Effective cross-selling benefits both customers and service providers. More comprehensive solutions can create greater value for the customer, stronger and more tightly-integrated relationships, and better financial returns for the provider. Yet in practice, service providers struggle to select the best cross-sell approach and then to manage execution by their sales teams.
The cross-selling challenge for many service providers is determining how best to align their sales organizations to effectively sell the company’s full suite of products and services. In our experience, the broad range of approaches to effectively cross-sell can be summarized into five basic models. The best model depends on the specific circumstances.
Figure 1: Approaches to Effectively Cross-Sell Services
1. All-in-one sales executive
In this approach, a sales executive is tasked with selling the company’s entire suite of services. He or she interfaces directly with the customer to assess customer needs, determine the solution offering (typically in collaboration with the service provider’s pre-sales product experts), prepare, price, and deliver a business proposal, and close the business.
Pros: From the customer and company perspective, this simplifies the relationship. A single sales contact can speak for the entire company. He or she can offer the best and most comprehensive solution for the customer incorporating all the appropriate services at the right price and contractual terms. This approach can be effective when the range of services offered is limited and of limited complexity.
Cons: When the company’s services are many and highly specialized (and possibly organized across multiple service lines or BUs), establishing and maintaining an effective sales force comprised of sales executives who have the skills and aptitude to sell a broad mix of services can prove to be quite challenging. While training and the support of pre-sales solution designers can help, often the sales executive sells only what he or she knows best or has sold successfully in the past, or in other cases, fails to put forward a compelling solution proposal to win the business. If the company is organized by service line with profit and loss targets, the sales executive will need to adhere to divisional pricing sheets or negotiate with each service line so as to agree on internal pricing arrangements that will then tie to the customer contracted pricing – further challenges for the all-in-one sales executive.
2. Service line-focused sales executive
Here the sales executive is assigned to a specific service line, for example, contract warehousing services. As part of managing the customer relationship, he or she may learn that an existing customer has a need for a complementary service, such as customs brokerage, which the company may offer but through a separate BU with its own sales force. With a high-level understanding of both the customer’s business challenge and the company’s brokerage offerings, the sales executive can, on his own initiative, bring another sales person into the sales cycle.
Pros: The customer has a single main point of contact, yet is offered a cross-service line solution. Pricing and customer contracts remain service-line specific, still managed by the service-line sales executives.
Cons: An ad-hoc approach. It relies on individual sales executives to identify cross-sell opportunities and then take the initiative to bring in another sales executive into the process. The sales person’s incentive to do so is not clear. Without a formal cross-sell incentive (as in the next model), motivation relies on the sales executive’s recognition that doing right by the customer (offering the best solution that the company can provide) will pay dividends in the long run, if not earlier.
3. Sales executive cross-sell compensation incentives
Similar to the previous model, but in this case, service-line sales executives have a cross-sell incentive built into their compensation plans. In this way, the compensation incentives are structured to specifically reward cross-sell success, beyond what a sales executive might gain as a result of “doing what’s right for the customer.”
Pros: The customer still has a single point of contact and has a higher likelihood of being offered a solution that best meets its business requirements. The cross-sell incentive provides an explicit motivation to team with another sales executive. The company and the customer benefit from this value creation.
Cons: This is still a somewhat ad-hoc approach. While sales executives are motivated to seek cross-sell solutions and team with other sales executives assigned to the company’s other service lines, it is still up to an individual sales person’s discretion to bring another service line into the sales process. Structuring such cross-sell incentives can be challenging. Many variants exist, with various pros/cons, from commission or bonus-sharing to paying double commissions, for example. Care must be taken that the incentives strengthen customer value creation, rather than undermine it.
4. Key account sales team structure
For selected key customer accounts, we have seen companies organize a team-based sales approach where service-line sales executives work together, proactively and collaboratively to win business. Typically, these include some sort of cross-sell incentive in their compensation plans, but not always. Senior management is tasked to establish such teams, provide oversight, and resolve team disputes.
Pros: Effective sales teams can deliver superior sales results that bring together all the possible company services to solve the customer’s business problem. Such teams can be selectively formed only for those customers perceived to have a high need for a cross-service line solution. An individual sales executive on the team can play “lead.” That role can change over time to suit the sales opportunity at hand.
Cons: While these cross-service line sales teams are formally organized, in practice they can be challenging to manage. Customers can be put off if they do not clearly understand how to work with the sales team. Also, an individual sales executive may not see the benefit to participating on the team.
5. Key account sales executive
To address weaknesses of the previous approach, some companies establish a key account sales organization, often reporting to the CEO or COO. In this model, a single key account executive is assigned to the customer, with responsibility to manage the customer relationship. This individual is tasked to sell all the company’s services and does so by eliciting the involvement of the service-line sales executives. While success requires effective collaboration between the key account sales executive and the service-line sales people, the key account executive has the overall responsibility for the customer and in this way, “calls the shots.”
Pros: Clear and unambiguous responsibility for the account lies with the key account executive. The key account executive’s deep understanding of the customer, along with a broad knowledge of the provider’s services and the skills of individual service-line sales personnel, results in significant wins. The customer benefits from a sales person who thoroughly understands their business challenges and communicates with a single person who is empowered to speak for the entire company.
Cons: Selling to a key account involves doubling up on the sales team – the key account executive along with one or more service-line sales executives, depending on the sales cycle. In its simplest form, a service-line sales executive’s compensation is the same for business sold to a key account or non-key account, and the key account executive is paid out of a separate compensation pool. This increases selling costs, which at times can be difficult to justify. Determining which customers to designate as key accounts can also be challenging. Occasionally, a service-line sales executive may choose not to participate in a key account sales cycle, if he or she believes that their time is better spent elsewhere, setting up a potential organizational conflict.
We have seen all of the above models work to varying levels of success alone or in a hybrid combination across a broad range of service industries. Their effectiveness may evolve over time with the structure of a company, its range and complexity of services, and with customer preferences.
As a service provider, getting cross-selling right can have a material positive impact on your customer relationships and profitability. For the customer, working with a provider that is skilled at cross-selling is a plus, as it should deliver more innovative solutions and value creation, all at a fair price. It is well worth the effort to find the model that works best for your company.
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Dave Frentzel is a Partner at New Harbor Consultants. Dave brings 25 years of management consulting and hands-on executive leadership experience to improve business outcomes. Prior to joining New Harbor, he held senior management positions in third-party service, consulting, and information technology companies. Dave has extensive global management expertise as well. He spent a decade living and working internationally, helping companies with their global go-to-market, organizational, sourcing, manufacturing and supply chain strategies and operations