Bankers today face two interesting and seemingly opposing directives. First, we’ve been told we must improve our cross-sell and our wallet share in order to maintain our profitability. Second, as seen in numerous recent news reports, banks are aggressively cutting costs wherever possible. Since most efforts at cross-sell seem to entail additional spending (for staff, training, and technology), how is it possible to achieve both of these conflicting goals?
To effectively answer this question, we must first understand the current state of cross-sell in modern financial institutions. The real challenge with creating a successful cross-sell program is to bring together all the pieces necessary to achieve success. For front-line staff to be successful at cross-sell, a few critical requirements need to be met. The consumer must have an interest in the product or products to be offered, the product bundle needs to be a fit for that consumer, the consumer needs to actually qualify for the product, and most importantly, the staff need to feel that they are providing a value to their customers by making an offer.
In the traditional relationship banking environment, all of these elements can be easily met, based on the personal relationships maintained between the banker and the consumer. In today’s environment, especially at larger institutions, this can only be achieved virtually. By virtually, I mean, through the use of enabling technology that is able to fill the gap in our banking relationship. We can achieve the same effect through a combination of statistical models, instant prescreen, sales scripting, and staff coaching.
The most difficult part of a process for most institutions is engaging their front-line staff to make effective offers. Only a veteran salesperson can hear “no” a dozen times and maintain enthusiasm for the next call. For our modern front-line staff, we need to use technology to reduce the number of consumers who decline offers. This is done through models that predict the likelihood of a consumer to accept an offer on a particular visit, in addition to using models to predict the most relevant product offer. By increasing our acceptance rate, our staff will immediately recognize the increasing value of the offers that they are making.
One client utilizing an instant prescreen campaign markedly increased their cross-sell acceptance rate to double the industry average. This is notable because their other products remained at half the average. The results clearly showed that an effective marketing campaign, supported with appropriate offers and realtime prescreen can provide a dramatic increase in acceptance.
The remaining question is, how can we reconcile technology investment with the need for cost savings? The answer, unfortunately, is not easy. Many banks have all of the capabilities described above, though they are distributed across different divisions: marketing, credit risk, and collections. I’ve yet to see a bank successfully bring these disciplines together for a single campaign. That doesn’t mean that it’s impossible, it just means that some additional consulting and technology will be required for successful implementation. Effective cross-sell can drive additional revenues and improve the efficiency of existing staff, but not without some additional investment.
So, where do the cost savings come from? There are a few options. If you have invested in additional staffing and budgets for a marginal cross-sell program, consider shifting funds. By improving your methodology, you have the opportunity to increase sales while reducing the overall cost. Another possibility is looking at marketing programs that don’t provide the return they once did. When considering instant prescreen, you might decrease investment in batch prescreen mailings (letters with pre-approved offers). Even as a short-term measure, this can free up the funds to launch the program. Once rolling, the program should drive revenues that comfortably justify its expense. Granted, that is not the level of radical cost reduction bankers are hoping for today.
At a time when banks have begun to realize that they are spending more on compliance than they are on growing their business, something has to give. The banks that choose to find cost reduction in their sales efforts will achieve a short-term savings, but position themselves for a long term struggle as their customer base shrinks. The key to cost savings is to utilize enabling technology to provide both cost reduction through efficiency and increased revenue through effectiveness. In the end, the successful institutions will be those that invest to improve customer relationship and wallet share.