Cross-Selling Part 2, the Data Side

In Cross-Selling Part 1, we looked at the human side that impacts the challenges of cross-selling successfully.  In Cross-Selling Part 2, we will look specifically at the most common initial data challenges.

The most common initial challenges are that the two major pieces of data necessary to successfully cross-sell are not defined in the data:

1) Categories from a consumer’s perspective.

2) Complementary categories, which are things normally used together.

To define anything in the data in a meaningful way the definition must follow some criteria or set of rules.  Because categories relate to share of wallet, and share of wallet relates to what customers buy in total, we want to define the categories to fit the way customers use them.

It is the way customers use or think about items that determines how they should be categorized for cross-selling purposes. Not the way engineers, plant managers, or purchasing managers think about them.

For example, a component manufacturer making products used in fluid/hydraulic systems had well over 100,000 unique item numbers.  They produce components that go in everything from trucks to HVAC systems to home appliances.  But in the database, every item was considered unique, because it was engineered and built for a specific application.  There was no category shown in the data.

However, the product literature and company’s customer knowledge made it clear; they had five categories of items, which are:

1) Filters (things that cleaned the systems’ fluid)

2) Fittings (things that connected things together)

3) Sensors (things measuring pressure or flow)

4) Actuators (things that pushed fluid in the systems)

5) Valves (things that directed fluid in the systems)

By starting with key word searches in the product description fields, we managed to identify and apply the category to all but 500 or so of the over 100,000 items.  The rest we looked up by hand and applied manually.

While we got lucky that most products had a useful category word in their description, and the company already understood what the categories should be, it usually is not so easy.  For example, a grocer had categorized every item in the store with beef in it as beef.  That includes beef soup, beef bouillon, frozen steak dinners, all sorts of things. 

There was no quick way to categorize steak and hamburger – like the beef at the meat counter – in a convenient way.  Fixing a problem like that is not as easy as it sounds.  A grocery store can have 100,000 or more item numbers active in the system at any time, and many hundreds are added or replaced each week.  Without rules in place, a manual fix becomes unwieldy in a hurry.

Another company categorized products by the type of equipment they went into (regardless of what the component was) another categorized by the assembly plant products came from.  They all made sense at the time the data was entered, but they did not make sense when using the data to cross-sell customers.

Regardless, until the category is put in each item in the database, category in cross-selling is not useful to a database marketer.

The cross-selling approach using complementary categories is different than offering people something like what they have already bought before.  Cross-selling with complementary items is focused on selling additional products that are typically used together or go together. 

In Part 1, we used tires and wheels as an example.  Understanding and then building a database of which sorts of items goes together is crucial to building a cross-selling program.

For some companies, every category they sell fits together.  For the fluid/hydraulic component manufacturer’s products, every system required every one of their categories.  It was easy to tell what was left to cross-sell by determining what was missing from a customer’s orders or what categories were bought in small quantities relative to other categories.

Other industries have a challenge in determining what goes with what.  Hardware, for example, caters to different people with different needs.  Some customers buy mainly plumbing-related items, others buy mainly paint-related, others primarily electrical, and so on.  But within each group there is still a need for variety.  An electrician needs wires, boxes, and switches.  A paint buyer will also need brushes, rollers, tape, and cleaning supplies.

By using complementary categories, we can spot missing categories in what customers buy, and offer them things we know they must be buying elsewhere.

In the next blog, Cross-Selling Part 3, we’ll look at a simple report called “the mileage chart” that helps uncover cross-selling opportunities and discuss several different ways to use it.  We’ll describe how to not only uncover simple cross-selling combinations, but to prioritize and plan to make cross-selling work.