Optimal Incentives to Foster Cross Selling: An Economic Analysis

Andre Decrouppe

Publication: ThesisDoctoral thesis

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Abstract

Cross selling is the practice of selling additional products to an existing
customer. It has the potential to boost revenues and can be beneficial for
both the company and the customer. For many multi-divisional companies
with product or service oriented organizational structures the attempt to
realize the benefits of cross selling generates incentive problems. In this
thesis, three problems spread over three business levels are identified.
Firstly, management needs to (financially) motivate business units in
fostering their cross selling efforts. Secondly, in order to make cross
selling happen, business units need to cooperate and to exchange
product-related information. Finally, in order to increase their short-term
benefits business units might act opportunistically by selling products or
services of other business units without paying attention to adding value
for their customers. These incentive problems are theoretically examined
by applying principal-agent theory and the theory of repeated games. Our
findings suggest that an optimized incentive structure is required to make
both the business units and the management better off. The thesis also
analyses the circumstances and necessary prerequisites under which cross
selling initiatives are beneficial for all involved parties. Apart from that
cross selling sometimes may turn out to be non-beneficial. In addition to
the elaborations above, risks and hazards of cross selling are presented in
detail and applied for the extension of the underlying model. Bottom line,
the work underlines that cross selling is to be realized holistically to
ensure durable success. (author's abstract)
Original languageEnglish
Awarding Institution
  • WU Vienna
Publication statusPublished - 24 Sep 2014
Externally publishedYes

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