Organizing For Cross-Selling: Do It Right, or Not at All

Link: https://www.sciencedirect.com/science/article/abs/pii/S0167811619300266

Customers who buy mobile phones may also want screen protectors. Many car buyers purchase long-term warrantees. It is
commonplace for companies to sell additional products and services to their current customers: a process widely called ‘cross-selling’. The approach appears simple and appealing but many cross-selling initiatives actually fail and hurt a firm’s bottom-line.

Cross-selling requires salespeople across business units to collaborate and share resources, information, and market intelligence. The results can be encouraging when different parts of the firm cooperate in this mission but cross-selling fails when business units resist collaborations, fearing loss of control and ownership of certain customers and product-lines, and even go so far as to sabotage company-wide initiatives.

Researchers have established that cross-selling performance is influenced by factors at both the individual and team levels. Less certain is how firms can leverage factors at the organizational level to improve cross-selling performance.

A working paper helps Chief Sales Officers understand:

1. How mechanistic and organic cross-selling structures and firm steering instruments, along with their interactions, are related to cross-selling performance, and
2. The relationship between cross-selling performance and firm profits, particularly the earnings before interest, tax, depreciation, and amortization (or EBITDA).

The relationship between cross-selling performance and firm profits, particularly the earnings before interest, tax, depreciation, and
amortization (or EBITDA).

To analyze the interaction of organizational cross-selling structures and steering instruments with cross-selling performance, the researchers conducted a cross-industrial, multi-phase, and multi-source survey of 549 sales managers. Once they analyzed responses to two questionnaires, they investigated the interaction of organizational structures and steering instruments with cross-selling performance at the business unit level. Next, they switched the level of analysis and examined the relationship between business-unit cross-selling performance and firm EBITDA.

The results show that while organizational structures and steering instruments are positively related to cross-selling performance, their overall effectiveness depends on their interactions. Further, the study concludes that the relationship between cross-selling
performance and firm EBITDA is U-shaped. Low cross-selling performance is negatively associated with firm EBITDA until a certain
threshold after which an increase in cross-selling performance is strongly related to an increase in firm EBITDA.

The findings provide the following key insights for Chief Sales Officers who are aiming to improve their firm’s cross-selling performance:

1. Cross-selling performance is determined to a high degree by organizational cross-selling structures and steering instruments and their interactions,
2. Depending on their current level of organizational cross-selling structures and steering instruments, organizations can manage their cross-selling performance through small alignments in their steering instruments,
3. Comprehensive alignment of organizational cross-selling determinants is important for leveraging cross-selling,
4. Managers should consider the firm’s current cross-selling performance level before setting up cross-selling initiatives

In contrast with previous work that implicitly claims that increasing cross-selling performance is desirable, this study provides a more nuanced perspective by concluding that if cross-selling efforts do not result in a very high cross-selling performance, firms will likely be more profitable if they do not engage in cross-selling initiatives at all.