Journal Articles

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

2011, Journal of Marketing Research

Shibo Li, Baohong Sun, Alan L. Montgomery

Abstract

Firm are challenged to improve the effectiveness of cross-selling campaigns.  In this research, we propose a customer-response model that recognizes the evolvement of customer demand for various products, the possible multi-faceted roles of cross-selling solicitations for promotion, advertising, and education, and customer heterogeneous preference for communication channels. We 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 multi-stage role of cross-selling promotion. The model yields optimal cross-selling strategies about 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, we demonstrate that households have different preferences and responsiveness to cross-selling solicitations. Other than generating immediate sales, cross-selling solicitations also help households move faster along the financial continuum (educational role) and build up good will (advertising role). We show that the suggested cross-selling solicitations are more customized and dynamic and significantly improve over the currently adopted campaign-centric solicitations.

Citation

Li, Shibo, Baohong Sun, and Alan L. Montgomery (2011), “Cross-Selling the Right Product to the Right Customer at the Right Time,” Journal of Marketing Research, Vol. 48, No. 4, 683-700. 

Kelley School of Business

Faculty & Research