Cross selling at cross purposes

Cross-selling has been seen as one of the most effective ways of strengthening relationships and increasing the value of each customer relationship.

Yet all too often, cross-selling is not done in a customer-centric way and its propensity to damage customer relationships, staff morale and even the value of the business itself makes it a risky activity. This is illustrated by these examples below. The answer is not that we should stop cross-selling. The answer is to cross-sell well!

Storing up trouble at Wells Fargo

The most recent example to hit the news is Wells Fargo, known as a bank that managed its way out of financial crisis by being close to its retail customers through its “stores” (as it calls its branches).

Faced with the previous credit crisis of the early 1990s, banks took one of two routes. Some diversified into glamorous and hugely profitable investment banking. Others (and Wells Fargo and its predecessor, Norwest, were among the best at this in the U.S.) decided to stick with more mundane retail banking, but make it better.

In practice, this meant cross-selling. A customer shouldn’t only have a checking account; they should have loans, savings accounts, credit cards, a mortgage, life and non-life insurance, all provided by the bank either through its own products or through third-parties. Wells Fargo did this so well that its average number of products per customer was above 6, far higher than others who often sit at 3-3.5.  The bank makes almost as much from fees and commissions as it does from interest on loans.

So what’s wrong with all that? Well, that’s what the Senate Banking Committee wanted to know when it brought CEO John Stumpf before it.  Stumpf had frequently communicated the goal that each retail customer should have 8 products. This laudable ambition had a very positive effect on the share price. But it had a very negative effect on staff and customers. Under pressure to cross-sell, it appears staff opened over 2 million accounts without the knowledge of customers. 5,300 staff have been fired. The bank has been fined $185 million.

Not all the staff were fired for doing wrong. Some were fired for under-performance or for insubordination. Many are suing the bank saying they followed the bank’s guidelines for reporting ethical concerns. One claimant, telephone banker Dennis Russell (quoted in the New York Times Dealbook 26/9) said he was expected to refer 23% of his callers to the cross-selling sales team. He said that most of his calls were from customers in financial distress, facing foreclosure on mortgages or in default on loans. “The people calling didn’t have assets to speak of. What products could you possibly sell them in a legitimate way?”

Cross-selling done in the right way should be a great way of working, benefiting customers, the staff who work with them, the financial institution and its shareholders. But before we look at some approaches that do work, let’s look at one more way NOT to cross-sell.

The magical six

A Scandinavian bank wanted to increase its product penetration for its SME customers. Those customers who took more than 5 products were seen as extremely valuable to the bank which wanted to make sure it kept them. So a plan (on the face of it sensible) was formed to transfer any customer with more than the 5 products to a specialist central team.

The unintended consequence was that local branches did all they could to keep their local customers by avoiding selling them the magical sixth product. Most local customers wanted to stay with their local branch rather than the anonymous central unit. So local banker and local customers conspired NOT to take the sixth product! This particular cross-selling  project was abandoned.

Getting it right

So what should be done to do cross-selling well?

Here are five areas to focus on:

  1. Customer centricity it needs to be right for the customer
  2. Trust colleagues need to trust each other to do the right things in the right way
  3. Knowledge avoid the pitfalls of too little and too much knowledge
  4. Recognition & reward it needs to be attractive to everyone in the supply chain
  5. Process cross-selling is not random. There needs to be a robust process


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