Oh, everyone talks about it.
Cross selling. It will save the bank.
We all know the statistics. Based on several different sources, we know that any given bank holds about 2 – 3 financial products per household where there could be up to 10 possible accounts. I spend a good deal of time talking about the appropriate use of cross selling in my book, Seven Billion Banks.
Despite cross selling being a major priority for banks over the last few years, we’re just not that good at it.
Consider the typical example:
The Phone Call
Jill has her checking account with her primary bank. It’s the only account she has there, although she has credit cards, an auto loan, and a mortgage with other institutions. She has three different credit cards, one that she just opened last week to start earning miles. They all have high limits and no balances, making her credit score quite high. But her auto loan is about 3 years old – about the time when people think about trading the car in or refinancing.
Jill gets a call from her bank. It’s an account executive at the branch cross selling. He tells Jill that they’re really happy she’s been such a good customer for so long and would like to schedule an appointment for Jill to come into the bank and review her bank relationship.
Jill doesn’t really know what that means – but it sounds ominous. She’s never met this “account executive” before; it wasn’t the person she opened her account with. She’s quite busy and declines.
Undaunted, the banker continues cross selling and suggests that she consider the credit card offer the bank has running.
Now Jill is annoyed. She just opened one last week. Who needs the additional inquiry? Plus, she has three cards with tons of room. Why in the world would she want a fourth?
She declines, politely.
The account executive then pushes again for the account review.
Jill says no, excuses herself, and hangs up. She’s now re-thinking the choice of bank.
3 Big Mistakes
This example illustrates the 3 big mistakes most banks make while cross selling.
- The Offer is Not Relevant to the Customer
- The Offer Comes at the Wrong Time
- The Offer is Not Palatable or Not Profitable
These are similar to the 3 big themes I talk about in banking.
“She’s Just Not that Into You, Credit Card Offer”
Obviously Jill didn’t need a credit card. Any quick check of her credit situation would have detected that. And sure, the account executive can’t run her credit before the call, but instant pre-screening can create a list of eligible and profitable targets. The rest should be accomplished through better analytics.
Irrelevant offers have two big downsides.
First, we waste our precious time with the customer. When the customer graciously gives us their attention for us to make a cross selling offer, irrelevant offers simply squander it. Who knows when we’ll have that chance again?
But more importantly, we waste our precious goodwill with the customer. With every irrelevant offer, we tell the customer, “we just don’t know you very well.” That was obvious in Jill’s case not just from the credit card offer, but from the request for an “account review.” Don’t you already know everything you need to know about Jill’s relationship with the bank? If not, why not?
When we feel like our bank doesn’t “get us”, we’re much less likely to give them more business.
What Jill really wants is a car loan. But the bank didn’t do the due diligence to know that.
The offer they made was not relevant to the customer.
“If You Had Called Just a Week Earlier”
Obviously Jill wanted a credit card a week ago; she opened one for the rewards. Had the bank called a week earlier cross selling – with a relevant offer – they might have won that business.
Most offers banks make aren’t that far off (well, except credit insurance; we’ll get to that next), but they’re poorly timed.
The reason most banks can’t time the offer right is because they’re looking at the wrong data.
Many banks still use static demographics and psychographics to segment customers into offer groups. This data such as income, age, geography, products held, and time with the bank don’t really change that often. That means the product we offer this group also won’t change.
But that just doesn’t make sense.
We know from our own experiences that our financial needs change over time. And those changes have almost nothing to do with these static, slow-moving data points. They have to do with life events. And life events trigger transactions and interactions with the bank.
By understanding what truly drives the need for financial products, we are in a better position to be there cross selling when it really counts. And with the advent of big data analytics, we really can know much more about the customer than we do today.
Otherwise, the offer comes at the wrong time.
“What’s in It for Me?”
All too often I still hear about the dreaded account review. Can we just all admit now that an account review is just an admission that we don’t know anything about the customer, and we’re trying to come up with an excuse cross selling them something by learning more about their needs?
Driven primarily by a lack of personalization and over-scripting, banks often inadvertently position the cross selling exercise as being “all about me” – the bank, that is. And with all the talk of Next Best Offer, very few banks can tell you what’s best for the customer – and the bank.
But we know from good selling techniques in other verticals that you sell – only after you gain trust. And trust is built on establishing a win for the customer (not a win-win, mind you, just a win for the customer). Want proof? You can see it everywhere.. here, here, and here.
The customer is not interested in whether the bank is profitable or not. They are interested in having their needs met. The bank shouldn’t be making an offer that isn’t profitable to begin with. That’s why claims of “protecting the customer” by shutting off the credit card in case of suspected fraud ring hollow. The customer knows they’re bogus.
The worst case comes while cross selling offers of credit.
It’s not a free proposition for our customers to apply for credit. They take the risk of being declined, but having an inquiry on their credit report.
We, as bankers, do not take this risk into sufficient consideration when making an offer of credit. A credit application should be seen as a sign of trust from the customer to the banker. And even if the customer doesn’t understand the full impact of the hard inquiry on their report, we do, and we should act responsibly about it.
Which is why the pre-approved credit card offer which results in a decline is the worst possible thing banks can do in cross selling products. I call it the “cross sale fail.” And there are almost no more reasons left as to why this should occur. Appropriate determination of eligibility criteria, the communication of those to a decent pre-screening vendor, and alignment of those criteria between marketing and underwriting will essentially stop that from occurring.
And we should as an industry stop offering financial products with little to no benefit for the customer. For customer with credit cards that limit liability to $50 in case of fraud – and that only in cases where the customer doesn’t report it in time, credit card fraud insurance is a waste of money. And shame on those institutions that still sell it. There are similar such products out there. We, in the United States, do not need a lecture from the United Kingdom about what happens when we try to “mis-sell” – a term that wasn’t even known to us until our colleagues across the pond introduced it to us.
There is no excuse for offers that are not palatable or not profitable – to both bank and customer.
The Fix Lies in Your Data
The fix to these 3 mistakes lies in a better use of data and analytics.
I just recently produced a report on the subject, 3 Mistakes Banks Make in Cross Selling and How to Fix Them. You can get the free report here.
In it, I discuss the three things which banks need to do to fix these mistakes. This 10-page report outlines the problem, solution, and how one bank successfully made the switch.