Approximately 70 percent of consumers say they would prefer to use one bank to manage a majority of their financial products, according to Needham, Mass.-based research and consulting firm TowerGroup. Yet, customers still have fewer than two products at any one bank.
Tired of losing customers to competitors, many banks are restructuring corporate cultures and making customer-centric, cross-selling marketing strategies an enterprisewide priority. By consolidating consumer data into centralized locations and training associates to use analytics tools, banks are creating more-targeted campaigns to bolster consumer portfolios and rebuild dwindling customer loyalty.
According to New York-based Deloitte Consulting, banking customers typically have 1.93 financial products at a single bank. However, banks are convinced that if a customer does not have at least two or three banking products with the institution, they are in jeopardy of losing customers' loyalty and, thus, their business, Deloitte reports.
Attracted to promises of increased customer loyalty and profitability, banks first added cross-selling strategies to their marketing arsenal almost a decade ago. However, many banks did not have a clear understanding of how to incorporate cross-selling technology into their marketing strategies, or how to maximize the solutions' analysis capabilities. It was not uncommon for marketing campaigns to push products that customers did not need or already had. As a result, many unfocused campaigns failed to produce results.
But, pressured by the banking industry's current competitive landscape, many banks are reevaluating cross-selling opportunities. Supported by a newly developed sales culture and evolving technologies, cross-selling could be the customer-loyalty driver for which banks have been longing. In fact, banking executives report that cross-selling is a priority for them over the next 18 months, according to a study by San Mateo, Calif.-based Epiphany, a provider of CRM and business intelligence solutions, that surveyed 91 banking executives between March 2005 and May 2005.
Aiming for the Right Target
The first strategic shift banks are making is ensuring that they are tapping the ideal customer base. "A bank can spend 30 percent of a sale on acquiring a new customer," explains Thomas Volk, executive vice president of international field operations for Dublin, Calif.-based Sybase, which provides open, cross-platform solutions to deliver information. "This cost hampers the cross-selling initiative."
So, the focus no longer is on acquiring new customers. "Instead, banks are grabbing a larger share-of-wallet from their loyal customer base rather than trying to earn new customers," says David Fleming, CTO of Fincentric Corp., a Vancouver-based provider of core retail banking customer value management software.
Further, banks are increasing marketing effectiveness by replacing outbound customer communications with messages delivered at customer touch points. By communicating relevant offers to customers as they conduct business in person, on the phone or online, banks are in a better position to up-sell, according to Epiphany senior director of industry marketing Pradeep Amladi. "The best way to succeed at cross-selling is to determine where the most customer interaction happens," he says. "Rather than reach out to customers [blindly], banks have a better chance of recommending a relevant offer to customers during their visit to the branch, call center or online," Amladi continues. "During these visits, banks have the customer's permission, time and attention."
But, banks must be careful not to overstep their relationships with current customers. Thanks to the flurry of recent mergers and acquisitions, banks' existing customer bases have expanded significantly. While this poses a ripe up-sell opportunity, banks must remain cognizant of each customer's needs before launching a campaign.
"Banks need a view of the entire household and what the financial needs are," says Lee Ann Hoover, managing director, financial services practice, with Chicago-based consultancy Navigant Consulting. "Banks cannot rely on paper-based files to remember and know at a moment's notice what is happening in a customer's life," she stresses. "Banks need to rely on automated tools to augment the customer relationship from the first moment they meet."
The New Sales Force
Clearly, technology is a core enabler of cross-selling efforts, and bank management must take an active role in ensuring that technology is used correctly this time around, asserts Hoover. "Senior management needs to uphold sales performance and ensure that its relationship managers are using the correct tools to conduct needs-based selling," she says.
Senior management at Chicago-based LaSalle Bank ($108 billion in total assets) made cross-selling part of the bank's mission in 2001 and stresses the role of technology in cross-selling efforts across the enterprise. The bank's sales group typically called upon customers to up-sell services. By training the bank's administrative staff across marketing, service and sales groups on the nuances of up-selling and using related tools, LaSalle not only augmented its sales team, it also positioned customer relations at the forefront of its marketing strategy, according to Jack Thurston, LaSalle's assistant vice president of marketing. "Through our management's support, up-selling has become part of our corporate culture," he says.
Armed with its newly trained, enterprisewide sales force, LaSalle added technology to the mix. With the help of Chicago-based SAVO Group, the bank converted printed sales materials to electronic form three years ago. Using SAVO's custom-built eBrochures solution, LaSalle presents product content to clients in e-mails or PowerPoint presentations, Thurston explains. Besides streamlining content delivery, electronic materials keep branding and selling messages consistent among LaSalle's departments, he asserts.
"There is nothing wrong with polished, printed pieces," Thurston says. "However, you can miss many opportunities during one-on-one interactions on the phone if you are not able to e-mail materials within 10 seconds."
LaSalle expanded the initiative with SAVO's Sales Asset Manager platform, or SAM. Dubbed "eMarketing Central" at LaSalle, the solution acts as a one-stop sales tool kit for the bank's relationship managers, Thurston relates. Based on parameters input by LaSalle, SAM suggests products best suited for cross-sell to the relationship manager. The platform assembles and customizes the best, targeted selling materials and information for the highlighted product within seconds.
"Efficiency within time savings and process improvements were the objectives when LaSalle implemented SAM. Over time, customer effectiveness has become the driving force behind the initiative," says Alisa Gilhooley, vice president of marketing for SAVO. "Having the most-precise information and materials in hand and available when face to face with a customer means LaSalle's relationship bankers are armed for a discussion that is meaningful," she adds. "Besides adding value to the relationship, this can ultimately translate into more business, faster."
A Single View
In addition to centralizing business information, banks are centralizing customer information. This requires banks to reorganize their corporate structures to enable a customer-centric approach.
"Each checking, credit card, mortgage and loan department was blanketing the same customer base to sell product, yet most of these untargeted promotions ended up in customer wastebaskets," Sybase's Volk explains. By breaking down silos and creating a single repository of customer information, newly reorganized sales forces are gaining a single view of the customer, which is helping banks transition from product-based sales models to a customer-centric sales approach.
Now, sales forces are analyzing their customers' needs, mapping their profiles with offerings and then selling relevant products. "Banks can only cross-sell if they analyze their customers' needs and paint a clear picture of their customer and their financial needs," says Jacob Jegher, senior analyst for Boston-based Celent.
Experts agree that data quality is the first step to creating a customer relationship strategy. "Data quality is such a hot topic," says Navigant's Hoover. "If data, including names and addresses, is clean, it will be better processed by the systems that relationship managers use as they interact with the customer."
Unlike original CRM initiatives that operated independently with incomplete data, newer applications are being linked to enterprise data warehouses and pulling information from the warehouses' available data sources. The second generation of CRM tools mine data and indicate a customer's lifetime value, credit risk or probability of defection. Some solutions even create scoring algorithms that detect warm leads and suggest actions onto users' computer screens. The result is a more complete understanding of customer needs and more-successful marketing.
"Five years ago, banks did not have the level of atomic data available today," says Peter Harvey, president and CEO of Intellidyn (Hingham, Mass.), which provides data and marketing products and services. Besides revealing what products people buy and what their interests are, "Transaction data can also reveal what offers customers will most likely respond to," he says.
"It is critical to deliver relevant offers. If you offer an investment product to someone who is struggling to save money, you are wasting your time and theirs," Harvey points out. "Use the data to identify the consumer's personal situation. This information is the foundation for a bank's creative marketing decisions."
While analytics are valuable for all financial institutions, virtual banks are unleashing the power of these tools with the most success. Lacking the personal interaction of a branch visit, online banks learn about customers through their page visits and their occasional telephone conversations.
In hopes of better understanding response rates to its cross-selling efforts, click-through rates and which ads made the strongest impressions on customers, NetBank uses analysis tools from SAS (Cary, N.C.) and Epiphany. "The biggest challenge for us is understanding our customers' needs and segmenting the correct offers to specific groups of customers," says Marsha Calfee, director of CRM delivery for Alpharetta, Ga.-based NetBank ($4.8 billion in total assets).
SAS keeps the bank armed with analysis and building models, such as product and customer profitability. Using this information with Epiphany's Interaction Advisor tool, NetBank can create a promotion or banner ad and select the right individuals to whom to push it.
Typically, marketing tools primarily rely on rules-based engines that help companies target promotions to large groups of customers with similar attributes. Epiphany's software has a predictive modeling tool that can determine the offer most likely to be accepted by an individual. "We can run research at any time to see the response rates," Calfee explains. "Based on response results, we can tweak the promotion to ensure it's targeting the right customer."
These tools are keeping NetBank on track with its long-term strategic plan. "Our goal is to have a customer base of 500,000 users, each with four products or services," Calfee explains. "Today, our 270,000 customers have an average of 2.33 products each." According to monthly evaluations of click-through rates and fulfillment rates, NetBank's consumer product purchases have increased 10 percent since August 2004, Calfee relates.
Similarly, LaSalle recently instituted a cross-selling initiative to help relationship managers better serve commercial customers. Called Product Profiler, the solution breaks all product and service groups into categories. Relationship bankers can obtain information, such as customer pre-qualifying questions on specific products, monetary awards programs, important contacts within each product group at the bank, and even how to spot a potential cross-sell opportunity with an existing customer. The system provides this information in readable chunks right at the manager's fingertips.
"Our tool provides relationship officers with the right information to properly identify potential cross-sell opportunities within our existing customer base," LaSalle's Thurston explains. SAVO's tools helped LaSalle save printing, storage and mailing costs, as well as reduce manual labor for relationship managers. More important, the tools contributed to more than $50 million in incremental deals, according to Thurston.
The Future Sell
The future of cross-selling lies in the ability to maintain an ongoing dialogue with customers, says Intellidyn's Harvey. And thanks to ever-evolving Web-based services, "Banks have more options," he adds. "These capabilities are increasing and the cost of technology is going down."
Online services are helping banks acclimate to electronic means of cross-selling and bringing cross-sell initiatives to consumers outside of the four walls of the bank. "Laptops, BlackBerries and other wireless devices are changing the face of cross-selling," says Navigant's Hoover. "Wireless devices untether financial services folks from their desks and let them meet clients wherever they are."
Banks are using these tools and real-time data to cross-sell offers to customers at the point of purchase - in the branch, on the phone and online. Building on systems integration and linking aggregation tools to the cross-selling equation, banking agents can view an up-to-the-minute aggregated profile of the customer's existing banking portfolio and deliver relevant offers instantly.
"More than 50 percent of customer decisions happen in real time," says Epiphany's Amladi. "The prime opportunity to target a customer is while they are conducting business with the bank." Currently, nearly 40 percent of banks already are involved in real-time cross-selling efforts, according to companies that responded to Epiphany's study. Almost 50 percent of other respondents are planning to make similar efforts.
With the help of Epiphany's Interaction Advisor, NetBank targets its customers with promotions in real time. As visitors log onto the site and are authenticated, that information goes back to NetBank's Epiphany database. Using Interaction Advisor's rules and modeling tool, NetBank makes real-time offers that the customer is most likely to accept.
"It is a self-learning engine that adjusts itself based on the rules and the [customer's] responses to the offers presented," the bank's Calfee says. "However, we are looking to the next level we can reach with the tool."
That next level could include merging a business process management (BPM) solution with NetBank's CRM tool. The BPM solution could monitor operational databases; then, an integrated marketing tool, such as Epiphany, could send a real-time offer based on event-based transactions in the operational database.
"If a consumer changes his direct deposit information, that would suggest to us that this customer either changed jobs or possibly moved. Maybe he needs a mortgage," says Calfee, who notes that NetBank hopes to begin evaluating the project within the next 12 months. "By analyzing this customer data in real time, we can target services to our customers in a timely fashion."