Cross-Selling the Right Product to the Right Customer at the Right Time

Li, Shibo; Sun, Baohong; Montgomery, Alan L
August 2011
Journal of Marketing Research (JMR);Aug2011, Vol. 48 Issue 4, p683
Academic Journal
Firms are challenged to improve the effectiveness of cross-selling campaigns. the authors propose a customer-response model that recognizes the evolvement of customer demand for various products; the possible multifaceted roles of cross-selling solicitations for promotion, advertising, and education; and customer heterogeneous preference for communication channels. they formulate cross-selling campaigns as solutions to a stochastic dynamic programming problem in which the firm's goal is to maximize the long-term profit of its existing customers while taking into account the development of customer demand over time and the multistage role of cross-selling promotion. the model yields optimal cross-selling strategies for how to introduce the right product to the right customer at the right time using the right communication channel. applying the model to panel data with cross-selling solicitations provided by a national bank, the authors demonstrate that households have different preferences and responsiveness to cross-selling solicitations. in addition to generating immediate sales, cross-selling solicitations also help households move faster along the financial continuum (educational role) and build up goodwill (advertising role). a decomposition analysis shows that the educational effect (83%%) largely dominates the advertising effect (15%%) and instantaneous promotional effect (2%%). the cross-selling solicitations resulting from the proposed framework are more customized and dynamic and improve immediate response rate by 56%%, long-term response rate by 149%%, and long-term profit by 177%%.


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