The six c’s of cross-selling success

As my colleague Alex Liu writes in this blog realizing the potential of cross-selling after mergers is harder than the partner entities usually expect at the start.

Much harder.

On average, fewer than 20 percent of the organizations engaged achieve their cross-selling goals. So our team surveyed seasoned M&A executives who have significant cross-selling experience in hopes of better understanding how to capture the cross-selling potential.

Our research highlighted six core dimensions—the six Cs—that appear to both help companies assess the cross-selling opportunity a merger presents and increase their odds of capturing it.

Complementarity: How well do the companies’ accounts, products, and services complement one other?

The size of the cross-selling opportunity correlates directly with the potential to take existing products to new customers and new products to existing customers. The more the two companies’ products and customers complement each other in those two respects—creating the potential for product bundles, for example—the more value the combined organization can realize from cross-selling. Indeed, the top performers report that complementary offerings are the most important factor in capturing revenue synergies successfully. But while M&A teams can evaluate overlap in customers or products, they tend to overestimate potential product complementarity, an optimism that usually stems from an insufficient understanding of the complexity of products and how customers buy and use them.

Connection: Do we have strong customer relationships to build on?

One executive we interviewed summed up this point well: “The stronger the relationship, the more successful the cross-sell.” The difference between having a strong relationship with a client company and with a specific individual in that company can have significant impact on success. One technology services organization achieved an 80 percent cross-selling rate within a year of the merger at accounts where salespeople had strong relationships with relevant decision-makers. Accounts where the reps had to sell to unfamiliar people took about 18 months longer to achieve similar results. The lesson is that sales leaders need to assess—starting as early as the due diligence stage—the strength of existing relationships and product relevance at an account or segment level.

Capacity: Can the sales force focus on cross-selling?

Sales teams have finite capacity and limited attention from customers. Determining whether they have sufficient “space in their bag” (meaning resources and mindshare for cross-selling) requires considering the existing commercial priorities, product assortment, and sales plan, and weighing those factors against the benefits of introducing a cross-selling program. Leading organizations evaluate three aspects in particular: individual salespeople’s ability to prioritize the cross-sell program; the priority, embedded in the sales quota, of selling other products; and the ease of introducing other products into customer conversations.

Capability: Does the sales force have the skills for cross-selling?

Companies often make assumptions about what a sales team could sell without objective assessment of the sales organization’s knowledge, skills, and experience. We have seen three cross-selling behavioral shifts that have proven especially challenging to navigate: transactional to consultative, product to solution, and farmer (account management) to hunter (account acquisition). In each case, companies stretched the sales force beyond its organic abilities. To determine whether sales reps have what it takes for new cross-selling initiatives, sales leaders need to understand the cross-sell sales cycle, existing rep knowledge and skills, and the sales operating model.

Compensation: Does the company provide the right incentives for cross-selling?

Almost three-quarters of the M&A executives we polled call incentives important or critically important to cross-selling success. Sales organizations often turn to sales promotion incentive funds, or SPIFs, to motivate salespeople to cross-sell on top of their existing quotas. But if an incentive fund is not meaningful for a sales rep, it sends the message that cross-selling is nice-to-have, not a core priority. What’s more, compensation alone will not achieve results. Success requires coupling a well-calibrated compensation plan with nonmonetary incentives such as admission to a president’s club or special awards presented by the CEO to high-performing cross-sellers.

Commitment: Is the company committed to cross-selling?

A merger may be the first time an organization embarks on a formal cross-selling program. Designing and launching such a program requires building new organizational muscles and demonstrating leadership discipline and commitment—starting at the top. Our research shows that commitment has the highest correlation of all six Cs with overall program success. The company must treat cross-selling as a distinct change program and apply the same rigor to it that it applies to other key strategic initiatives.

For a fuller analysis and more detail on the Six C practices, please read this article. One thing our research makes clear is that the companies with the greatest cross-selling success prioritize four or more of these dimensions. In other words, a systematic approach is key.

Deal volumes are on an upswing after a largely moribund year in M&A. Companies that show a deep commitment to capturing the cross-selling opportunities will have a significant edge in meeting their revenue-synergy goals in mergers.

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