At Truebridge, we have done research to identify the barriers to cross selling. In a nutshell, we identified the need for banks to shape their image as the place to go for more of their customers’ financials needs beyond deposits and loans. We also highlighted the fact that banks needed to do a much better job in creating referrals. There are several ways that these barriers can be overcome. Why aren’t banks attacking these problems with more force?
A recent conversation with the president of a community bank gave me a good understanding of their points of pain and it sets up a real catch 22 for the whole industry. The low interest rate environment has squeezed margins and driven down revenues forcing expense cuts. On top of that, new regulations are adding to the cost of banking. What is needed most now is revenue growth. But growth takes money. Money that is not there to spend.
So how do you grow without money? The answer is leverage. I don’t mean leverage through debt, I mean leverage by using what you have; your brand, your branches, your employees, and your customers.
Leverage your customers – You have already spent quite a bit of time and money to acquire your customer. Depending on various estimates, that could be anywhere from $350 – $800. According to industry experts, cross selling to an existing customer only costs 10% of what it would cost to acquire a new one. Yet, on average, banks’ share of wallet is only two of the ten financial products that their customers own.
Leveraging your brand – A brand represents a considerable investment. If you look at estimates of brand value, they go into the billions of dollars. Most banks don’t think about it much because it is not readily apparent on a balance sheet. Your brand means more than the fact that people know who you are, but also how they feel about you. While the past few years have done some image damage for the banking industry as a whole, most community banks enjoy an image of being trusted and that is a critical element in making any sale.
Leverage your branches – There is much being said today that the branches have become an albatross for banks, an expensive way to gather deposits in today’s increasingly online world. Trying to maintain profitability has led many banks to cut branch operations to the bone. It shows. I can walk into some branches near my Boston office and see one teller and eight empty stations and a line of six people. To get more out of these branches, start thinking about the advantage they could provide. A place for more face to face sales.
Leverage your employees – Most frontline employees are very good at customer service. They are friendly and they genuinely like to help people. Many banks have assumed that more leverage from an employee means trying to change them into sales people. An expensive proposition with mixed results at best. Getting more referrals from the branch employees can be done quite effectively by building a customer service process that helps uncover needs and start dialogues.