Customer intimacy and cross-selling strategy

Customer intimacy and cross-selling strategy

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Article ID: iaor20073633
Country: United States
Volume: 51
Issue: 6
Start Page Number: 1007
End Page Number: 1012
Publication Date: Jun 2005
Journal: Management Science
Authors: ,
Keywords: information, game theory
Abstract:

Better targeting opportunities and the increasing role of information-intensive environments have created new challenges for firms in obtaining customer information. Such information can help firms increase their profits through cross-selling opportunities. However, revealing personal preferences and contact information can raise the risks for customers when dealing with a firm. Consequently, some customers trade off the benefit and risks of revealing information. As the opportunity to obtain a higher level of information increases, customers incur a higher level of risk when dealing with a firm. This increases the firm's incentive to commit on a cross-selling level. By such a commitment, a firm can obtain customer intimacy and benefit from detailed customer information. As a result, profits increase while prices decrease. Thus, legal regulations that explicitly require firms to spell out the extent of cross-selling may actually improve the profits of the firm.

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