Cross-selling is a concept all banks seem to be harping on, but is it worth all the hoopla?

Selling new products to existing customers has long been on most banks' agenda and has been constantly discussed in various internal/external meetings. Yet historically, few banks have had significant cross-selling success. When establishing cross-selling strategies, banks must remember that the ultimate goal is improving the bottom line.

Cross Sell

Selling of banks products/services to an already existing customer—is the broad definition of what cross sell means. It can be selling an existing checking account customer a credit card or selling an existing credit card customer a mortgage. Banks have been using cross sell as a marketing approach to expand their footprint and also increase their customer base.

Every bank has its own logic of how many relationships it would like to have with its customers. It can be 1:2, 1:3, etc. The more relationships the bank has with a customer is tantamount to one having a better wallet share of the customer. More spends on all the products of the bank leads to better top- and bottom-line performance. Conversely in pursuit of selling newer products to existing customers, banks tend to forget that profitability of a customer is very important aspect and just not addition of another product. If banks tend to attract customers with free checking in the hope of getting other business from those customers and if this does not happen then the purpose behind cross-selling is defeated. As well, some banks forget that the objective was profit—not a higher cross-sell. Many tactics merely increase cross-sell—not profit. Offering discounts for additional products and services, but at the cost of forgone revenue, results in losses.

Banks in the past and some banks in the present also have been traditionally organized in product silos, with their own marketing and technology support. This has led to a siloed approach leading to less cross sell. Banks need to understand that it takes a great deal of time, effort and teamwork to successfully cross-sell beyond the traditional bank product set. Credibility and motivation are very important aspect here. The person interacting with the Clients needs to have an expertise on the subject and help the client in understanding and getting the right product.

Cross-selling comes with its advantages, of course. It considerably reduces customer acquisition costs, servicing, and marketing and communication costs and thereby substantially increases spread for banks. It is well understood and key finding that greater the number of products held by customer leads to an increased probability of retention.

Tools Enablement

Successful cross-selling requires that banks understand what their customers need and that the bank keep track of their interaction via phone banking, web, walk in, etc. Just making phone calls to sell loans or plastic cards that the customer does not desire may often end up annoying him. Analysing the customer database and then putting the right customer relationship management strategies in place is essential to ensure that the cross-selling effort does not backfire. Customers also would not like their data to be used by Banks to merely send them mailers of no interest to them. They will, however, appreciate a bank that does not try to sell them the same product again and again. It's also important to keep track of interactions across channels. If the customer declines an offer at the call center, there's no point in offering the same product when he or she visits the banks Web site. That would be the equivalent of telling them that they are data and not an individual.

Based on the market size the tools required to target customers also matters. For large Banks with large number of customers, CRM, referral tracking, profitability analytics, easy-to-use referral and sales-call tracking systems; complete activity management, scalable and flexible agency management systems, information support systems are required. Along with the systems/tools effective training gives customer service and sales representatives the knowledge they need to better meet customers' needs and to utilize the tools that management has invested in.

Training, Incentives and People

Having tools and systems to cross sell does not end the process of selling. Getting the employees involved in this exercise and motivating them to sell is an important aspect. It is important for the Bank to provide rewards for the cross-sale or referral that are commensurate with the profitability of the product or service to the bank. It also makes sense to involve the staff in coming out with innovative campaigns and also ideas which will stimulate them to sell newer products. As banking products tend to get very complex, helping the employee understand the complexities of the product, rules and regulations and compliance issues if any need to be educated. Help in identifying a prospect and handing over the lead to a qualified lead for closure is also important. Constant coaching in helping them to understand customer's needs, wants and goals along with dealing in an emotive, emphatic and interactive manner is imperative. Linking cross sell to be a part of an employee's performance appraisal along with non cash recognition and cash awards are some of the initiatives taken for employee engagement.

How to Track Cross Sell

Measuring the conversion and maintaining the metrics is important. At the end of the day how many customers did the account representative see? In how many of these meetings was a cross-selling opportunity identified? How many of these were referred? What was the outcome of those referrals? An enterprise wide referral system enables management to set objectives, monitor performance and apply training and compensation resources. In addition to this Banks would like data on lead generation, conversion of leads to account, performance of employee, branch, division etc all leading to overall financial results and profitability.

The more relationships a bank has with a customer, the more loyal the customer will be and the bank gets to know the customer through several relationships, thus the assessment of the credit quality of the customer can be bettered. At the end it will be a win-win situation for both the bank and customer as it is cheaper and easier to get customer from ones own data base than going out for getting new customers. Banks should be careful in exploiting this situation and see that the bottom line along with the top line goes up and not just cross sell of products.