By Jenifer Snook
Community banks and credit unions are facing tougher competition every day. Pair that with many financial institutions losing important NSF fee revenue and it is more important than ever to make sure each and every customer is profitable.
There are two ways to increase sales: gain new customers and sell new products to existing customers. Community banks and credit unions will not “win” against the competition by maintaining the status quo.
According to the International Journal of Bank Marketing, 94% of bankers surveyed believed establishing a sales culture was very important to their institution’s success. Yet, less than half had actually instituted even the most rudimentary reforms. Towers Perrin research found that of those banks with a sales culture, only 52% said their cross-selling success met their expectations.
If sales are so important to success at financial institutions, why have so many either not implemented a sales culture or failed to achieve the results after implementation?
Barriers to Effective Cross-Selling
Myth #1: If I set the quotas they will come.
Many FIs still employ the “product-push” promotion where a special incentive or product is offered hoping employees will “push” it. They also set quotas for employees to try and hit.
The Towers Perrin research showed 63% of bank respondents have compensation packages that reward specifically for cross-selling additional products, and 59% are offered incentives for a referral. For most, the rewards are in addition to base compensation. This is the same survey that showed only half of the respondents felt they had met their cross-selling goals.
Why? Employees often think of selling as persuading customers to buy or do something they normally would not do. Some people view selling as sneaky and undignified – pushing unwanted products on unsuspecting people. However, employees don’t want to push products or services they believe customers don’t want or need. Employees may honestly tell customers, “This is the product we’re pushing this month.” Yes, I’ve actually had a teller use that exact quote during a mystery shop once.
If employees believe that cross-selling is only for the benefit of the bank, no amount of quotas or incentives will help them increase cross-sales. Instead, we should employ a culture where cross-selling means building valuable long-term relationships that are mutually beneficial.
The first key: in any selling initiative is to make sure employees understand cross-selling is done for the benefit of the customer, rather than just the benefit of the bank. When employees understand how our products can make our customers’ lives better, they will be a lot more likely to talk about them with your customers.
Myth #2: Product knowledge is like riding a bike
Most people perceive training to be “one and done.” Once you’ve trained employees you’re done and you don’t have to worry about it again. It’s like teaching someone to ride a bike – once you learn you never forget.
Unfortunately, having product knowledge is very different from riding a bike. It’s an ongoing, continuous process that never ends. In fact, product knowledge is more like the saying, “If you don’t use it, you lose it.” You can teach tellers to balance drawers and cash a checks with the “one and done” concept because it’s a task they conduct daily.
According to the Towers Perrin surveys, when front line employees were asked what they considered to be the largest barrier to cross-selling, the most listed answer 59% of the time was lack of product knowledge. When managers were asked the same question, their top barrier was not lack of product knowledge, but rather lack of competitive products to offer.
Essentially, managers believe employees have adequate “product knowledge” when in fact, the majority of employees believe they do not.
The second key in any selling initiative is to make sure that employees not only understand the products the banks offers, but are product experts.
Myth #3: Once I get the checking account the rest will follow
Establishing deposit accounts for new retail banking customers, or “onboarding,” is a perfect opportunity for expanding customer relationships and growing core deposits.
Most banks realize onboarding is important, but they don’t spend a great deal of time making sure the process is executed. This can lower your overall profitability per account and cause customers to leave your bank more quickly.
Research demonstrates the average customer uses less than two services from any one financial institution. That same customer may use anywhere from two to six different financial institutions in the same community. Seventy percent of all customers share their banking needs with more than one financial institution, suggests Affinion Group, a global consulting company.
Second, cross-selling keeps the customer with the bank longer. It is much easier and more cost effective to keep the customers we have than to gain new customers. Some banks have as high as 30-40% attrition rates for new customers in the first year.
According to Frank Newell in the New Rules on Marketing, “If you have only a checking account at your local community bank, that institution has only a 50-50 chance to keep you as a customer. Add a savings account of any kind and the odds of retention jump to 10-1. Three accounts in the portfolio and the odds jump to 19-1.”
The third key in any selling initiative is for your financial institution to not just implement, but actively monitor your onboarding program. Successful financial institutions are realizing growth in deposits, increased cross-sells, higher satisfaction and greater loyalty – all during a new customer’s first 90 days.
Creating a Sales Culture
Define Sales: Let your employees know that sales at your bank is not “pushing” products or meeting quotas. Sales = Service. We are a full-service financial institution and we can and should help customers meet all of their financial needs.
Product Experts: Having product experts in your branch is not an easy task. It takes commitment at all levels but especially ongoing commitment from the branch managers. Managers need to consistently encourage and coach employees to be product experts.
Follow-up: We must be intentional in following-up with our new customers. A structured contact system for our new accounts will enable us to take ownership of the relationship. Leaving off this step will leave cross-selling to chance and opportunities will be missed.
If you implement this formula, you can’t help but be successful with increasing cross-sales in your branch.