Financial Marketing and Cross Selling Blog
Dodd Frank legislation will undoubtedly translate into less fee revenue. So how are banks going to make it up? With rates so low and flush with deposits, many banks are focusing on lending, especially to small business. But right now there doesn’t seem to be enough demand from qualified borrowers to make up the revenue shortfall. Once again the industry is talking more and more about the need increase revenue per customer, cross selling, building share of wallet. It all means the same thing. The real challenge is that this need is coming right at a time when cost controls are forcing budgets down, including marketing budgets. That means that bank marketers must find more efficient ways to market.
The impact of life event marketing in the financial services industry has been known for years. When someone gets married, they may be looking to buy a house. When someone has a baby, they may be in the market for life insurance. When someone changes jobs, they may be thinking about rolling over their 401(k) plan. And when someone is getting into the retirement zone, lots more comes into play; retirement income, rollovers, and on and on. A recent Forrester Research study of 26,000 online households shows that consumers are 43% more likely to buy a financial product around a life event.
Let’s start with a definition. What is the mass affluent market? Various financial organizations define it differently, but I will use a definition and data from Forrester Research published in a March 10th article in The New York Times by Nelson D. Schwartz entitled, “Got $100,000? Have a Cookie: Banks Try Luring the Top 10%”. Forrester defines the market as those with assets between $100,000 and $1 million, not including the value of their home. They estimate that there are 40 million people in the US today that fit into this category. Forrester also estimates that a third of all retail investment assets are held by this mass affluent market segment.
That’s where the money is and that’s where banks want to sell more. As Schwartz says “The aim is to sell higher-margin products like mutual funds, stocks and retirement advice to depositors who have traditionally looked to their local bank only for checking and savings accounts”. He cites some research done by Pinnacle Financial Strategies of Houston that supports this effort. It says that a study of a West Coast institution revealed that they earned $1,193 from a typical mass affluent household while only $630 from a mass market household in general. That’s a big difference; nearly double.
We all know the phrase “you only get one chance to make a first impression.” This is never more true than with banks and credit unions today. Based on research completed by Truebridge, Cross Selling Success Factors, one of the biggest problems that financial institutions face when it comes to cross selling is that they are seen narrowly; as the place to go for transactions involving deposits and loans and not much more. How much easier would it be for banks and credit unions to cross sell if they were also seen as the place to go for so many other financial products that people buy as they move through life from sending kids to college to living in retirement. Research shows that people only buy an average of two out of ten financial products from their bank or credit union. That’s because these financial institutions often fail to take advantage of a golden opportunity to change perceptions.
It is the classic battle between WE and THEY in the financial banking arena. You know your consumers (THEY) need the products and services that you offer but you struggle to find a process that effectively allows them to buy multiple products and services. How can you bridge the gap between WE and THEY and make it an US relationship?
In the May 2011 issue of Bank Investment Consultant, Elizabeth Wine brings up some very valid points about the importance of cross selling and the poor execution that is happening inside many financial institutions.
Managing the cross sell is a task that does not have an end. To do it well, you should never be ‘done’. The art of cross selling involves all parties within the financial institution to be working together. The same BIC article also stated that “ninety percent of a recent BIC survey respondents said the support of senior management was critical for the successful implementation of a cross sell program.” Read more >>
As more and more bank customers find their way around the online platform, the harder it becomes to drive cross selling opportunities at the branch level. All signs point to more effective marketing techniques online where customers are spending most of their time.
But what does it take to get the dialog started online? How can you transition a transaction minded customer to research mode?
For starters, you need good, easy to read content. Most consumers today are not reading the Wall Street Journal or Financial Times on a regular basis. The typical American hears the word Tax Deferred Bonds and cringes. So when you want to build or purchase education, keep this in the back of your mind.
Once you have the education, make sure you use it in a way that gets customers to raise their hand. Remember, most people don’t visit their local library because they want to. To make education exciting, tie it to financial situations that we all face. Make it pop and most importantly, make all content connected to your professionals. Make it easy for customers to submit requests to talk or meet in person.
And finally, make your content portable. The easier it is to walk away with information the more likely customers will read it. Better yet, give the customer the option to enter their contact information before downloading the educational guide. This way,... Read More >>