Cross-sell has long involved selling additional products and services to bank customers, based on an assessment and understanding of their needs. Done appropriately, it provides substantial value both to banks and the customers they serve. Yet when cross-sell goes wrong, it also underscores that banks should establish guiding policies and procedures—just as they have for credit, asset liability management, and other areas.
To succeed in this effort, management needs to get out in front of this issue.
That is, management must proactively provide its Board and regulators with details that support continued cross-selling and the opportunity it provides to grow revenues and enhance the customer experience. Most essentially, senior management must also demonstrate that its activities will avoid any reputation risk to the bank.
Until recently, cross-sell policies at banks have been informal and inconsistent. But that’s changing.
Going forward, bank management should expect increased stakeholder requests for detailed cross-sell guidelines—describing when and how cross-sell activities take place. And in the months to follow, internal cross-sell policies will now receive increased evaluation both from internal and external reviewers. In some cases banks may focus on renaming the term “cross-sell” to avoid its present poor reputation.
But rebranding changes nothing. Instead, bank management should now focus on substantial changes that can positively impact the customer experience and justify cross-selling to those skeptical about its value.
Several guiding principles will bolster banks in this new environment:
1.) Banks must cross-sell successfully to achieve organic growth and maintain their importance to customers. Banks that want to increase their operating efficiency and demonstrate profit growth need to harvest as much “low hanging fruit” as possible and execute an effective cross-sell program that increases per client income and enhances account stickiness. The economic impact of cross-sell is significant and quantifiable. Recently, we found that a bank capturing both the commercial and personal business of its clients generated 200% more contribution compared with when it provided only a personal or business relationship. Yet, cross-sell levels at most banks remain low. Why?
- Many bankers are uncomfortable going outside their silos to bring in product experts from other areas. Some bankers lack the knowledge while others lack the self-confidence to do so.
- Many “bankers”—particularly in small business and the middle market—are lenders and do not assess their clients with the relationship focus that effective cross-sell requires.
- Senior executives fail to emphasize consistency in cross-sell, allowing bankers to opt in. At one client bank that views itself as relationship oriented, we found cross-sell ratios varying from 1.7 to 3.5 depending on the line of business. At this bank cross-sell-related compensation is minimal, failing to encourage bankers to build wallet share.
Banks and their Boards need to understand that if a bank is to achieve its optimal economics and provide an enhanced customer experience, cross-sell is not an option.
2.) Cross-sell can and should benefit the consumer and business customer. Of course banks want to sell more to each customer, but cross-sell must demonstrate value to customers:
- Bankers should assess customer needs, emphasize a solutions-orientation in the ideas they present, and avoid product pitches. For commercial accounts, relationship bankers teaming with product and service specialists assess top client requirements and evaluate their business needs in areas such as cash management, and owner needs in mortgage, wealth management, trust, etc.
- In our experience many business customers complain not about pushy bankers but a lack of attention and express a desire to be shown new ideas that can meet their company or personal requirements. Cross-sell should bring the best resources of a bank together to enhance the customer experience.
- Compensation cannot be tied to “widget” sales, but should assess elements including increased profitability and customer satisfaction.
3.) To meet increased Board and regulatory vigilance, banks will find they need to formally articulate their cross-sell processes. Management can trust its bankers, but must also verify the appropriateness of their actions. As part of establishing procedures, management will set inspection policies with both supervisory personnel and information systems auditing current practices—and flagging problems. For example, warning signs of poor practices on the consumer side include low balances in new deposit accounts and non-activated credit cards. Banks should assess and track performance by branch, sales office and/or salesperson. Focusing managers and IT on this area serves as an excellent way to measure the effectiveness of sales training, sales programs and cross-sales management.
4.) Banks need to assess current practices and operate with a bank-wide eight step cross-sell process:
The process begins with an assessment of current practices and includes working across the bank to determine and quantify growth opportunities. Importantly, cross-sell requires a process that continually reviews its effectiveness and targets where to realign activities. As it builds off the key elements of cross-sell success outlined above, management should create a manual-based rulebook that outlines when cross-sell is appropriate, guides banker action, and informs internal and external audiences about cross-sell procedures. This will bring formality to what is usually ad hoc activity.
Regulators and legislators will go down the wrong path if their actions discourage banks to cross-sell. They also risk promoting unexpected consequences. Understandably, recent events have made them suspicious of bank motives and protective of customers: consumers and small businesses in particular. But rather than paint cross-sell with a broad negative brush, they should encourage appropriate cross-sell to ensure that more customer needs are satisfied by banks. Non-bank payments and finance companies are growing in number and importance, but are often subject to less rigorous oversight, with many lacking the culture of customer service that informs the core philosophy of most commercial banks.
Senior management and its Board cannot be intimidated by legislators, regulators and the press—nor dissuaded from leveraging the power of cross-sell to better serve customers and build sustainable relationships. In fact, recent events can turn out to be a positive for the banking industry, if they examine current cross-sell approaches and set practices to increase sales while ensuring the best interests of consumer and business customers.
Addressing this area requires strong, immediate management action to avoid yet more regulatory and compliance quicksand—a prospect smart banks need not be sold.
Charles Wendel, the president of Financial Institutions Consulting (FIC), has extensive experience as a banker and a consultant. He can be reached at CWendel@ficinc.com.