Online Customers Aren't the Only Target for Mobile Banking Services

While attending the 2009 Mobile Financial Services Congress in Miami a little over a month ago, there was a consistent message from almost all of the speakers that a mobile banking customer is less likely to attrite, more likely to use additional engagement services such as bill pay, and less costly to serve.

Interstingly, it was also emphasized that while most banks have promoted the use of mobile banking to their current online banking customers, the real financial benefit is realized when a customer who is not as heavy a user of online banking is converted to the mobile channel. In other words, it makes stronger financial sense to try to segment offline customers and implement a proactive channel migration strategy to convert channel usage.


Some of the presenters at the Mobile Financial Services Congress suggested that offline customers who are quickly purchasing the newest wave of smart phones may actually bypass the online channel in favor of mobile banking services.

M-Com and Fiserv presented the findings from recent research that reinforced this trend. Nearly two-thirds of those surveyed reported contacting their financial institution once a week or more through traditional bank channels. Nearly half of survey respondents use their bank's call center or interactive voice response to help manage their finances. These are among the costliest channels for the bank to support, with each call center transaction costing an average of $3.75 and each automated voice response system transactions costing an average of $1.25. Conversion of even a small percentage of these transactions to the mobile channel would bring high returns. The study also found that the offline customer not only is aware of mobile banking (70%), but also have an interest in these services (60%). The primary area of interest is in checking balances (46%), contacting customer service (37%) or locating a nearby ATM or branch (30%).

It is clear there is a tremendous untapped opportunity for converting offline customers to the mobile channel with enhanced targeting, expanded enrollment opportunities (channels other than online) and improved communication of benefits of this channel. The banks that are the most aggressive in reaching out to these households will reap the greatest rewards

Cardlytics Introduces Bank Statement Innovation

At a time when banks are looking for ways to generate new revenue and increase customer loyalty, Cardlytics has developed a way for banks to leverage transaction data to deliver targeted offers to clients on their online bank statements.

Since the privately held company launched the innovative product last November, more than 100 marketing campaigns have been run, reaching half a million bank customers. According to a recent AdvertisingAge article, the company expects to have 50 to 70 financial institutions on board by the end of the summer, reaching some 10 million customers by the end of the year.

The program uses transaction data such as the date and amount of purchase, location and merchant to develop special offers by the merchant where the transaction occurred or by a competing merchant in the same category. Imagine an offer from a local restaurant appearing on your statement after a recent purchase from the same establishment. Or maybe an offer from a competing eatery.

The activation of the offer is electronic without any special processing by the bank or retail institution. When the offer is activated by clicking the area on the online statement, it is converted the next time the debit or credit card is used at the participating merchant and the purchase is processed by the bank.

The merchant pays for the online ad to Cardlytics, with a pay-for-performance model with the bank getting a piece of the action. Initial response rates for the program, according to Cardlytics has been very favorable, with the only drawback potentially being the lack of demographic data available for targeting.

This type of turn-key rewards program could expand quickly, using the same type of model and insight that is used for Google with their paid advertising. The success, however, will hinge on a combination of the banking industry's ability to embrace a push-based retailing concept and the customer's acceptance of a perceived sharing of data. As with most new online concepts, acceptance will most likely vary by segment.

Be Careful of 'Mental Opt-Out' With Email Marketing

For those who read my Blog, you know that I feel strongly that the email channel is significantly underutilized by the banking industry. Not only do marketers not effectively leverage this channel in conjunction with other direct and mass marketing options, most banks do a terrible job at even collecting email addresses in the first place.

Unfortunately, for those who have begun to use email marketing in support of customer communication efforts, some have gone to the opposite extreme by viewing email as a 'free' marketing tool without giving adequate thought to the importance of relevancy. As many realize in their daily scanning of their email in box, overusing the email channel can have a detrimental effect of the value of this channel and negatively impacting the overall customer experience.


It was with great interest therefore that I read a recent op-ed in DM News written by Mark Smith from Portrait Software discussing the mental opt-out that occurs when a company bombards a customer with too much untargeted email marketing communication, only to have the reader open the email and then quickly hit the "delete' key. The impact of multiple irrelevant emails is to either explicitly receive an opt-out to future email or to implicitly lose the intended reader's trust and attention for future communication that may have been of interest.

As Mark mentions in his op-ed, if you get a reputation for sending irrelevant communications, you are basically asking for mental opt-out. And just because a customer's name doesn't appear on the do-not-contact list, it doesn't mean they are paying attention.

As financial institutions get more comfortable with this channel, it will be important to ensure that adequate targeting is done and that the focus of each email is to positively impact lifetime customer value.

Differentiation Is Key Component To The Value of Rewards

Yesterday, it was announced that merchant-funded rewards leader, Cardlytics had signed a global strategic alliance with loyalty leader Groupe Aeroplan allowing for the expansion of transaction-driven marketing (TM) to Canada and abroad.

Unlike traditional rewards programs used by financial institutions that are points based and driven by the volume of transactions processed, the Cardlytics platform provides the ability to present highly targeted retailer offers to customers through a bank's online statement, mobile device or email based on the customer's recent transaction activity. Since the Cardlytics decisioning tool resides within the bank's firewalls, customer insight never leaves the bank and retailers never have access to proprietary customer information. In addition, as opposed to the points reward program being a cost to the bank, the Cardlytics pay-for-performance model not only eliminates risk for the merchant, but also can provide much needed revenues for the partner bank.

The Cardlytics solution has been so well received, that as many as 70% of U.S. households could have such a program tied to their bank's debit and/or credit card relationship by Q1 of 2012, according to Scott Grimes, Cardlytics' CEO. This amazing growth and acceptance begs the question . . . if all the banks have the same program, how can differentiation be achieved and maintained?

In an interview with Lynne Laube, President and COO of Cardlytics earlier this year, I asked her how banks can leverage the Cardlytics platform and retail partnerships beyond simply offering the same offers as the bank down the street. She explained that while most bank clients will have many of the same nationwide retail partners, there will the capability to offer significant regional or even local offers. While some of these merchant partnerships might be initiated by Cardlytics, individual financial institutions can also link retailers to the platform.

For industrious financial organizations, the ability to offer current or prospective corporate, commercial or small business clients with highly targeted audiences who are prone to buy their products could be a strong business development and retention strategy for calling officers. It also would differentiate the bank's reward program from others across the country. By expanding the program's merchant partnerships, the retail and small business customers will also receive more targeted offers, making the program more valuable to the customer.

Another way a bank can differentiate a merchant-based rewards program will be to expand the channel integration of the merchant offers. Beyond simply providing the targeted offer as part of online statementing, the individual bank's ability to seamlessly integrate the offers into email, SMS alerts and even mobile channels will increase customer engagement and loyalty. Leveraging GPS capabilities could enable customers to receive onsite rewards at merchants they frequent or merchants within a defined radius.

According to an eMarketer study released today, while mobile coupons still represent a small portion of digital promotions, popularity and usage is growing at a rapid pace. It is believed that mobile couponing may grow by as much as 80% over the next two years fueled by the growth of smartphone users. Banks' ability to take advantage of this mobile trend will be the foundation for future rewards program growth.

Potentially most powerful from a differentiation perspective, Laube mentioned that insights from ongoing transaction monitoring can provide valuable behavioral insights that can assist in customer and household segmentation and even financial product cross-selling. Banks could leverage merchant rewards as a 'virtual currency' for different segments of customers or could provide merchant offers as an incentive for consolidation of relationships. As banks begin to introduce more advanced PFM and other money management tools, this type of rewards platform can also be integrated into the customer dashboard.

In a world filled with offers from Groupon, Living Social and more than 600 other competitors, the marketplace for untargeted offers may be reaching a saturation point. According to research firm, Lab42, while 44 % of households use deal websites, 55% feel overwhelmed by the number of offers filling up their email box. Given this mixed landscape, the ability to provide highly targeted, timely and valuable offers will be the key to effective differentiation.

What do you think?: How else do you think banks could differentiate themselves using merchant-funded rewards?

Demographics No Longer Effective For Financial Direct Marketing

Bank and credit union marketers have traditionally relied on the use of demographic segmentation as a means of targeting customers for product and service communication. 

Recent studies, however, provide growing evidence that changes in product delivery, communication channels and competition may have made a demographic-based targeting approach much less effective compared to other approaches that use additional data sources.

Marketing segmentation is one of the most widely used marketing tools and has long played a crucial role in identifying and treating differences among customers. For decades, bank and credit union marketers have used demographic segmentation for product development, product positioning, marketing communication and results measurement. Traditionally, this segmentation has been done based on characteristics such as age, income, gender, family life stage, occupation, education, race, etc.

The reason for using demographic segmentation is that it is relatively easy to use for most financial institutions due to relatively accessible customer databases and because this form of segmentation is continuously referenced by both academic and trade literature. While it is still true that there are differences in the use of financial services across demographic segments, however, research as far back as the 1960s has suggested that demographic variables are only remote proxies for differences in buying styles, decision processes or sensitivity to promotional influences (A Two Dimensional Concept of Brand Loyalty).

A more recent research paper in the Journal of Financial Services Marketing entitled, Suboptimal Segmentation: Assessing The Use of Demographics In Financial Services Advertising found that there is little support for the reliance on demographic variables for bank marketing. Despite continuing popularity, the research found that while demographics can explain broad behaviors, they play a weak role in explaining brand preference, product purchasing, innovation adoption, channel use and technology uptake.

The explanation provided by the research indicates that customers today are better educated, more individualistic, more marketing literate and more influenced by the convenience of new channels and product offers than the customers of the 1960s and 1970s (when demographic modeling first came into vogue). The result is a significant fragmentation of the marketplace into much smaller groups that can't be defined by age, income, and other simplistic variables.

For the research, customers of the banks analyzed importance scales on 28 service related comments that related to nine key financial service factors such as website appeal, trust, customer service (pre- and post-sale), how the customer gathers insight, ease of contact, appeal of marketing, appeal of personalization (both in marketing and on the website), brand image and products used. The responses were analyzed against five demographic measures:

• Age
• Gender
• Income
• Occupation
• Education

Overwhelmingly, significant differences between demographic groups were not found, suggesting that demographic segmentation is a suboptimal basis for targeting marketing to customers. This should not be a total surprise to bank marketers if they were to do a simply straw poll of their demographically similar friends to see what services they hold, how they transact their banking, how much they trust the banking industry and their willingness to try new technologies.

More than ever, interests, opinions and overt behaviors are a much better indicator of customer demand according to the recent studies around the use of 'big data'. How does the customer save, spend, and transact is a much more powerful determinant of future financial product purchase and use patterns than the demographic profile of a customer.

Beyond Demographic Segmentation - External Tools

Part of the challenge of going beyond demographics for financial services segmentation is that some key data elements may be missing on a banks customer database or may be difficult to collect for modeling purposes due to internal data silos (product use, channel use, spend and payment data, etc.). Secondly, the difficulty and/or cost of acquiring some primary customer data may be prohibitive (social insights, credit insights).

In response to these needs, some tools have been developed using census-based (non-personal) insights. Many of these have been marketed by credit bureaus and other providers, providing more accurate geodemographic classifications that can be overlaid on customer profiles for better targeting and analysis. A summary of the segmentation advances made by bank marketers can be found in another research paper entitled, The Evolution of Segmentation Methods in Financial Services within the Journal of Financial services Marketing.

Within the context of the evolution of bank segmentation, some financial organizations have created needs-based segmentation that combines, age, family structure, age of children, etc. While some of this data is difficult to compile, it helps in the determination of produce needs and use. PriZm from Nielsen is a good example of segmentation based on lifestyle and lifestage. As with the geodemographic segmentation above, this type of lifestyle segmentation is not done at the household level but is approximated based on neighborhood insight. The power of this type of tool, therefore, will depend on how it is used (modeling, analysis) and how important personalized data is to the needs of the marketer.

Beyond Demographic Segmentation - CRM Tools

At its core, CRM is primarily concerned with obtaining knowledge about the customer at three levels:

• Understanding the demographic composition of the customer
• Understanding how the customer interacts with the bank (what products are held, what is the balance of the accounts and how do they use the service(s)
• Understanding channel use and preferences
• Understanding how to leverage this insight to sell more and prevent attrition

Understanding a customer's channel preference for purchasing new products and transacting with current products is invaluable for banks and credit unions that have both extensive physical networks but also evolving online and mobile channels that impact a customer experience. 

Organizations without channel preference insight from a marketing perspective are at a competitive disadvantage and are apt to be wasting significant marketing dollars. Similarly, those banks that simply defer to email and/or online or digital channel are also missing significant opportunities from consumers who prefer traditional channels. 

While third party tools have been developed to approximate consumer channel preferences, research has shown that channel preferences differ between most other industries (retail) and financial services. By understanding customer demand for each channel, institutions are able to optimize channel mix and allocate resources accordingly.

Behavioral Segmentation

Behavioral marketing is gaining followers within the marketing community while the dimensions of how to segment based on behavior differs from institution to institution. While some organizations will segment based on internal purchase, payments, and/or use dynamics, others are expanding the realm of behavior captured to include digital and/or social behavior. 

Decisions as to what behavior to include usually is based on access to insight and ability to process the insight. As was intended by demographic segmentation, the goal of behavioral segmentation is to divide the customer (or prospect) base into quasi-homogeneous groups that align with a bank marketers' business strategies.

A new report from Aite Group entitled, A Behavioral Segmentation of Banking Customers, uses a customer's financial activity to distinguish between segments, providing insights into purchase behavior, likelihood of referrals, interest in deals, revenue potential, risk of attrition, etc. By assigning a score to the frequency of various financial activities, insight can be gained regarding marketing opportunities (and risks) by segment.

"Segmenting consumers by how many products they own or whether they are of a certain age, income classification or educational status does very little to help banks or credit unions improve marketing effectiveness," stated Ron Shevlin, senior analyst for Aite Group and author of the report (available here). "Tracking customers' engagement is a much better predictor of customer relationship growth and referral behavior, and it helps banks and credit unions improve the relevance and focus of their marketing communications."

Interestingly, as with any segmentation or grouping of customers, there are risks to making broad assumptions with the insight. For instance, in the Aite report, highly active customers provided both an excellent source of relationship growth and referrals but also were more likely to attrite (consistent with their high activity and comfort level with channels). That said, the report found ways to make this highly active group more engaged through Personal Financial Management (PFM) tools which are valued by the highly active segment.

Bringing It All Together

While any one segmentation process can be powerful as a tool for bank marketers, many of the larger financial organizations combine many of these tools to provide a multi-dimensional view of their customers and their needs. An example of this type of segmentation was provided by the The Financial Services Club blog in a presentation by AdKit as shown below.

Options For Financial Marketers

In an era where information is prevalent and relatively easy to obtain, it is imperative that advanced segmentation dimensions be identified, tested and utilized for more effective (and efficient) marketing. With increased competition and ever-tightening margins, firms that are not able to successfully pinpoint potential customers, cross-sell indicators and income opportunities will be at a significant disadvantage to those more progressive organizations.

It is time to pursue targeting of customers and prospects that goes well beyond demographic variables that have been proven to be suboptimal. This will require testing and mirroring what is being done by the best in the financial services industry as well as other industries.

For some best-in-breed ideas beyond what was discussed above, I suggest following the IBM Big Data Hub that provides an amazing wealth of insights, case studies, technical overviews as well as interactive tools to assist any bank or credit union marketer.

Additional Resources

A Two Dimensional Concept of Brand Loyalty: Journal of Advertising Research 9(3) 29-35 (1969)

Suboptimal Segmentation - Assessing The Use of Demographics In Financial Services Advertising: Journal of Financial Services Marketing (Volume 16, 173-182)

Segmentation of Bank Customers By Expected Benefits and Attitudes: International Journal of Bank Marketing (Volume 19, 6-17)

A Behavioral Segmentation of Banking Customers: Aite Group (April 2013)

The Evolution of Segmentation Methods in Financial Services: Journal of Financial Services Marketing (Volume 7, 27-74)

Segmenting Retail Banking Customers: Journal of Financial Services Marketing (Volume 10, 179-191)

The Big Data Hub: IBM

Retail Banking Customer Segmentation in Worldwide Banking: The Financial Services Club Blog (2011)

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Banks and Credit Unions Must Improve Cross-Selling Efforts

Despite the fact that banks and credit unions have talked about the importance of cross-selling for decades, few institutions have a disciplined process to take advantage of cross-selling opportunities that can grow operating revenue from existing customers. 

For those organizations that do have a process in place, studies show that many are not targeting the offers to reflect insights readily available, thereby annoying some of the best customers.

Outside of an improved interest rate spread (which is unlikely in the foreseeable future), banks can only create revenue by adding new customers or by deepening existing relationships. At a time when competition for new customers has never been greater from both traditional and non-traditional players, the only sustainable opportunity is to sell more to the customers a bank or credit union already has.

While the findings differ a bit by study, research shows that U.S. adults own between 8-12 financial products each, with ownership of services increasing with age (until age 54), by channel (online users have more products) and by type or institution (credit unions and smaller banks do better cross-selling).

Forrester: North American Technographics Benchmark Survey, 2009

Forrester: North American Technographics Benchmark Survey, 2009

While the number of products held by a typical household hovers around 10, most customers only hold 2-3 services at any one institution. Only the very best organizations sell more than four services to any one customer (not including 'go with' services such as debit cards). How can banks improve their penetration within their current customer base?

Sources of Sales

According to the most recent Gallup U.S. Retail Banking Survey, which asked 9,000 financial service customers how they engage with their bank when they purchase a product or service, one in every five customers opened a new account or signed up for a new service from their bank in the last six months. The vast majority of these sales (59%) came from customer already planning to open an account or buy a new service (the bank did not need to do any marketing to these customers since they were going to take this action without any selling).

The rest of the potential customers include 1) those who were considering opening an account but needed additional prompting (33%), and 2) those who were not considering opening an account, but did so with some prompting (8%).

Source: 2013 Gallup U.S. Retail Banking Survey 

What is important about the 33% of customers who are considering buying a product, but hesitate until they receive something from the bank or are talked to, is that the bank that 'wins' is usually the bank that understands the timing of the decision, has the best relationship and knows the offer that will best resonate with the potential buyer.

Not to be ignored are the 13% of the customers who Gallup found at one time considered buying an additional product or service at the bank, but opted not to do so. These are lost opportunities as well.

Gallup also found that customers who are 'fully engaged' with a financial institution are much more likely to buy an additional product from the bank or credit union than those who are just 'satisfied'. This makes sense when you consider that a customer could be very satisfied with a financial institution that they have an account with but don't do much with the account (mortgage only customers, CD customers without checking accounts, etc.).

For example, while less than 45% of 'satisfied' households surveyed by Gallup said they would consider their bank or credit union the next time they needed a product or service, that consideration increased to 83% among customers who were both satisfied and 'engaged'. In fact, customers who are engaged said they were more likely to open a new account, add ancillary products and services and/or obtain planning advice than those customers who are just satisfied.

Source: 2013 Gallup U.S. Retail Banking Survey

The Buying Process

As has been discussed in several other research studies in the past couple years, banking and credit union customers do a significant amount of research before purchasing a product or service. In the Gallup research, it was found that more than half of the customers considering buying a new product seek out information prior to the time of purchase. In fact, the research found that customers who looked for information had a 17% lift in eventual sales conversion rates.

The key for financial institutions is to identify the most influential information sources for converting the 'pondering' customer to being a 'sold' customer. Not surprisingly, the Gallup research found that social media was the most effective channel used by customers that lead to a sales conversion. What may be a surprise to many is that written material (direct mail and email) was the second most effective selling tool for banks and credit unions.

Source: 2013 Gallup U.S. Retail Banking Survey

Interestingly, the channels with the highest cost to the bank (speaking to someone in the branch or a customer service representative over the phone) provided a relatively smaller lift in sales conversion even though they are primary sources of information for potential customers.

The requirement for banks and credit unions to manage multiple communication channels to effectively and efficiently move potential customers through the sales funnel is a difficult challenge. Gallup believes financial marketers should ask themselves the following questions as they allocate resources.

• Do we know where our customers, specifically, are looking for information prior to purchasing?
• Are we delivering a consistent message across sales information channels?
• How do we balance our resources between those channels that are high impact in conversion but low in usage (i.e. social media) vs. those that are high in usage but have lower impact in conversation (i.e. spoke to someone in a branch)?
• Do we know what our customers value in a bank and are we delivering on the message at every touch point?
• Do we know what actions we need to take to increase conversion rates in each channel?

Improving The Cross-Sell Process

While what qualifies as a 'cross-sell' may differ between financial organizations, the cross-sell ratio is still the number of products and services sold divided by the number of customers (or households). The key to boosting the ratio is to accelerate the rate and effectiveness of sales conversations. While I have covered some ideas around cross-selling in previous Bank Marketing Strategy posts (here, here, here and here), Gallup provided some great insights into how to improve cross-selling effectiveness.

1. Define and measure cross-selling: As I mentioned above, there are many ways to define products or customers as it relates to cross-selling. Since there are no industry standards, it is difficult to compare different institutions. It is not difficult to set a definition for your bank, however. The primary decisions are whether to include 'go with' services within the product category (debit card, online banking, mobile banking, bill pay, direct deposit, etc) and whether a cross-sell ratio includes only retail banking products and customers/households or small business, investment services and commercial customers/products as well. The key is to keep the measurement within your organization consistent and meaningful.

2. Analyze the drivers of cross-selling: How is your organization's cross-selling ratio trending over time? What is impacting your cross-selling trend? Your trend is most likely impacted by the following:

• New customer acquisition: As new customers are acquired, the cross-sell ratio decreases if your team is not cross-selling new customers at or above the current cross-sell rate.
• New customer cross-selling: There is no more important time to cross-sell than during the onboarding process. If your institution does not have a multichannel, onboarding process with multiple 'touches', new customer acquisition is probably negatively impacting your cross-selling ratio.
• Existing customer attrition: Attrition of established relationships due to moves, etc. can negatively impact your cross-sell ratio if the relationship is not replaced with a similarly strong engagement. On the other hand, the culling of low engagement, single service relationships can dramatically improve your cross-sell ratio.
• Existing customer cross-selling: Building a proactive, targeted and consistent cross-selling strategy can improve your cross-sell ratio over time and set the stage for improved revenues and lower attrition (customers with more services are less likely to attrite).

3. Build the cross-sell message into your vision and values: Cross-selling requires more than lip service. To be effective, senior management must embrace and continuously communicate to importance of cross-selling to both the bank and the customer. It should be published, posted, presented and reinforced continuously both within the bank and to the general public. Wells Fargo has made cross-selling part of their internal mission statement and vision for more than a decade. It is posted for their employees and is made public on their web site and presented as part of every investor meeting (see Wells Fargo case study below).

4. Provide metrics for employees to measure performance: Building an employee measurement and performance component to your cross-sell process is imperative to success since employee engagement is required for cross-selling to be effective. Setting standards for employees on a customer level will improve cross-selling and ultimately increase revenues.  

5. Identify and share branch level best practices: When measurement is done on a branch and regional level, causes of variations begin to become clear. While some of the variations are out of a branch's control (market differences, branch location, etc.), other variations are caused by controllable factors such as leadership, employee engagement, training, etc. It is important to find 'success stories' and share them across the organization to improve results across the board.

6. Improve the cross-sell communication process: As can be expected, the effectiveness of any cross-sell process depends on the quality of customer communication through every channel. This obviously includes improving the employee-customer engagement but also includes every marketing engagement with the customer through all channels.

Unfortunately, according to the Gallup study, financial marketers could definitely improve cross-sell communications with current customers. Sixty-six percent of 'fully engaged' customers felt the offers they receive are 'general' in nature, 41% found the offer annoying, and stunningly, 53% of customers already had the product being promoted (Ouch!). Of significant concern is that the most engaged customers (the ones most likely to buy) felt they were targeted worse than those who were less engaged.

Source: 2013 Gallup U.S. Retail Banking Survey

Gallup suggested several keys to making your cross-sell marketing program more effective:

• Identify the most engaged customers (accounts held, transactions made, etc.) and review the products already held with your institution
• Model the best relationships as the foundation for building similar relationships with less engaged households
• Make product recommendations based on event-triggers, account ownership trends, market changes, etc. Increase insight gathering from customers to improve this process.
• Make sure marketing offers are customized based on the customer relationship regardless of channel being used for marketing (provide flexibility to employees and personalize all marketing communication).
• Leverage analytics on previous behaviors on the customer/household level to improve targeting, timing and offer selection.

7. Implement a short-cycle sales management process: Promote an environment that cultivates immediacy, focus and continuous improvement through daily huddles, short term result monitoring (weekly as opposed to quarterly). Breaking down major initiatives into 'bite sized' portions makes the accomplishment of major goals palatable on the individual level and promotes team engagement. Both actions and outcomes should be broken down in this manner. Commitments from individuals and teams are easier to measure as well.

8. Recognize and reward: Simplicity and frequency are the key. Most financial institutions over-complicate recognition and incentives, diluting the potential impact of the program. All activities and behaviors that drive cross-selling should be recognized and rewarded. Money may not be the only reward either. Sometimes recognition can be just as impactful, especially for shorter term accomplishments.

Improving cross-selling is difficult to do and even more difficult to maintain over time. Since returns on investment are sometimes slower and more incremental than major product promotions, financial institutions often place cross-sell initiatives further back on the burner or give these initiatives less attention. This has been seen with onboarding and event-trigger programs that represent 'easy money' once implemented.

Unfortunately, given the current rate and revenue environment, banks and credit unions can no longer implement cross-sell programs as a short-term focus or miss opportunities that are there for the taking on a daily basis. All marketing channels need to focus on selling current customers the right product, at the right time, through the right channel leveraging the insight we have on each individual customer.

If we don't, our competitors will.

Case Study of Financial Cross-Sell Success: Wells Fargo

Wells Fargo's obsession with cross-selling is legendary and starts at the top of the organization. The vision of the bank is that service and salesmanship are at the core of how the bank can continue to be successful and that if silos within the bank are broken down, cross-selling will flourish.

As opposed to just saying cross-selling is important, however, senior management continues to make this effort a primary focus of the bank and goes out of its way to show the value of cross-selling for both the bank and the customer. 

In fact, within the published vision of the bank that is available on the Wells Fargo web site is the bank's published strategy around cross-selling which illustrates the connection of value to the customer:

"The core of our vision-based strategy is 'cross-selling'— the process of offering customers the products and services they need, when they need them, to help them succeed financially. The more we give our customers what they need, the more we know about them. The more we know about their financial needs, the easier it is for us to work together for them to bring us more of their business. The more business they do with us, the better value they receive and the more loyal they become. The longer they stay with us, the more opportunities we have to satisfy even more of their financial needs. That’s the mutual benefit of cross-sell."

In a presentation at the 2013 Citi Financial Services Conference, Senior EVP and CFO Tim Sloan reinforced this overarching strategy and showed that Wells Fargo continues to achieve industry leading cross-sell rates, with their average customer having 6 products at the bank and their top region approaching a cross-sell rate of 8 products per household.

Source: Wells Fargo Investor Presentation at Citi Financial Services Conference (March 2013)

According to Sloan, "We've remained focused and have continued to grow cross-sell across our business lines. We have successfully grown cross-sell in our retail bank overall, and as tenure with the bank increases, the customer has more products with us. But, we also have many opportunities to continue to grow cross-sell with our average customer as we look at the potential of the average household." (note: Wells Fargo includes 'go with' services in their cross-sell measurements)

Source: Wells Fargo Investor Presentation at Citi Financial Services Conference (March 2013)

Sloan continued in his Investor Day comments, "We believe we can continue to grow cross-selling because we have many opportunities to increase penetration across our product lines. For instance, we've continued to increase the penetration of certain consumer lending products in our retail household base since last year's Investor Day. In particular, we've had great success in our credit card area, with new credit card account penetration increasing to 33% of our retail household base. Despite this success, we believe the penetration is still too low."

Source: Wells Fargo Investor Presentation at Citi Financial Services Conference (March 2013)

Wells Fargo's commitment to cross-selling extends beyond the retail customer base and is measured in the Wholesale Banking, Investment Banking, and Wealth, Brokerage and Retirement (WBR) areas of the bank. The impact of this cross-sell focus is that fees at Wells Fargo continue to grow in all areas of the bank as new relationships are established and current relationships are expanded.

Source: Wells Fargo Investor Presentation at Citi Financial Services Conference (March 2013)

Wells continues to improve cross-selling without being the lowest cost option in the marketplace. According to Sloan, it is because the people on the front line are focused first on building the overall customer relationship.

Here is a direct quote from his Investor Day presentation:

"You don't build long-term sustainable value to shareholders by just being the lowest price option, you have to offer an entire relationship to a customer.

So when we go out, we want to win business. And sometimes to win the business in terms of providing credit for example, you have to be competitive on price. Sometimes that means you're lower, sometimes it means you're in the mix and sometimes you might be towards the higher end. But the reason that we've been able to demonstrate these returns, even if we are aren't very competitive on price is because we have a relationship focus and you've seen what we've been able to do in terms of broadening those relationships over time.

So when I was out on the line or when I think about pricing today, I don't think about it as, geez, this is the loan pricing. I think about what's the total relationship worth? And does it make sense to make some sort of investment to bring the business over so we can get the rest of the products and services over time without [tiring] obviously, but the rest of products and services over time and being able to grow that relationship. 

Because we have confidence in our team because they've been able to demonstrate to do that, that's an easy bet to make every day of the week."

Additional Resources

Banks: Stop Missing Sales Opportunities - Gallup Blogs (May, 2013)

The Secret Weapon Banks Aren't Using - Gallup Business Journal (May 2013)

2013 Citi U.S. Financial Services Conference Presentation (Tim Sloan Slides) - (March 2013)

Banks Can Do Better Than Modest Revenue - Gallup Business Journal (May 2013)

Banks: If You Want More From Your Customers, Rethink Your Marketing Efforts - Gallup Blogs (May 2013)

Banks That Only Measure Satisfaction Are Leaving Money On The Table - Gallup Blogs (May 2013)

The Bank That Works - Forbes (February 2012)

Solving The Cross-Sell Imperative In Financial Services - Forrester Research (September 2009)

Keys To Cross-Selling Success - BAI Banking Strategies (September 2011)