What is cross-selling? How startups are using it as a story to raise their next funding round?
Look at how Amazon has expanded their market size by offering additional services to the customers. It started as an online bookstore and expanded to multiple e-commerce categories providing other services like Amazon Prime Subscription, Prime Videos, and Fire TV. They even entered into Grocery and Food-delivery businesses.
One common thing in all QSR outlets like McDonald’s, KFC, Subway etc. is that whenever you order Burgers, they will ask you — “Would you like to make it a meal — Add Fries & Coke?”. This is a great example of how cross-selling is being used in the offline world.
Cross-selling is an excellent strategy for a business to sell additional products or services to an existing customer base. It could be launching new categories or verticals by understanding the entire customer journey.
Let’s look at how businesses use cross-selling techniques to increase revenue.
In the travel industry, companies like Booking.com and Makemytrip started with flight booking and later expanded to hotels, trains, cabs, insurance and whatnot.
Swiggy started as food delivery and introduced Swiggy Genie to send any package or buy anything from any store. Then launched Swiggy Instamart for groceries and now acquired Dineout to compete with Zomato in the dining out vertical.
Careem in the middle-east started as a ride-hailing business, introduced Hala Taxi and later launched food delivery and groceries to gain significant market share. Now they are looking to build a super-app similar to what GoJek did in Indonesia.
This is also applicable in B2B business; Freshdesk started as a ticketing platform, expanded to a chat widget and now offers an entire CRM suite under Freshworks, similar to Zoho.
So with cross-selling, you can increase your LTV (lifetime value of customers) by offering additional products or services to the existing user base. So again, Positioning the brand is very important in nailing additional revenue streams.
CRED is one such app that achieved unicorn status by cross-selling to a loyal & trusted user base. It started as a credit card bill payment service, expanded to rent, school fees, and bill payments then sold travel packages, promoted D2C brands and now moved to a complete e-commerce category. They also have a vertical of financial services. I will not be surprised if they introduce a Cred Checkout as a payment service on top of customer addresses and saved cards.
How to think of cross-selling?
- Start by understanding your customers deeply. What’s the motivation for using your product or service? What are their pain points, and how can your product solve them?
- Deep-dive into your existing data, understand the entire customer journey and identify additional services that can close the loop or provide value to your customers.
- High-margin items are generally preferred for cross-selling as they can generate decent revenue even if 1% of the customers convert.
- Sometimes you just follow your intuition and experiment with the additional services. For eg — Swiggy shows a lot of ads on the tracking page.
Cross-selling will not work all the time
- It’s evident that startups are using cross-selling as their story to raise the next funding rounds, but sometimes all these strategies fail at execution.
- Paytm started with mobile recharge and did pretty well in bill payments, movie tickets, and bus & flight tickets but failed drastically in e-commerce.
Understanding consumer perspective toward the brand is critical while thinking of cross-selling. For example, there is human psychology that if you think of ordering food — “Swiggy & Zomato” comes first to your mind. That means no matter how often Ola launches food or grocery delivery, attracting customers is difficult in the long run without spending money on discounts.
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