One 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. Yet, where can these be found in today’s sluggish economy? Inevitably, banks are looking at their existing customer base with a renewed interest in cross-selling to deepen customer relationships and expand “share of wallet.”
Cross-selling as a strategy is nothing new. Wells Fargo has been a champion of the concept for decades and claims to sell almost six products to each household. Cross-sell efforts in general have been marginally successful, with the average bank owning just 2.5 financial products out of nearly nine owned per household. Cross selling investment products has been particularly difficult. What are the impediments?
The struggles of cross-selling to customers are two-fold. On the consumer side, there is a natural inclination to believe that one provider cannot offer the best product in all situations. On the bank side, success is hindered by organizational silos and a general failure to appreciate the impact of effective cross-selling on metrics like customer retention.
So, what makes for successful cross-selling? A well-defined strategy is an important but relatively easy answer to the question. Analysis, however, shows that execution is what separates success from also-rans, comprised of four key elements:
Customer interest. A customer’s interest in having a deep relationship with their bank is primary. Our research shows that 41% of U.S. adults are interested or very interested in “putting or keeping all of their financial products and accounts with a single firm.” Age is one factor affecting this desire, with younger consumers more open to the concept. 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 understand that there is a value to a financial firm in consolidating their multiple accounts with that firm so they expect to share in that value; they expect to receive a financial benefit for their patronage. In fact, 60% of U.S. 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 such as an understanding of what products and services are typically purchased together and a 360-degree view of the customer to know what products they currently own, both with and outside a particular firm. Thirty-eight percent of consumers who purchased a checking or savings account acquired both products at the same time, making packaged selling of those products a logical cross-sell element.
Servicing followup. 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 receives servicing post-sale and today that means in the digital channels. Most financial firms are using rudimentary cross-selling techniques online and via mobile, with marginal success.
So, what will drive the cross-selling success the industry craves? First of all, you need to create a broad-based group from across the firm, including marketing, product, customer intelligence, and channel managers. Each has a piece of the cross-sell success pie, so each must be engaged in the process. Second, shared goals are required to encourage silos to work together for the greater good. At Wells Fargo, cross-sell imperatives are written into the overall corporate goals. This type of top-down approach is required for success.
Finally, financial institutions must see every customer touchpoint as a potential cross-selling opportunity. The key to success here is analysis with an eye toward relevancy. For example, a customer receiving an email account alert about a low balance is a great candidate for overdraft protection because the service is relevant to the situation. The best institution will dissect all interactions to see if there is a relevant cross-sell fit and ensure that the proper cross-sell offer is made.
Mr. Strothkamp is vice president and principal analyst with Cambridge, Mass.-based Forrester Research Inc.