Extending Upselling and Cross-Selling Efforts (2,414 words)
By Kelly J. Andrews
A very good retail salesperson upsells this handbag to match that dress, the lamp to complement the sofa. To contrast, telephone reps, lacking face-to-face contact, used to function as mere order-takers, not salespeople. Direct marketers relied on persuasive copy to sell, not their inbound reps.
This outdated reality has changed. The reasons are several: First, the increased costs of mailing have put pressure on call centers to increase order sizes and become profit centers. Second, upselling and cross-selling efforts not only increase average order size, but also help retain customers by turning single-buyers into multi-buyers and upping their involvement with the company.
The reach and scope of upselling and cross-selling have expanded. Now upselling efforts begin in the call center, continue deep within the database and extend outward through follow-up efforts, such as mail, e-mail and outbound telemarketing.
Says Kevin Faulkner of RightPoint Software, which produces Real-Time Marketing Suite, "Any time you're communicating with a customer, you have a marketing opportunity. If someone comes to your Web site, and you have special products or promotions, instead of making an offer with an off-line call, you can integrate it. If someone calls you with a service request, you have the opportunity to make an upsell."
Upselling in the Call Center
Lillian Vernon is a good example of the progression of cross-selling within the call center.
David Hochberg, vice president of public affairs at the Rye, NY, catalog company, explains, "We have traditionally in the past used upselling as a means to sell overstocks and discontinued merchandise. You call our 800 number and at the end of the transaction, the rep is trained to say, 'Would you like to hear what items we have on sale?' Most consumers find that very compelling because everyone wants a bargain."
Lillian Vernon uses upselling to speed sales of slow items in its current edition instead of waiting for the next mailing to add a discount. Mike Berg, vice president of customer communications, explains that as responses come in for each edition, Lillian Vernon tracks which items are selling slowly and cuts the prices, decreasing overstocks before they happen.
While cross-selling opportunities and suggestive selling are unlimited on the Web, a catalog still can display only a finite number of items, restricting cross-sell opportunities to a certain degree. For example, Lillian Vernon reps identify which catalog volume the customer is using before they make offers.
Says Hochberg, "If you are using catalog volume 908, the rep knows which items to offer you. Say you're ordering from Lillian Vernon's home decor catalog. Well, obviously, we can't sell you anything from Lilly's Kids catalog because you don't have that in front of you."
In fact, Lillian Vernon does a limited amount of cross-selling between catalog volumes, as well as extensive upselling of inexpensive add-ons. Says Hochberg, "Some things we can sell unseen. A lot of our products require batteries, and you can upsell batteries because you need them to make the product work. There is a handful of items that you don't need to see a picture."
Explains Liz Kislik, a call center consultant with Liz Kislik and Associates, "It's possible to sell items that aren't in the book, but you have to be careful. If you sell something that's not in the catalog, it has to be easily understood and visualized. Otherwise you send returns through the roof."
While selling between different catalog volumes such as Lillian Vernon's home decor and holiday editions is possible, marketers who have multiple, discrete titles have even more difficulty selling between them. Why? In order to cross-sell between books, their databases must be integrated on a product level. For most multititle publishers, this isn't practicable.
Al Langsenkamp, chairman of Sigma Micro Corp., brings up the example of Lands' End. He explains, "When Lands' End was in its acquisition phase, they bought Territory Ahead and Willis and Geiger. At one point in time, they had as many as five operations on our system."
If the databases had been integrated, Lands' End's later sale of several titles would have been a complicated extrication. Langsenkamp advises keeping customer records separate but consistent, then upselling within a single book only. "You can still cross-mail," he says.
Kislik points out another major stumbling block for between-book cross-selling in the call center: the Federal Trade Commission's Telephone Sales Rule. Normally, catalog call center reps are exempted from the rule if they only upsell items within the catalog in front of the customer. When they expand their sales efforts to items that aren't on the page, they qualify as telemarketers and are subject to the restrictions of the rule.
Says Kislik, "If you bring the Telemarketing Sales Rule into play, when you examine all the factors related to compliance, it may not be worth doing."
Inspiring Sales Reps
Some call center managers find that inbound reps are resistant to selling, but Lillian Vernon has avoided that problem through upfront hiring practices. Says Hochberg, "When we hire representatives, we make sure they're more than just order-takers. We want people with selling skills."
In addition to hiring gifted salespeople, Lillian Vernon encourages reps with cash incentives. Berg says that his reps are compensated on a per-upsell basis, rather than on straight commission. Thus, a rep who upsells batteries is rewarded the same way as one who sells a comforter to go with a sheet set.
Other call centers choose different compensation strategies. Which method works best, says Kislik, "depends on the environment and the structure of the program."
She continues, "If you are evaluating people on effort, then it generally makes sense to make it part of base pay. If your intent is to reward them for results, then you have to give them more leeway to achieve results. Then it may make more sense to give commission."
Lillian Vernon's upselling program is designed to generate maximum sales. In fact, reps are trained to make an upsell offer on every call. Explains Berg, "The only time we don't upsell is during peak holiday weeks, and that's only for a half-hour here or there during spikes."
Kislik offers a different point of view: "The rep should have some discretion. When reps feel forced, there may be some sort of backlash. If they have discretion, they're usually more committed to the program."
She says that there are times when reps sense that an upsell is not the best move, for example, if the customer happens to be buying that chic black dress for a funeral, not a cocktail party.
Hochberg says that although an upsell attempt is made with every call, "We don't jam it down the customers' throats. If the customer makes any objection, the reps are trained to back off."
Berg explains, "We don't look at it as a cold sell. It's really a customer service. If a customer orders a toy that needs batteries, if we tell them so and offer them batteries for $2.99, that's a service."
"The trick is knowing when to approach a customer with an upsell," Kislik says. She suggests that some apparent objections, such as when a customer claims to have a tight budget, can be overcome.
"We all buy stuff that's over our budgets sometimes if it's something we really want," she says.
RightPoint's Faulkner advises, "In a call center, you're not trying to push hard-core sales messages. You want to be subtle. You only want to make offers that fit."
New Tools for Cross-Selling
Lillian Vernon's long-established upselling program for overstocks is only the beginning of its upselling efforts.
Hochberg says the company recently enhanced its proprietary order-taking software so that reps can upsell appropriate items based on the products customers choose.
"You buy a dinnerware set, and if we have matching mugs, the computer will prompt the rep to ask the customer about the mugs," he explains.
The upsell suggestions appear to reps as screen prompts, which are needed, Hochberg says, because of the vast Lillian Vernon product database. He explains, "The challenge is that we sell 6,000 SKUs, and although our reps are experts on the products, 6,000 products is a lot to memorize."
Mike Berg says that Lillian Vernon's buyers make the selections of the cross-selling products that are programmed to pop up as screen prompts for inbound reps. While group-filtering or real-time data modeling software can be used to generate upsell suggestions on the fly, Lillian Vernon considers its buyers to be the best merchandisers and relies on their judgment to choose complementary upsell offers.
Lillian Vernon also engages in external upselling with a program run by Magazine Direct. Before the termination of the call, the rep offers the customer the add-on of low-priced magazine subscriptions. Other examples of external upsell companies include MemberWorks and Triad Discount Buying Service, which market membership clubs as add-ons to partners' catalog sales.
Heidi Meyer, Lillian Vernon's vice president of specialty marketing, runs the Magazine Direct program. She explains, "At this point, we have a series of eight or so top magazines that we offer. They're general interest titles: women, men, we even have a kids' title."
First a rep offers the most popular titles, and if the consumer is not responsive, he or she suggests one of about 200 secondary titles. These suggestions are up to the rep's discretion. However, Meyer says that Lillian Vernon is developing targeting capability so reps will be prompted to suggest magazines based on the customer's demographics or purchase choices.
Cross-Selling After the Fact
Upselling during a call is a customer service function, whether managed with high-tech tools, such as a real-time database, or low-tech means, such as a buyer's expertise. Cross-selling after the call is a database function.
For example, Lillian Vernon segments its lists extensively to mail specialized versions of its catalogs to the right customers: the kids' catalog to a parent and the kitchen catalog to an avid cook. Instead of renting prospect lists, cross-selling this way allows companies to fully leverage their customer files to identify potential affinities between catalog or product lines.
Upselling and cross-selling products are core components of marketing programs for financial and telecommunications sectors as well. Not only does cross-selling benefit the bottom line, but it actually boosts retention rates for churn-prone industries. According to RightPoint's Faulkner, customers who buy many services from a company almost never churn.
American Century Investments, a financial company that markets more than 60 mutual funds, uses cross-selling to promote additional services to existing customers. The Kansas City, MO, company creates models using demographics combined with its knowledge of clients' risk tolerance and financial goals.
Explains Stephen Cole, American Century Investments' director of research and development, "We're not interested in anything more than how you respond to financial needs. Are you the kind of person who likes to take control? Do you like to share control? Do you want to give away control to someone else you trust? It gives us a very robust sense of customer knowledge."
To apply that knowledge, American Century uses Clementine 5.1 software from SPSS Inc. of Chicago.
Says Cole, "We're very proactive in our cross-sell. If you own fund X, through the Clementine model, neural net and our own product affinity study, we can identify that you're the kind of person who would own fund Y."
American Century Investments uses direct mail for its cross-selling offers, using versioned mailings based on the offer and the segment. Buyers respond via mail or toll-free phone number.
Once a customer calls, the SPSS cross-selling software kicks in again. Explains Cole, "With our modeling capability, we would know right away what segment this person belongs in based on how they relate to their finances."
Cole says that if the company's models suggest that a person is likely to defect, it steps up its sales efforts.
"We try to show that person some other funds we have that meet their characteristics," he says. "We use the association algorithms we have in Clementine to do that. That tells us that a customer is 80 percent likely to leave, and we also know that given your characteristics, we can predict how likely you are to respond to three different offers, and we will make those through our modeling."
Cole says that using cross-selling gives a response rate two to five times higher than cold sales, while boosting customer retention by keeping customers actively involved in their finances.
"It works," he says. "People appreciate the fact that you're able to respond to their financial needs in a language and message they understand and think is appropriate."
Cross-selling after the sale can be cross-channel as well. An outbound telemarketing phone call may be used to boost a direct-mail credit card offer with a balance transfer, or an e-mail offer may upsell a catalog purchase.
Anne Marie Burgoyne, director of marketing for e-mail marketer Digital Impact, suggests that e-mail can be an effective way to upsell a first-time buyer, a method used by client The Sharper Image. E-mail can be used as an ongoing communication method for continuous upsell (e.g., re-contacting buyers when their first supply of products has run out) or for cross-selling a related product. The testing facility of e-mail makes cross-selling a low-risk proposition.
Suggest Burgoyne, "Some companies split up the list according to how often someone has purchased, other clients have 10 categories of products and test among the categories. For example, if they purchased something from one category in the past, is it better to upsell a more expensive item from the same category or to try to cross-sell from another category?"
Many of the techniques and technologies for cross-selling in the call center are outgrowths of the Internet. For example, the Net Perceptions recommendation software used by Amazon.com and CDNOW to make targeted offers on their sites or through e-mail is now available in a call center version, and RightPoint's Real-Time Marketing Suite can be used for both Web and phone.
As the line between online and off-line methods blurs, the distinction between customer service and sales has also faded. Most companies are compelled to introduce selling into their inbound centers, and most customers perceive an upsell or cross-sell offer as a service—as long at the targeting is right.
Lillian Vernon's Berg explains, "It's not like we're selling swamp land in Florida. Customers have our catalog and they're ordering from it, and we're offering them things that go together. A lot of customers thank us for that."