FEATURE
Why companies who cross-sell have happy customers and investors The key to becoming a successful business is focusing on the buyer
O
ne of the great myths which chief executives use to promote big mergers and takeovers is the notion that sticking two companies together will create ‘revenue synergies’ by allowing each firm to sell to the other’s customers. History tells us these synergies rarely materialise and in fact mega mergers typically destroy value for shareholders. Yet there are plenty of UK firms who have successfully expanded into adjacent businesses or geographies, either organically or through small bolt-on deals, and grown their revenues and earnings consistently by cross-selling more services to their customers. WHY CROSS-SELLING WORKS When it’s done properly, cross-selling has a number of benefits for customers which in turn can help increase revenues and earnings. The best cross-selling helps customers feel understood, meaning they form a deeper connection with the products and services they buy. This in turn makes them more likely to stay loyal when times are tough, limiting customer losses. Customers who buy multiple products or services will obviously help grow earnings more than a customer who buys just one product, but there are other less obvious ways they can benefit a business such as saving time and money in acquiring new customers. Now more than ever, businesses are looking to cut costs and consolidate their suppliers. Having multiple relationships with multiple providers can be a real headache, so if a company can become a one-stop shop and cross-sell products its customers really love it sets them apart.
Cross-selling can even speed up a buyer’s decision-making process: if they know they are going to get the same level of service and care from a trusted provider, customers are less likely to delay purchases. LEARNING FROM THE MASTER One firm which mastered the art of cross-selling different but related services to its customers years ago is equipment rental firm Ashtead (AHT).
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Chart: Shares magazine • Source: FE Analytics
Once a customer rents a piece of kit from Ashtead for the first time, the company knows what its needs are, and in all likelihood if it 04 August 2022 | SHARES |
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