Cross-Selling: It’s Important, But Often Neglected

Bankers giving each other a high five during a meeting

It’s one of the basic rules of retention: The more products you sell to a customer, the less likely they are to leave your bank.

Just look at the proof. According to Bank Intelligence Solutions (BIS) from Fiserv, a customer with just one product at their bank will stay for about 18 months. Add just one more product and the bank extends that relationship to four years. At three products, that relationship will last an average of 6.8 years.

Industry sources show that more than 50 percent of customers today have only one product with their bank. RPM Consulting, for example, says most of the banks they work with lose about 50 percent of single-service checking households each year. However, adding a savings account improves retention by 67 percent; and adding a loan as well improves retention to 90 percent or more.

Cross-selling is also more cost-effective than acquiring new business. BIS says that it costs 8 to 10 times more to acquire a new customer than to reach out to an existing one.

Given the statistics, it’s surprising that many banks fail to focus retention efforts on a formalized cross-selling program. The 2012 ABA Marketing Survey Report found that less than half (49.6 percent) of the participating banks have a company-wide cross-selling strategy. That’s a decline from 57.3 percent in 2009, and 60.1 percent in 2007. When BIS surveyed more than 400 community banks, they found that 60 percent don’t even have ongoing marketing efforts for existing customers.

But why? With an average of more than 100 products and services, most financial institutions aren’t lacking for products to pitch. Research from Wells Fargo shows that the average banking customer has 16 financial services products across their providers. And yet, the ABA survey points out, banks average just a 2.3 cross-sell ratio (products per customer).

It’s worth noting what qualifies as a “cross-sell” may differ between financial organizations. There are many ways to define products/services and customers/households as they relate to cross-selling. As a result, there isn’t an industry standard for number of products per customer.

Regardless of how banks define products and customers, it’s apparent that many in the industry need to start focusing on a structured cross-sell strategy. Results from a 2012 Aite Group survey show that just one in 10 customers increased the number of products or account balances they have with their primary bank.

With 41 percent of U.S. adults “interested in” or “very interested in” putting or keeping all of their financial products and accounts with one firm, according to Forrester Research, it’s easy to make the case for cross-selling to existing customers. The difficult part is implementing a program that’s affordable, measurable and effective.

The potential is there. And it’s time to take action. The good news is that government regulations have spurred banks to find ways to drive new sources of revenue and profitability. As a result, institutions are starting to seriously look at their existing customer base with a renewed interest in cross-selling. It’s still a crucial way to deepen the customer relationship and increase the bank’s share of the customer wallet.