Joseph Lamb

Joseph Lamb

Joseph is a published author, a pioneer in the managed services industry and is currently serving as a facilitator for the Connectwise Evolve organization of peer groups, the CEO of RedVine Operations and co-owner of RedVine Marketing.

Using Cross-Selling to Drive Revenue Growth


Cross-selling can be a valuable tool to grow revenue, but many managed service providers (MSP) neglect the existing customer for the acquisition of a new one.  Don’t do it!  It costs significantly more in sales costs to bring on a new customer as opposed to selling something new to an existing customer.  As a general rule of thumb, you should generate 70% of your revenue each year from new customers and 30% from existing customers.  These percentages will vary based on how much cross selling you have already done but the idea is to ensure a portion of your revenue growth every year is from existing customers, either through cross-selling or up-selling.

What is Cross Selling?

Cross selling is simply selling a complimentary or related product or service to an existing customer.  While upselling is selling a customer more of something they already buy (or a higher level of that product or service), cross selling is selling an entirely different product or service to an existing customer.  If you are a highly mature MSP, you already sell an all-inclusive service to every customer, but it is rare, even in the most mature companies, to find that every customer buys every product.

A good example of cross selling is the advent of “cloud backup” that took place a few years ago.  Customers were running backups to tape or to disk locally, then manually moving disks/tapes offsite.  This was due to bandwidth limitations.  When higher bandwidth became available, “cloud” backups became popular.  The smart MSPs seized this opportunity and went back to every customer and sold them a cloud backup product (often at higher margins) to replace their existing local backups.

Effective Cross Selling Basics

To effectively cross sell your existing customer base you must first accept an assumption regarding “target customer profiles (TCP).”  Your TCP should narrowly define the customer that is a fit and target for your services.  This can be defined by customer size, geographic, demographic, and psychographic characteristics.  Care must be taken here as defining your TCP too narrow limits the amount of companies you can target for your services and defining your TCP too wide makes it very challenging to scale and grow your business because your customers needs will vary too greatly.

In an ideal world, every customer will buy every service you offer.  This rarely happens but it should be the goal.  To drive this behavior first you must define your TCP and make sure that your marketing and sales are focused on these customers only.  You actively refuse business that does not fit your TCP.  Secondly, you have to define a service offering that includes everything you provide and try to limit how many ancillary services you can provide.  Immature companies have a new groundbreaking service every month they want to sell so their invoices look like a hodgepodge of technologies and services and no two customers are alike.  Mature organizations build everything their target customer needs into one service and don’t sell anything else.  It is all or nothing!

Once you have defined your target customer profile and built an inclusive all-in service, you are ready to cross-sell!

Why should I focus on Cross-selling?

There are many reasons you should focus on cross selling.

  1. It is less expensive to sell an existing customer than a new one. This lowers sales costs while increasing revenue.
  2. The more services a customer uses, the “sticky-er” they become, and you will keep them longer.
  3. Generally speaking, add-on products are high margin and raise the total profitability per customer.
  4. The more your customers buy everything you provide, the easier they are to support.

And while there are many positives, there are not many negatives to cross selling except for the time to plan and execute your cross-selling strategy.  Let’s take a look at how that might work.

How to Execute your Cross Selling Strategy

Once you have determined your target customer profile and simplified your service offering to ensure everything is included, you are ready to move to the next step of cross-selling.

The best way to organize your project is to list all your customers in an excel spreadsheet along with all of the services you may offer.  Then mark which customers have which service so you can determine which customers need to be contacted.  Once you have made a list of those that need to be contacted, get someone in sales involved and show them the opportunity that is available.  Most sales personnel will jump at the chance to make easy sales!

It may go without saying it, but make sure you are using incentives in your organization to drive the behavior you desire.  If cross-selling is to succeed, you must have a person or group responsible for the metric that is strongly related to the activity.  In this case it would be new MRR dollars, or cross-selling dollars.  Figure out which metric works best for your organization and incentivize staff to meet those targets.

Working with your sales team, schedule time with each customer that needs to be contacted and schedule out how quickly you can get them all done.  For some services you are pitching, it may be an optional component that brings ROI, but the decision would be more impactful for some than others. In other cases, the product or service is essential, and you can take a more firm approach when selling it to your customer.   Security services may very well fall into this category.

If you have an executive review process where you meet regularly with customers to discuss their needs and suggest projects, you can use these meetings to effectively cross-sell products to customers on a schedule that is already in place.

The Cross-selling Results

As stated previously, a portion of your revenue annually should come from cross-selling existing customers.  Executed properly, you will make more margin per customer, have a happier support team since there will be more consistency in the customer base, and have less churn as customers that buy everything you do will stay with you longer.

If you need assistance deploying your cross-selling strategy, feel free to reach out to RedVine Operations and we can have a chat.  Now go sell!

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