A recent article in the BAI Community addressed this question and I thought it brought up some good points. Cross selling has been a hot topic for several years now in the financial world. In fact, for the past several years, increasing cross sell opportunities has been the number one initiative for bank executives according to the Grant Thornton study (80% of respondents ranked it as their number one initiative this year).
David McNab of Objective Business Services and FlowTracker Analytics Inc. wants to help define just what a cross-sale consists of in his BAI Community article. According to McNab, “we don’t think eating your own lunch is selling.” What he means is that a lot of banks gauge cross selling by the number of different products that a customer has. The problem with this calculation is “it counts products (however defined) per customer (however defined) instead of looking at the source and destination of customer money flows.”
Unless new money is involved, it shouldn’t be considered a cross sale in Dave’s approach. However, one may argue that when you move money from one account to another, the new account may introduce opportunities to increase fee income that the previous account wasn’t able to deliver. A classic example of this is moving money from a deposit account to an investment account. In this scenario, the new account has the potential to grow both the customers assets as well as the banks at a much higher rate.
Furthermore, it’s been well researched that the more products a customer has with a company, the less likely they are to leave meaning your retention rates go up. So determining cross-sell success by the average number of products your customers have could be a viable component to the calculation.
However you slice it, Dave and I agree that understanding your cross selling capabilities is extremely important. Bottom line, it’s been over two decades since regulations opened up the doors for banks to cross sell more products and services to their customers, putting them in a position to become the dominant force in our financial landscape. However, it’s clear that most banks are not satisfied with their cross selling efforts.
What are your thoughts about how cross sales should be measured? Should the number of products be included in the equation or should only events that bring in new money be valued?
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