’. In 2018, Zalando generated €5.4 billion in sales, which represents a 20 per cent increase compared to the previous year. Similar to Zalando’s business model, the online platform Booking.com is also making use of the Cross-Selling pattern: whenever customers book accommodation, the booking website will suggest a suitable airport transfer, rental cars or specific tours and activities.

Cross-Selling: petrol stations as profitable grocery stores

When and how to apply Cross-Selling

This pattern holds great potential in situations where a simple, low-margin product or service addressing a basic need can be combined with high-margin products. This is frequently the case with consumer goods, where convenience can drive customers to make additional purchases, such as food at petrol stations. The pattern also finds application in the B2B sector, where highly specialised products can be bundled with other products or services. This could, for example, be specific high-rise elevators in a building with low-rise commodity elevators and escalators, or new escalator installations that include maintenance services. Such bundles usually address customers’ desire for one-stop shops. In B2B, Cross-Selling is often used in conjunction with the Solution Provider pattern (#47).