Cross selling

Cross selling is the sale of a product to customers who already purchase a different product from the supplier.

Cross selling is often cited as a source of competitive advantage to an existing business and as a source of synergies that justify an acquisition.

For cross selling to be effective it demands some relationship between the products concerned: for example, the buyer of one may have an obvious need for the other at the same time (so estate agents can cross sell mortgages to house buyers) or the products involved may sell to the same general market. It is also possible to cross sell products that appeal to the same demographic groups (e.g. same age groups, income levels, social grades etc.).

As cross selling can lead to savings on very significant overheads such as advertising, sales forces and retail space it can be a significant source of saving. Where the potential from cross selling is not proven (as in a proposed acquisition), investors do well to be sceptical. Points to consider include the existence or not of examples of the successful cross selling of similar product combinations and whether the target markets for two products are really the same.

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