Could your management style and use of rewards actually be hurting your cross selling initiatives?

Many sales leaders attempt to spur more cross selling by using transactional leadership methods such as compensation, rewards, and recognition.  But this 2014 study indicates that those tools may actually be HURTING your cross selling efforts.

Background

 Cross selling is one of the major objectives of marketing and sales leaders globally.  In theory, adding more products to an already existing customer should be easier than hunting new customers.  We also know that the more products that a single customer buys from us, the “stickier” they are, that is, they are less likely to switch vendors.

But cross selling is never as easy as we think it should be. Why?  This study focuses on personal identification and cognitive evaluation theories  that attempt to answer that question and to provide some guidance to sales leaders on how to improve cross selling results. It follows up on a 2012 research study that found that  58% of critical incidents leading to failure of cross-selling realization are related to sales-people and 26% to sales managers. In other words, it’s not the product, it’s the sales team.

Research Summary

 Cross-selling is the process of selling additional services or products to an existing customer who has not previously purchased the item.  The researchers here attempt to dig further in cross-selling in a complex B2B environment. They specifically study cross-selling in a biotech firm with customizable products and often lengthy sales cycles and the effects of supervision tactics, monetary rewards, and adoption behavior on the salesperson in the process in order to further detail the root causes of the 2012 study cited above.

Before we address the results of this study, a couple of definitions are in order so that we are all speaking the same language.

Transactional leadership:  a style of leadership in which the leader promotes compliance of his/her followers through both rewards and punishments.

Transformational leadership:  a style of leadership in which the leader identifies the needed change, creates a vision to guide the needed change through inspiration and executes the change with the commitment of the group.

Findings and Implications

Finding: The more the salesperson adopts the product portfolio, his/her cross-selling performance increases.

Implication: train your sales teams across the entire product portfolio, they     must be comfortable with the entire portfolio in order to sell it

Finding: The stronger the transformational leadership, the greater the positive impact of the salesperson’s adoption of the product portfolio on cross-selling performance.  . This type of leadership creates a sense of responsibility and leaves room for creativity for the salesperson which makes him/her more interested and intrinsically motivated to cross-sell.

Implication: Hire and promote for transactional leadership. Train and hold your sales managers accountable for a transformational leadership style and reinforce that through all aspects of your Sales Operations initiatives

Finding: The stronger the transactional leadership, the lesser the positive impact of product portfolio adoption on cross-selling performance.

Implication:  Root out the transactional leaders on your team, their activities will hurt your effort to cross sell.

Implication: Adding a monetary incentive to transactional leadership behaviors decreases the impact of leadership and portfolio adoption on cross-selling.  In other words, compensation does not fix everything!

Implication: Adding monetary incentive amplifies the negative effect of transactional leadership on portfolio adoption on cross-selling.  See point above.

This study indicates that our usual “go to” tools of compensation and rewards may actually hurt our cross selling efforts. This may sound counterintuitive to you but the authors suggest that strong transformational leadership will provide the intrinsic motivation to your sales teams to improve their cross selling efforts.

Adding monetary incentives with transactional leadership decreases or removes the intrinsic motivation that is initially instilled through the leadership behavior.

Cross-Selling Performance in Complex Selling Contexts: An Examination of Supervisory- and Compensation-Based Controls

Christian Schmitz, You-Cheong Lee, & Gary L. Lilien

Published in: Journal of Marketing Vol. 78 – May 2014

 

For a PDF copy of the complete study, contact:

Steve Young

Syoung41@gsu.edu