What is Cross Selling

Cross-Selling is a practice of selling an additional item to the customer to increase the overall sales opportunity for a retailer.  Since the basic principle of any retail business is to establish good customer relationship and to have a win-win situation in practice, it is equally important to know whether the customer gets benefited by the idea of cross-selling. Having said this, it is very important to know scientifically which product creates an opportunity to cross sell, or else it would lead to loss of revenue for a retail firm.

With an understanding of the idea of cross selling, one can hypothesise manually on few products which would follow cross selling. But for a retailer with a large number of products, it becomes practically difficult or rather impossible to ascertain the principles of cross selling for large number of products. Are there any scientific options which would statistically identify the opportunity of cross selling and improve the confidence of a retailer to sell more?

Yes, it is possible to examine the hypothesis on cross-selling scientifically and discover relationship among various products. Having found the relationships, a retailer can develop strategies in many ways like, to plan on promotional campaigns or to attract customers or for new product introduction.

Amongst the various statistical techniques available, conjoint analysis help to discover the relationship present among the products. Here customers are surveyed with questionnaires on their preferences to understand the relationship which would be treated statistically to arrive at structured results. These results are put under trial for testing for certain period; these test results then can infer the relevant changes that need to be made before implementing the strategies.

Amongst other popular techniques are Collinearity analysis, regression analysis, cluster analysis. The availability of powerful data analysis software and sophisticated mathematics makes it simple for the retailer to make simple changes in his merchandizing strategies to result in significant increases in his overall revenue.

Retailer's possession of POS level data presents a huge opportunity to increase revenues with little investments. The technology needed to make put science behind the money is now affordable to the savvy retailer who is willing to embrace the new methodologies.