Posted by Brad Strothkamp on October 24, 2011
A result of the recent and continuing rash of government regulations is a renewed desire on the part of banks and credit unions to drive new sources of revenue and profitability. One outcome of drive for revenue is a renewed interest in cross-selling to deepen customer relationships.
Cross-Sell Strategy Is Not New
Cross-selling as a strategy is nothing new. Wells Fargo has been a champion of the concept for decades. Cross sell efforts in general have been marginally successful, with the average bank owning just 2.1 financial products out of nearly seven owned per household. The struggles of cross-selling to customers are two-fold. On the consumer side, there is a natural inclination that one provider cannot have the best product in all situations. On the bank side, organizational silos and a general failure to appreciate the impact of effective cross-selling on metrics like customer retention hinder success.
The Elements Of Effective Cross-Selling
So what makes for successful cross-selling? A well-defined strategy is an important but relatively easy part of the question. An analysis of the problem shows that execution is what separates success from also-rans. Effective cross-sell execution requires four key elements:
- Customer interest. A customer’s interest in having a deep relationship with her bank is primary. Our research shows that 41% of US adults are interested or very interested in “putting or keeping all of your financial products and accounts with a single firm.” Age is one factor affecting this desire, with younger consumers more open the concept, but another is the level to which the customer is an advocate of his primary provider — a concept we call Customer Advocacy. Customers who agree more with the statement “My financial provider does what’s best for me, versus its bottom line” are far more likely to consider their provider for additional product purchases.
- Relationship pricing. Consumers are smart. They know there is a value to a financial firm in their having multiple accounts with that firm. They expect to share in that value; they expect to receive a financial benefit for their patronage. In fact, 60% of US online adults think that getting better rates from their provider is the kind of encouragement they need to have a deep relationship. This shared financial benefit is at the heart of a pricing strategy called relationship pricing.
- 360-degree customer view. Metrics are a vital component of effective execution. Next-best cross-sell analyses are valuable, but so, too, are elements like an understanding of what products and services are typically purchased together and a 360-degree view of the customer to know what products she current owns, both with and outside a particular firm. Thirty-eight percent of consumers who purchased a checking or savings account purchased both products at the same time, making packaged selling of those products a logical cross-sell element.
- Effective execution. This is the missing link of effective cross-selling. Financial firms have to know where their customers are and where they would most likely consider additional product purchases. Today that occurs in two places: when products are being opened and when products are being serviced. Most product opening is done in the branch, and many firms do an adequate job of cross-selling in the branch. The greater opportunity is when the customer is servicing, and today that