Skip to Main Content
PCBB Banc Investment Daily February 04, 2014
Banc Investment Daily
February 04, 2014

Cross Selling With A Purpose

Several years back, Amazon reported that cross-sells were responsible for 35% of its sales. It's not surprising, given the effort the online retailing giant puts in to boost sales. For instance, when customers shop its site, Amazon showcases complementary products they might also be interested in. Amazon also advertises "frequently bought together" items in the hopes of landing additional sales. Given the results, Amazon is clearly really good at what it does.
How about banks? Certainly banks spend oodles of money year after year marketing their products to customers, but are the results there and how do you know? A 2012 study by Deloitte provides insight, finding only 19% of retail bank customers owned three or more products in addition to a checking account with their primary bank. By contrast, 49% owned three or more products with other financial institutions.
Banks have problems cross-selling for a number of reasons. One issue that's become more of a sticking point in recent years is lighter branch traffic. This has forced banks to rely more heavily on ATM teasers, email, snail mail and occasional phone calls to get the word out. Often times, these marketing attempts are broad-based and unfocused. Unless customers are in the market for a new mortgage, a home equity loan, a new credit card, a business loan or some other banking product, your message--however you deliver it--is likely to be tuned out.
There are, of course, many lessons to be learned about effective cross-selling. If we could drive home just one of them, it would be this: Banks don't necessarily need to communicate more with customers; they need to communicate smarter.
Banks have a lot of customer data at their fingertips, but they don't always use it to create targeted marketing campaigns vs. generic ones. A good first step is to understand how customers are interacting with your bank. If customers primarily do their banking in person, email promotions may not be the best way to communicate. Likewise, if you're only relying on your tellers to cross-sell, you'll miss out on the opportunity to reach customers who mostly bank online and rarely step foot into a branch.
Next, you need to understand what products and services might appeal to specific customers. It'd be absurd to promote your bank's low mortgage rates, for example, to a 98-year-old widow, but customers in their 20s and 30s might be prime targets. Likewise, a new credit card might not appeal to a customer up his eyeballs in debt, but small business owners might be more receptive. Targeted campaigns should be a snap for banks using good customer analytics programs, but many have significant catching up to do here.
As you ramp up your efforts, you'll need to make sure your customer-facing teams are well-trained in the various products. After all, you are trying to cross sell so training is critical and so are appropriate incentives. Bundling is yet another effective strategy to ensure customers feel more bang for their buck.
Amazon didn't get to where it is today by being timid about cross-selling. Banks that want to deepen relationships with clients--and who wouldn't--should take a lesson from the retailing giant and find a way to better connect with customers..