# Cross Selling & Upselling Explained: Pros, Cons, and Key Differences

![Cross-Sell: To sell related or complementary products to a customer.](https://www.investopedia.com/thmb/fWE1i3ZMGlCtHjC5ieUOYz1w6cg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/cross-sell.asp-final-e1b6e840e9cf43aa9771a79ea38d71c0.png)

*— Investopedia / Julie Bang*

## What Is a Cross-Sell?

Cross-selling refers to the attempt to sell additional products or services to an existing customer who has made a purchase. It is a common sales tactic in the financial services industry, and especially attractive for the income financial professionals earn from selling [additional types of investments](https://www.investopedia.com/articles/younginvestors/10/what-is-an-investment.asp). It can benefit customers who may need and/or appreciate other products. However, some existing customers may view cross-selling as pushy and driven by a firm's desire for revenue, rather than their best interest. In fact, Wells Fargo was fined more than $185 million and refunded more than $2.8 million to customers for its cross-selling scandal in 2013.

### Key Takeaways

*   Cross-selling involves marketing related or complementary products to existing customers, enhancing revenue opportunities for businesses.
*   Effective cross-selling requires understanding customer needs and ensuring products align without appearing pushy or self-serving.
*   Cross-selling successfully can foster brand loyalty, offering customers value and satisfaction through a wider range of products.
*   It’s crucial for advisors to have a thorough understanding of the products they cross-sell to maintain trust and compliance.
*   Poor cross-selling practices can harm customer satisfaction and business reputation, as seen in past scandals involving fraudulent practices.

## Understanding the Cross-Selling Process

Cross-selling to current clients is a primary revenue-generating method for many businesses, including financial advisors. It's often the easiest way to grow because advisors already know their clients’ needs and have established relationships.

However, advisors need to be careful when they use this strategy. A money manager who cross-sells a mutual fund that invests in a different sector can be a good way for the client to diversify their portfolio.

However, an advisor who tries to sell a client a mortgage or other product that is outside the advisor’s scope of knowledge can be a disservice to a customer and damage the business relationship.

When done efficiently, cross-selling can translate into significant profits for stockbrokers, insurance agents, and [financial planners](https://www.investopedia.com/terms/f/financialplanner.asp). Licensed income tax preparers can offer insurance and investment products to their tax clients, and this is among the easiest of all sales to make. Effective cross-selling is a good business practice and is a useful financial planning strategy, as well. 

## Keys to Mastering Cross-Selling Techniques

Advisors need to fully understand the financial products they're selling. For example, a stockbroker focused on mutual funds must receive extra training to sell mortgages.

A simple referral to another department that actually sells and processes the [mortgage](https://www.investopedia.com/terms/m/mortgage.asp) may lead to situations where referrals are made whether they are needed or not, as the broker may not understand when the client really needs this service but is only motivated to earn a referral fee.

Advisors need to know how and when the additional product or service fits into their client’s financial picture so that they can make a more effective referral and stay compliant with suitability standards.

[FINRA](https://www.investopedia.com/terms/f/finra.asp) may use the information that it collects from its inquiry to develop and implement a new set of rules that govern how cross-selling can be done.

Advisors should also know the range of products their company offers. A new staff member may interact with clients without a full grasp of the firm’s advisory services. They need to learn the company’s offerings to spot cross-selling opportunities.

## Cross-Selling Strategies in Financial Services

Until the 1980s, the [financial services industry](https://www.investopedia.com/articles/financial-careers/08/financial-career-options-professionals.asp) was easy to navigate, with banks offering savings accounts, brokerage firms selling stocks and bonds, credit card companies pitching credit cards, and life insurance companies selling life insurance.

That changed when Prudential Insurance Company, the most prominent insurance company in the world at that time, acquired a medium-sized stock brokerage firm called Bache Group, Inc. in an effort to offer broader services.

The mergers of [Wells Fargo & Co](https://www.investopedia.com/articles/markets/090915/who-are-wells-fargos-main-competitors.asp). with Wachovia Securities and Bank of America with Merrill Lynch & Co., both in 2008, occurred at a time of declining profits for both banks—and of financial crisis for the brokerages.

To a large extent, they were aiming to expand their retail distribution arms by buying large and established distribution channels of the brokerages, hoping for synergy between banking and investment products and services.

With few exceptions, cross-selling failed to catch on within many of the merged companies. As an example, Bank of America lost [Merrill Lynch](https://www.investopedia.com/articles/financial-advisors/020416/advisors-how-do-edward-jones-and-merrill-lynch-compare.asp) brokers through the insistence that the brokers cross-sell bank products to their investment clients. Wells Fargo has been more effective in instituting cross-selling because its merger with Wachovia brought a relatively similar culture into the fold.

It can be difficult for large firms to effectively integrate different types of products. H&R Block Inc. failed in this proposition when it acquired Olde Discount Broker in a push to offer investment services to its tax customers.

The company ultimately decided to jettison the brokerage enterprises and focus solely on taxes. After acquiring Olde for $850 million in 1999, H&R Block sold that division of its operations for $315 million less than 10 years later.

## Comparing Cross-Selling and Upselling Tactics

Cross-selling and [upselling](https://www.investopedia.com/terms/s/suggestive-selling.asp) are sales tactics used to convince customers to purchase more. However, there are differences to consider.

Upselling, or suggestive selling, refers to encouraging customers to buy a more expensive or upgraded product or service.

The aim is to maximize profits and enhance the customer’s experience. This can boost the customer’s perceived value and increase Customer Lifetime Value (CLV).

> **Fast Fact**
>
> Companies are 60% to 70% more likely to sell to an existing customer, whereas the likelihood of selling to a new customer is 5% to 20%.

For companies, it is easier to upsell to their existing customer base than it is to upsell to a new customer. Existing customers trust the brand and find value in the products and/or services.

This trust drives the success of upselling. For instance, if a customer trusts a brand, they will generally trust the brand when it presents a seemingly better option.

Alternatively, cross-selling is the sales tactic whereby customers are enticed to buy items related or complementary to what they plan to purchase.

Cross-selling techniques involve suggesting, discounting, and bundling related products. Similar to upselling, it aims to boost sales per customer and enhance value by meeting consumer needs.

## Pros and Cons of Cross-Selling

### Advantages

Companies employ different sales tactics to increase revenues, and one of the most effective is cross-selling. Cross-selling is not just offering customers other products to purchase; it requires skill. The business must understand consumer behaviors and needs and how complementary products fulfill those needs and add value.

Customers purchase from brands they trust and have had positive experiences with. Therefore, it becomes easier to sell to an existing customer than to a new one.

Existing customers are more likely to purchase products that relate to or complement what they already plan to purchase. As consumers begin to use more of a company's products, they become increasingly loyal to the [brand](https://www.investopedia.com/terms/b/brand.asp).

### Disadvantages

On the other hand, cross-selling can have adverse effects on customer loyalty. If done incorrectly, it can appear as a pushy, self-seeking sales tactic.

This is evident when a salesperson aggressively tries to sell a related product or attempts to sell without understanding the customer's need for it. Not only does this affect the sale, but it also negatively affects the brand's reputation.

Additionally, cross-selling to the wrong type of customer could be counterproductive. Some customers have high service demands, and the more products they buy, the more service they command. As their service demands increase, so do the costs associated with providing those services.

Lastly, some customers habitually return or exchange products. When cross-selling to this segment, profits are not realized. Initially, their purchases generate substantial [revenues](https://www.investopedia.com/terms/r/revenue.asp); however, they often return or default on payments, costing the company more than what the customer generated in revenues.

Pros

*   May potentially increase revenue by increasing sales quantities, especially in less popular goods
    
*   May increase brand loyalty as customers are further exposed to an assortment of one company's products
    
*   May fulfill all of a customer's needs, preventing them from approaching a competitor for other requirements
    

Cons

*   May result in increased service-related costs as it may be more expensive to cross-sell compared to other strategies
    
*   May negatively impact relationships if the cross-selling technique is found to be pushy
    
*   May result in a negative public perception of requiring or demanding multiple products be paired together
    

## Real-World Example of Cross-Selling

In 2013, Wells Fargo employees opened, without consent, new bank and credit card accounts for unsuspecting customers. The motivation: to meet cross-selling quotas. After an internal investigation, more than 30 employees were terminated.

To identify how widespread the issue was, Wells Fargo hired an independent consulting firm to review new accounts opened since 2011. They also created new procedures for validating new accounts, as well as implemented new training programs and security protocols.

The consulting firm found that over two million accounts were fraudulently opened within a five-year period and 115,000 of those accounts incurred fees. Eventually, over 3.5 million fraudulent accounts were discovered.

Wells Fargo returned more than $2.8 million to affected customers, and more than 5,300 people were terminated. Without notice or explanation, then CEO John Stumpf resigned. In 2016, Wells Fargo was hit with a $185 million fine for this scandal.

## How Can You Increase Your Cross-Selling Effectiveness?

There are several strategies you can employ to make cross-selling effective. Consider using an email drip campaign to periodically introduce complementary products and services. Wait until you have developed a relationship and have proven success with the customer.

Make sure your products and services are aligned with the needs and goals of the customer. Offering something that serves no purpose is counterproductive and can detract from customer satisfaction.

## What Are the Do's and Don'ts of Cross-Selling?

When cross-selling, consider your loyal customers who are more likely to purchase again. Build campaigns focusing on satisfied customers and promote additional products to them. Train associates to recognize satisfied customers and assess their needs.

On the other hand, don't assume that customers are aware of your other offerings. Educate them, and help them understand how those products can deliver value. When speaking to a customer, do so in a personable manner; otherwise, it comes across as a sales pitch. Lastly, avoid unhappy customers as it can further the divide between them and your brand.

## Is Cross-Selling Ethical?

Cross-selling is a valid and ethical business practice to bring in more business. Cross-selling isn't meant to trick a customer; it is meant to inform them of alternative goods that may fit a different need. It's simply good business practice to discuss winter coat sales with a sporting enthusiast who is out shopping for new skis.

## What Is Cross-Selling on eBay?

eBay features a Cross-Promotion Connections program whereby eBay sellers can connect. When a buyer wins a bid, they can see the seller's other listings, as well as their connections listings.

Previously, eBay featured a no-cost Cross-selling tool that allowed sellers to promote related products. Sellers could choose to either promote related items or promote discounts for larger orders. This feature was discontinued and is only allowed for select users at certain times.

## The Bottom Line

Cross-selling is a strategic marketing practice focused on offering related or complementary products to existing customers. It can enhance both sales and customer satisfaction when executed effectively. Prevalent in the financial services sector, cross-selling can foster brand loyalty and provide customers with the products they need so that they don't turn to competitors for them. However, unless done well, cross-selling can result in significant pitfalls such as customer dissatisfaction, increased service costs, and damage to a company's reputation. This was epitomized by the Wells Fargo scandal, where aggressive and unethical cross-selling practices resulted in significant fines, customer distrust, and reputational harm.

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. "[Wells Fargo, Wachovia Agree to Merge](https://www.sec.gov/Archives/edgar/data/36995/000119312508205973/dex99a.htm)."
>     
> 2.  U.S. Securities and Exchange Commission. "[Agreement and Plan of Merger By and Between Merrill Lynch & Co., Inc and Bank of America Corporation](https://www.sec.gov/Archives/edgar/data/65100/000095012308011151/y71399exv2w1.htm)."
>     
> 3.  Ameriprise. "[Ameriprise Financial to Acquire H&R Block Financial Advisors](https://ir.ameriprise.com/news-events/news-releases/press-release/2008/Ameriprise-Financial-to-Acquire-HR-Block-Financial-Advisors/default.aspx)."
>     
> 4.  H&R Block. "[Form 8-K](https://investors.hrblock.com/node/22731/html)."
>     
> 5.  Harvard Law School. "[The Wells Fargo Cross-Selling Scandal](https://corpgov.law.harvard.edu/2019/02/06/the-wells-fargo-cross-selling-scandal-2/)."
>     
> 6.  Consumer Financial Protection Bureau. "[Consumer Financial Protection Bureau Fines Wells Fargo $100 Million for Widespread Illegal Practice of Secretly Opening Unauthorized Accounts](https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-fines-wells-fargo-100-million-widespread-illegal-practice-secretly-opening-unauthorized-accounts/)."
>     
> 7.  eBay. "[Cross-Promotions Connections](https://pages.ebay.com/cl/en-us/My_eBay/crosspromotion-connections/)."