Prune Out Cross-Buyers Who Aren’t Plums

Add-on sales and cross-channel marketing are always good, it would seem. What a surprise that marketing researchers at Georgia State University claim there are consumers who cost you profitability if you push for additional business. In their studies, the researchers found that about 20% of cross-buying customers show one or more of four behaviors:

• Service demanders. As these customers cross-buy, their demands for support services grow out of proportion to the additional revenue you’re getting. At a retail bank the researchers studied, customers who were engaged into additional financial services more than doubled requests for assistance with online banking and balance transfers. 
• Revenue reversers. Consumers of this type are serial returners, seeming to assume that since they’re good customers, they’ve an open license to ask for refunds on used merchandise or to back out of service contracts. 
• Promotion maximizers. Thorough familiarity with your offerings and close tracking of your pricing policies result in these customers cherry picking the loss-leaders and rarely purchasing items or using the shopping channels where your store will earn an adequate return. At a catalog retailer which carried a broad assortment of products and at a multichannel fashion retailer, the researchers tabulated an average annual loss of about $300 for each promotion maximizer. 
• Spending limiters. For these consumers, the size of the pie doesn’t increase. Instead, the total spending stays the same while spread over a broader range of item and channel types. They are probably the least costly of the four types to support, since your revenue from them stays the same. However, any targeted marketing to them is incrementally more expensive because there are more targets to hit. 

     You might choose to fire these customers or discourage them from doing business with you, since they’re losing you money. I agree that you should prune them out, but I suggest doing it by changing their behavior, not by chasing them away. Turn them into profitable customers. The first step is to identify them by analyzing the purchase habits of your cross-buyers. Next, review the effects of your incentives.

• Find the sweet spot at which service demanders are sufficiently satisfied, and keep the service to that level with them. 
• Require justification for returns from revenue reversers and cancel incentives when these customers default. 
• Design your promotions to minimize cherry picking. 
• For spending limiters, do your own cherry picking for the marketing hot buttons you’ll hit. 

Click below for more: 
Assess the Costs of Customer Satisfaction 
Keep Ecommerce Product Returns Pleasant 
Discount Partner Items Simultaneously or Not? 
Keep Targeted Selling Appealing