Selling new products to existing customers has long been on most banks' agendas. Yet historically, few have had significant cross-selling success. When establishing cross-selling strategies, banks must remember that the ultimate goal is improving the bottom line.
David Lewis, Chief Marketing and IT Officer, ING DIRECT (Wilmington, Del.)
Kenneth Kehrer, President, Kenneth Kehrer Associates (Princeton, N.J.)
Heywood Sloane, Managing Dir., Bank Insurance & Securities Assoc. (Wayne, Pa.)
Michael D. White, President, Michael White Associates (Radnor, Pa.)
Q: In today's competitive financial services environment, what makes for a successful cross-selling strategy? What are the major obstacles?
David Lewis, ING DIRECT: For many banks pursuing a loss-leader strategy, cross-sell becomes a strategic imperative. If you attract customers with free checking in the hopes of getting other business from those customers, failure to cross-sell means losses. As well, some banks forgot 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. Even when the paradox is recognized, the losses are often justified by the assumption of higher retention leading to a higher lifetime value, but that makes little sense if the customer is losing money for the bank every year.
Kenneth Kehrer, Kenneth Kehrer Associates: The key obstacle to success is that banks have traditionally been organized in product silos, with their own marketing and technology support. And as they acquired or built new lines of business (i.e., mortgage banking, securities brokerage, insurance), these businesses were not well integrated into the general bank. But there are other obstacles as well - e.g., privacy regulation and disruptions from bank mergers, where the priority for technology resources is conversion of merged banks to a common platform.
Heywood Sloane, Bank Insurance & Securities Association (BISA): It takes a great deal of time, effort and teamwork to successfully cross-sell beyond the traditional bank product set. Credibility and motivation are key. Clients need an easy way to get to the person with expertise, and all the people touching the client relationship need to want to help the client get there.
Q: What technology tools are required for successful cross-selling? What are the obstacles banks face in implementing these tools?
Lewis, ING DIRECT: Successful cross-selling requires that you understand what your customers need and that you keep track of their interactions. Customers do not want their data abused by banks merely interested in exploiting the data to more intensively cross-sell. 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 our Web site. That would be the equivalent of telling them that they are data to us, not an individual.
Sloane, BISA: It really depends upon the size, breadth and sophistication of the market the institution is pursuing. The larger and more varied the market, the more complex and necessary the tools. What can be done largely by word of mouth in a smaller community-based firm requires robust CRM, referral tracking, profitability analytics and information support systems in larger institutions. The biggest obstacle I've seen is the mismatching of tools with the institution and the markets it is addressing.
Kehrer, Kenneth Kehrer Associates: While tools are important, banks are beginning to see that the glue that integrates these tools is an enterprise-wide referral management system. 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. And incentive compensation provides the encouragement to cross-sell.
Michael D. White, Michael White Associates: Simpler technology tools and strategies are required. These include easy-to-use referral and sales-call tracking systems; complete activity management; single-entry, multi-carrier quotation systems; simple CRM; scalable and flexible agency management systems; more Web-based systems and an increasingly paperless environment; and reporting and audit tools that enable banks to meet compliance responsibilities of sales supervision. However, we must constantly remind ourselves that technology is a tool, not a product. Its end purpose is to serve, not enslave. The goal is a steady stream of referrals, sales activities, and new and renewal sales volumes that meet banks' monthly goals.
Q: What are the people issues banks need to consider when implementing a cross-selling strategy? How can banks train and motivate employees to maximize cross-sell?
Kehrer, Kenneth Kehrer Associates: Customer-facing bank staff need to understand that the other side of the coin of cross-selling is fulfilling customer needs. This can be achieved with certification-based training delivered in small doses. A key is to tie any technology training directly to how the use of the tool meets a customer's need.
Two kinds of incentive compensation for cross-selling should be part of the mix. First, it is important to provide rewards for the cross-sale or referral that are commensurate with the profitability of the product or service to the bank. But it may be equally important to engage customer-facing bank staff in the excitement of internal marketing campaigns and contests.
White, Michael White Associates: Key to active support for cross-selling is installing a widespread program of employee training that enhances identification of insurance prospects and insurance needs, compliance with bank insurance laws and regulations, and fully integrated sales efforts. Instruct how to identify potential prospects and efficiently pass on qualified leads to insurance-licensed professionals. Coach how to interpret conversations and transactions to better identify customer needs, wants and goals. Such training is not just analytic; it is emotive, empathic and interactive. To create team effort throughout the bank, incorporate referral activity in bank employees' job descriptions and annual goals. Clearly define objectives and acceptable and superior performance.
Performance appraisals should measure employees' referral performance, and salary reviews and bonuses should be, at least in part, predicated upon satisfactory referral activity. Be sure the rules and schedules of any referral-incentive program are distributed to all bank employees. Do not neglect the positive use of non-cash recognition and awards. In most cases, an employee's primary incentive is recognition by his or her supervisors and peers for a job well done.
Q. How can banks track their cross-selling efforts?
Kehrer, Kenneth Kehrer Associates: The most useful metrics are activity-based. How many customers did the account representative see? In how many of these encounters was a cross-selling opportunity identified? How many of these were referred? What was the outcome of those referrals? An enterprisewide referral system enables management to set objectives, monitor performance and apply training and compensation resources.
White, Michael White Associates: The bank will want various data and comparisons on lead generation and referral activity, sources of funds, sales source, agent activity, agent sales, branch performance in leads and resultant sales, and the agency's overall financial results and performance. Appointments and sales per week, average premium and commission per sale, and multi-product purchases aid sales management. Measuring agency line item expenses as a percent of revenues helps evaluate profitability. The bank's rank among others in insurance-fee income and the contribution of insurance to non-interest income are also useful measures.