Cross-Selling Strategy In Data Mining

Introduction

We are focusing here on a problem where we are trying to make develop a recommendation system. The most important part to build a recommendation system is to determine what product can pair up with the original product. To determine this problem, we are majorly focusing here on a strategy called cross-sell strategy.

Cross-selling is a sales technique which gives recommendations to the customers by giving suggestions in the column called “frequently bought with” which attracts the customers to buy products related to the products they have already bought. It can also be explained as a technique where a customer is enticed to a product that compliments with the initial brought products.

As a fact, Amazon attributes up to 35% of its revenue to cross-selling – both the “Frequently Bought Together” and “Customers Who Bought This Item Also Bought” sections promote products related to the item that you are currently viewing on the site. This can be compared with an example where you go to MC Donald’s and they ask you the classic question “Would you like fries with that?”A term that is highly used with cross-sell is up-sell. Up-sell can be described as selling higher value products/services to the existing customers. An example can be given as, if you go to a mobile store to buy a phone. You have a price range of around 500$, but you eventually end up buying a higher range phone because the salesman provided you with a great deal on various other phones and fantastic features and you got swayed away with them.

Cross selling can be explained as a core component of a customer centric relationship, which requires an integrated view of the customer. The success of this program depends on many factors such as a well-defined business strategy, regular monitoring and effective targeting strategy. To cross sell effectively, one has to think naturally about those products, which would pair well like coffee and bagel. You also have to pay special attention to the price of the items that are being paired with. Cross-sell products are typically similar in cost. This strategy has proved to be a great strategy for profitable growth across multiple sectors.

Background

Now a day, almost all of the industries use the cross-selling strategy. Some of the examples are being discussed here of the different industries where this strategy is being used:

• E-Commerce: One of the most recognized website which uses this strategy is Amazon, where you can see the section “Customers also bought”. The recommendation system suggests “similar minded customer” who were based on previous purchase history and behavior of the customer.
• Retail: One of the companies who have achieved great heights is Tesco. Their key to success is segmentation based cross- sell and product diversification.
• Financial services: Wells Fargo’s core strategy for revenue growth is cross-sell. It has the highest cross-sell ratio of 6 products per household. It is very important to track the data whether it is cross-sell or up-sell. Well, how will you otherwise know what products pair well for cross selling? Or what features drive your upsell. Metrics and data analysis can help you fine-tune the sales plan and then you can carefully develop cross-selling and up-selling which can dramatically increasing your company’s growth.

Analytical Tools For Cross-selling

Tableau Desktop is designed to allow anyone to connect with any time of data and analysis and understand the big data. It is easy to use and implement the attractive dashboard. Tableau also provides the drag-and-drop interface to generate data visualization. DiscussionDataset We are using data from the subscriber of t-mobile since t-mobile offers different cross-sell strategies to attract their customers. They have different offers for buying phones, for their services and for Netflix. They use a variety of strategies, which helps us study a variety of strategies and expand our areas of research.

Data preparation

To collect our data, we have called a couple of times to the t-mobile customer care number. We have talked to the customer representatives and asked a couple of questions for our survey which includes something like how many users do you subscribe an average weekly or what new schemes do you plane to take out for attracting new customers. Other than that, we have also followed a couple of websites, which would provide the data for t-mobile customers.

Process for Cross-Sell

“The strategy for cross-sell is to combine different products using demand for the primary product to sell the secondary product. ” (2011) A good example is of package or a combo deal. Also, the combine products can offer an attractive price as compared to their individual prices. An example can be given when we go to in n out; there is a combine meal of French fries and burger, which is cheaper than their individual prices.

There are many methods to implement cross-sell. One of the strategies is sequential cross-sell which involves selling different products or services at different points of the customer’s period of time with the firm. An example of this strategy can be explained when you bring a printer and it has been 6 months, so you go back to the customer and ask the customer is they need a cartridge or not.

“The Impact of the bundling can be powerful. ” Let take T-mobile Wireless Network services as an example. If you subscribe for one line it will be way costlier than take 4 Line into one subscription. T-mobile increases their customers and customer’s get a lower price subscription accounts. That’s a win-win situation for both. The figure below shows the benefits and churn reduction due to bundled mechanism for t-mobile.

Factors driving to implement the strategy

1. What – choice of product.
2. Whom – selection of customers.
3. When – timing.
4. How – contact strategy.

Benefits of Cross-Selling

For the firm:

1. Promotes innovation and expansion.
2. Enhances customer profitability.
3. Builds customer equity.
4. Enhances market position by differentiating from competition.

For the customers:

1. It broadens the choices of services and products.
2. Gives much attracting deals which increases customer satisfaction.
3. Offers convenience by giving a one stop-shop for different products.
4. Encourages customer relationship by a good marketing strategy.

Conclusion

We have already discussed what is cross-selling, the basic strategies used in it and the process of cross-selling. Now, we just want to conclude that cross-selling works when you find the correct complimentary product to the original product. It basically works because the prospective customer is already in the process of buying the product and you provide them a product, which qualifies as a pair to the original product. You should keep in mind to promote only those products where the additional sale increases the value to your customer and also increases the value to you. At last, I would like to say cross-selling is all about profitability.