Posted by Ajay Kelkar on Sun, Mar 27, 2011
Most companies think about Market share, but what about Mind share! Mind share is much more than just advertising. Mostly exposure to advertising can not duplicate the kind of results that a superior customer experience can.
According to research from VRL Publishing, the average number of products per retail banking customer is 3.69. Top of the list is Bankinter, a top 10 Spanish commercial bank. Bottom of the list is, perhaps surprisingly, Standard Chartered, with a cross-sell ratio of just 1.4 products per customer.
For many marketers in India, cross selling still constitutes pure blind telecalling to existing customers. The entire concept of “need based” selling is completely forgotten. Wrongly done cross selling can create a huge negative image for the bank!!
Very few banks publish cross-selling ratios, making comparison difficult; and cross-selling is particularly hard to quantify. Many banks rate products per household over per customer (like Wells Fargo), while some add peripheral products other banks ignore (such as free insurance). Still, looking at 20 global banks that published a cross-selling ratio in 2008, the overall average is 3.69 products per customer.
I wonder how such a list may look for India.
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Cross-selling ratios – selected banks, 2008
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Country/
region
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Average number of products per customer(1)
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Bankinter
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Spain
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6.34
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Wells Fargo
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US
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5.81
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Komercní banka
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Czech Republic
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5.7
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Bradesco
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Brazil
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4.7
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BBVA(2)
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Spain
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4.7
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Average
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3.69
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(1) often also referred to as products per household;
(2) ratios from H1 2008 not full-year Source: BPA
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Wells Fargo is at 5.81 products per household .Some 24 percent of its retail bank households had 8 or more products.
Wells Fargo’s Chairman & CEO, Richard Kovacevich, explains the importance of the company’s cross-selling strategy:
Cross-selling — or what we call “needs-based” selling — is our most important strategy. Why? Because it is an “increasing returns” business model. It’s like the “network effect” of e-commerce. It multiplies opportunities geometrically. The more you sell customers the more you know about them. The longer they stay with you the more opportunities you have to meet even more of their financial needs. The more you sell them the higher the profit because the added cost of selling another product to an existing customer is often only about ten percent of the cost of selling that same product to a new customer. This gives us — as an aggregator — a significant cost advantage over one product or one channel companies. Cross-selling re-invents how financial services are aggregated and sold to customers — just like other aggregators such as Wal-Mart (WMT), Home Depot (HD) and Staples (SPLS).
Here are some “best practises” to think about:
1. Cross-sell ratio should be defined, tracked, and reported at all levels of the organization.
2. Product Bundling is being leveraged at many banks to help drive higher customer satisfaction. This is accomplished through combined statements, linking of products, and free services to certain clients. From a front-end sales perspective, product bundling can create an easy to-understand value proposition. For many banks, the rise of packaged or bundled accounts has fuelled higher cross-sell figures. Wells Fargo, for instance, which for the past decade or so has put cross-selling at the centre of its entire retail banking plans, reports that sales of its Wells Fargo Packages accounts – a checking account and at least three other products – continue to be strong.
3. The structure of the employee incentive for cross sell will have an impact on results. Balance is important between an incentive based solely on individual product merits versus a more holistic approach based on the incremental value the cross-sold product brings to the relationship