A southern idiom is “if it were a snake it would have bit you.” This idiom is often used when searching in a general area for an object only to find it a few feet away. Many times I’ve recalled this saying when reviewing data from financial institutions. Just like the snake in the grass watching for prey, the best prospects are right there within the existing customers.
The average US individual has 8.5 banking products across all relationships excluding investments per a recent RFi Group study. However, Forrester research indicates the average cross sell ratio for banks and credit unions is only 2.1. That means each customer has 6.4 relationships elsewhere.
While 6.4 may not seem like a large number, it can really add up to lots of lost opportunities. If a financial institution has 50,000 customers, there are about 105,000 existing accounts if the institution is achieving the 2.1 national cross sell ratio. The real opportunity lies in attracting the 320,000 accounts that are at other institutions down the street or on the internet.
An ongoing data-driven cross sell program will allow you to attract these relationships away from the competitor. It’s much easier (and cheaper) to encourage an existing customer to expand their relationship than it is to attract an entirely new customer. Plus, as your existing customer adds additional products with you their longevity will grow from a low of 18 months with one product, to 4 years with 2 products and to 6.8 years for 3 products (Bancography). Your financial institution will grow through more services with existing customers and a reduction in attrition.
As you plan for 2017, hopefully cross-sell will be at the core of building lasting relationships and growing household profitability. An approach based upon an analytic-driven cross sell initiative will breed customer lifetime value, brand loyalty and retention for years to come. If you are interested in learning more, download our recent whitepaper, “Making Cross-Sell Part of Your Bank Culture.”