What Was Old Is New Again: Cross-Selling Is Back In Vogue
Bank of America CEO Brian Moynihan stated in a speech today he plans to step up cross selling as a part of his efforts to revamp the company. The strategy of cross selling is nothing new, but few financial providers have been successful in pulling it off. Why is cross-selling such a challenge? The reasons are two-fold:
From a customer perspective:
- Nobody Can Be Good At Everything. It is the going in assumption that no single financial provider can have the best product in all situations. Consumers don’t naturally assume that their brokerage provider would also be the best provider for their mortgage.
- To Each His (or Her) Own. Each product purchase is a discreet transaction. The product being purchased drives what is important. A customer may choose their checking account provider based on the availability of ATM and branches, but when that same customer is shopping for a credit card, they may desire the flexibility to aggregate debit and credit rewards which their existing provider may or may not offer.
- “What If…”. There is some hesitancy on the customer's part to have all their "eggs in one basket." The current financial crisis has likely only added to the angst of holding too many assets with a single firm. While this concern will subside to a degree over the next few years, it has been and will continue to be in the back of consumer’s minds.
From a provider perspective:
- What’s The Business Case. The benefits of cross-selling and retention are not nearly as well understood and clear as the benefits of acquisition. Any respecting marketer will likely know the cost per acquisition on marketing efforts, but few understand the revenue implications of retaining or cross selling existing customers. Former Wells Fargo CEO Dick Kovacevich gave us his view when he said “The cost to us of selling a product to an existing customer is only about 10% of selling the same product to a new customer"
- All For One, One For All. Buy-in is incredibility challenging. Cross selling is a group effort, and we all know silos abound in financial services. Everybody must share in the expense, execution and reward of cross-selling customers. Corralling the cats is no easy task and requires high-level executive support ala Mr. Moynihan from Bank of America.
- If We Build It, They Will Come. Many financial providers fall into the trap of assuming that if they offer a breath of products consumers will naturally buy what they offer. This attitude results in subpar cross sell performance. Effective cross selling requires objectivity related to product offerings, customer interest and operational readiness.
In a report I wrote last year on cross-selling financial products, 41% of online US adults said they would consider purchasing multiple products from a single provider.
The key to successful cross selling starts with understanding why customers don’t want to buy multiple products from a single provider as much as why they do. By understanding that information,financial providers can start building a strategy to either take advantage of the opportunity or to eliminate the barriers that may exist.