April 25th, 2009

CROSS SELLING AND UP SELLING - A lasting relationship

By Alon Werber - VP Marketing & Business Development

Alon Werber looks at how operators can best harness customer data to deliver the right product or service at the right time

The hugely competitive and ever evolving battle to win the hearts and minds of the mobile user is bringing marketers within this sector new and escalating challenges, but also huge opportunities. In addition to rapid churn rates and high customer acquisition costs, marketers are now also faced with an economic downturn, during which it is likely they will see, if they have not already, a reduction in consumption levels. Therefore it is essential now, more than ever, that marketers use all the tools at their disposal to maintain customer loyalty and retention, as well as ensure arpu is maximised.

The key to building long-lasting relationships is to continuously present the consumer with services, offers, merchandise and bundles, which meet their requirements at exactly the right time. In this sense the key is to always think of ‘what’s next?’ for the customer. Instead of trying to predict what users want, operators need to adopt a system which acknowledges a customers response, or lack of response, immediately and keeps the dialogue open based on their decisions, whilst executing the offers in real-time. It’s an essential part of the Customer Relationship Management mix and will help to deliver optimum results yet it’s not something that can be achieved through ‘traditional’ campaign management systems. This means operators cannot maximise tried and tested techniques such as up-sell and cross-sell if they do not address the customer, just at the right time, and based on his actual behaviour.

Gartner forecasts that within the next three to five years the techniques of up-sell, offering the customer a higher priced or better version of the product they are purchasing; and cross-sell, offering a related product, will soar. These are important techniques in optimising the lifetime value of customer relationships, so how can marketers best implement them in order to ensure maximum return on investment?

Get your facts straight. Whilst it sounds like stating the obvious, it is something that many operators can often fail to maximise because they don’t have the right tools at their disposal. Current and past behaviour patterns are the best predictors of future action; to be able to up-sell and cross-sell effectively, operators must monitor usage of services or products in real-time to enable behavioural-based targeting; an approach that, until now, has been hard and costly to adopt. Yet with the development of tools, like our own Marketing Delivery Platform, which is able to monitor and harness data on usage and behaviour patterns and execute marketing offers in real-time, this can be addressed. Tools such as these will enable operators to be better equipped to launch targeted, personalised and perfectly timed offers delivered through the right channel; increasing the chances of users purchasing the additional offering.

Many operators may claim to understand the importance of personalisation; however they often fail to deliver. It is all very well offering deals such as buy-one-get-one-free, 3-for-2, but does the offer address what the user wants? Operators often send marketing offers to customers in a non-targeted way that is irrelevant to the user. Users won’t purchase content or subscribe to a new service if it is not relevant and delivered at the right time. It is ineffective to offer new, more expensive services to a customer who has, for example, not paid their bill. Equally, it is pointless to offer content relating to Heavy Metal bands if previous purchases made by the user have been related to R&B - it will simply not work. What’s more, if users are bombarded with multiple, irrelevant offers, there’s a possibility it will be seen as spam, not a term you want associated with your brand. To prevent this, marketers should adopt a personalised, multi-step online marketing plan rather than generic, multiple, one-trick-pony plan. In this sense, operators need to follow the example set by online service providers who have maximised the potential of personalisation with “Amazon-like” recommendations linked to the users’ preferences and real time behaviour.

This personalised approach has been proven to deliver compelling results, for example, a cable operator recognised its key competitive advantage was the delivery of video on demand (VoD), yet subscribers weren’t purchasing this premium content. Through targeted marketing offers to different consumer categories the operator was able to convert users that had never previously bought content, and by analysing relationships between content categories was able to design cross-sell offers that leveraged purchases from one category to promote purchases in another relevant category. This not only drove VOD subscribers to pay for premium movies but also introduced customers to new categories; increasing overall sales in the promoted categories by 42 per cent over a nine month period. This is the strategy that operators will need to embrace if they want to out-perform the competition and improve levels of customer retention and profitability.

Timing is a critical component within the equation. All too often an opportunity can be missed if an operator does not react in time to retain relationships with users - meaning lost revenue and the potential of alienating the user by offering a mis-targeted, mis-timed offer. If a customer is buying a ringtone, it is best to offer a related cross-sell before the purchase is completed and not two weeks later as the user is less likely to want to spend extra on additional products or services. This is an opportunity which operators will miss if they don’t have a full profile of the customer or have the ability to implement offers in real-time. So often it is only when you address the customer ‘here and now’ - when their mindset is open to marketing offers and they are about to purchase, that you will achieve a high success rate and customer satisfaction. The chances of cross-selling or up-selling will have dramatically dropped if there is a lapse between time of purchase and offer. Furthermore by offering a deal at the point of purchase it will make the user feel as though they have a personalised service and, as long as it is something they will like, and there is a saving, the chances of the user following through with the offer increases. In this sense, it is essential operators react to the user’s responses in real-time; keeping the communication with the user open to allow the execution of offers based on requirements. Even if the customer is not in the process of purchasing a service, this does not mean that they could not be tempted by a marketing offer. For example, with pre-paid mobile customers, operators should automatically offer a silent customer, with a low balance, a special top-up benefit. Through this the operator can improve response rates and drive ARPU from cross-sell and up-sell offers whilst user satisfaction increases.

One of the key advantages with cross-selling is the ability to promote products that are not necessarily one of the big sellers but something consumers would be interested in if marketed correctly. Initially when a new product is launched it can be a bestseller, but over time interest wanes and items can seem like one-hit wonders; this immediate surge of revenue is known as the Short Head. Mobile service providers play to this model by refreshing on-deck content to keep people engaged and encouraging them to make fresh purchases. Yet it is the less popular products that can deliver consistent revenue when offered alongside the latest content; this is known as the Long Tail and gives operators the unprecedented opportunity to cross-sell by promoting products being left behind. To do it effectively, service providers need a flexible platform to launch a diverse range of products in real-time, whilst exploiting the limited window of opportunity for content-related offerings. So when a customer is purchasing the latest remix of a particular song that is topping the charts, it is also the perfect opportunity to cross-sell the original version of the song. By doing this, the operator is selling an item which is not particularly popular but is still available to purchase; increasing the arpu. The Long Tail theory is that the Long Tail, over a period of time, will equal the Short Head in size; that collectively many products account for as many sales as the few bestsellers. With cross-platform selling exploiting the Long Tail and Short Head simultaneously, operators need to be able to capture and analyse customer preferences and lifestyle characteristics to support this one-to-one marketing. By using these factors to create packages and bundles - operators can turn on-the-fly promotions into optimal marketing offers.

So the bottom line is that to be able to run effective marketing offers you need to have current statistics of what is going on with all your products - what’s popular, what’s not. Through implementing effective marketing tactics, operators will be able to analyse in real-time the results they are achieving and measure any level of reduction in consumption; giving them ample time to rectify problems and turn them into a positive outcome.

Central to the effectiveness of these methods is having a full view of a customer’s profile; that is, having full visibility of their preferences, behaviour and buying patterns in real time so offers can be personalised to suit individual needs and delivered when, and in a manner, that is most appropriate for the customer. This is the key to ensuring that cross-sell and up-sell - the ‘what’s next?’ part of the CRM mix - delivers optimum results: driving revenue, improving customer loyalty and reducing churn.

As featured in European Communications