Years ago, I was trying to set up a meeting with the head of a small business group at a top five bank. When we spoke by phone, he said he only wanted to meet if I had a “secret sauce” that would lift his business. Not having any secret sauce that I could find anywhere, we never met.
I have long denied that any kind of secret sauce existed to boost revenue growth and profitability, defining “secret sauce” as a straightforward action or technology that would result in fast, positive change. Instead, our work emphasizes the need for a targeted strategy aligned with consistent and rigorous execution. While strategy and execution remain critical, one area has emerged as both critical and essential for bank profits and, even more basic, survival. Getting this area right does provide the closest thing to a secret sauce that I have seen.
Cross Sell Connection
That area is cross sell. In several recent engagements, we have seen a direct and undeniable correlation between the number of products sold and the level of account profits. This may seem obvious to many, but, remarkably, many banks fail to focus on this area or to include it as a metric in their banker compensation plans.
The importance of cross selling is hardly a secret. Decades ago, former Wells Fargo & Co. CEO Dick Kovacevich stressed the importance of cross sell and promoted the phrase “Eight is Great” to underscore Wells Fargo’s focus on selling each consumer customer eight products spanning lending, deposits, investments and insurance.
If the value of cross sell is so basic and its importance so well known for so long, why do banks lag in this area both in consumer and business banking? There are at least four reasons:
Product knowledge and complexity. Over the last ten years, product proliferation and complexity has increased dramatically and continues today as mobile and related initiatives grow. Oftentimes, product managers are able to create new products much faster than their sales staff can intellectually absorb and sell them. One bank we know addressed this issue by simplifying its product set, eliminating low volume and low profit products in order to have bankers aim at the highest yielding opportunities. (Of course, this assumes you know your product profitability.)
Client knowledge. In order to cross sell effectively, you need to know your customers’ needs. That is easier for a corporate or middle market banker than others because of their limited number of accounts. However, bankers with hundreds of consumer or business names cannot be expected to diagnose each one individually. They need to begin with their top 10 to 20 accounts and develop sales plans for them. Beyond that, banks can apply data analytics to uncover opportunities and determine priorities within portfolios. We are not suggesting that the banker resemble a product pitch man, but rather that he has the background knowledge to understand the customer’s current product use and future needs.
Organizational silos. Customers may see your organization as one bank, but bankers understand that their institutions can resemble fiefdoms with significant hurdles to internal cooperation. One bank we know fails to push a certain valuable product area because that product generates fees rather than loan volumes. Instead, the top manager that his group reports into wants to build loan volume in large part because of compensation, so a product that is attractive to many customers and that could differentiate the bank from others remains undersold.
Compensation. You sell what you incent. If banks want to cross sell, they need to set specific cross-sell goals as part of overall compensation. They should also define which product or product areas they want cross sold and how that will be tracked. If not, bankers may head to the lowest yielding (and maybe easiest to sell) products rather than those that provide the greatest value to the bank and the customer.
So, how can banks create a cross-sell culture? It takes some work, but here are the necessary steps:
Account Planning. Most banks operate with an account planning program for larger relationships. In those cases, management needs to make sure the plans are detailed and that careful follow-up execution occurs. Smaller accounts need to lever customer relationship management (CRM) and, in some cases, third-part analytics to set product and target priorities. Rather than formal account plans, smaller accounts require a brief checklist-based approach to highlight priorities and drive actions.
Metrics and Compensation. Significant cross sell will not occur without its inclusion among performance metrics and its reflection as a major comp component. Bankers need to be explicitly directed to focus on this activity.
Integrated Teaming. Today, bankers are stretched more than ever. They need to work closely with product specialists to recognize opportunities and how to capture them. The silos have to come down. Compensation helps but an internal culture of cooperation remains even more critical. Product specialists need to attend team meetings and become part of a group that commits to executing on the plans they create together.
Product simplification. Many banks would benefit if they offered fewer rather than more products. Too many products increase operational costs and confuse both the customer and the sales staff, making cross sell an even greater challenge. The 80/20 rule applies to product sales as well as most everything else. Product managers also need to set priorities so that bankers are moving in the same direction.
Top management support. Kovacevich kept repeating his cross-sell mantra and was largely responsible for its success. He overcame the resistance of many bankers who hoped that “This too shall pass” and wanted to return to their old ways. Cross sell is not an option; it needs to be mandated by senior management, and senior management needs to monitor its success. A hands-off or business as usual approach will lead to poor results. Many banks will fall short in this area.
While cross sell may be a secret sauce it is not an easy one to create. The ingredients for success are multiple and complex and require significant attention to detail. Unfortunately, just because it is an obvious area for attention does not mean that banks do it or do it well.
Mr. Wendel is president of New York City-based Financial Institutions Consulting, Inc. He can be reached at [email protected].
