Citizens Bank is among the financial institutions that have decided to make cross-selling their products a top priority.
Sometimes customers need a little reminding of all the financial opportunities available inside bank branches. Providence, R.I.-based Citizens Bank has decided to spell it out.
The bank recently placed sandwich board-style signs outside of its branches. In bold letters, the temporary signs invite customers and potential new customers to get pre-approved for mortgages inside.
The idea is a pretty basic one, but according to industry experts, Citizens may be onto something.
Jim Jones, president and founder of First Wellesley Consulting Group, said he first noticed one of the signs about two weeks ago. He described it as an example of a bank’s effort to cross-sell products. Jones said the signs may not make people instantly pull over and run inside the bank to fill out mortgage applications, but knowing their local bank branch offers this service should stick with them.
“The language is very simple, but the concept is sound,” said Jones.
At the Massachusetts Bankers Association’s 2006 Residential Lending Conference earlier this month, Jones polled community bankers on what their biggest challenges are for 2006. Improving cross-selling was the most popular mortgage strategy local bankers are planning this year, according to the survey. Finding ways to improve cross-selling and referral results was ranked the second-most challenging aspect of mortgage lending by the bankers who attended.
“It’s a very important issue for community bankers today. It’s not going to go away,” said Jones.
According to Jones, the question of how to improve cross-selling has plagued the banking industry for decades, and it continues to be labeled as a major challenge.
“It’s something that looks really simple. The challenge is several-fold,” said Jones. “Banks have not been known for their selling skills.”
“[The challenge is] the fact that it’s really not [just] banking anymore,” added MBA President Daniel J. Forte.
In recent years, banks have worked to incorporate an array of financial products and services beyond the scope of those with which they typically have been associated. Forte said the process is an evolutionary one. Legislation over the years has allowed for banks to enter new areas of the financial service business.
In January 2005, a U.S. District Court ruled in a declaratory judgment action that state-chartered banks are allowed to engage in insurance sales with proper license to do so. It was ruled that the 1999 federal Gramm-Leach-Bliley Act and the National Bank Act preempted provisions of state insurance law. Forte said there are now about 70 banks that are licensed to sell insurance in the Bay State.
However, bankers still need to evaluate if and how cross-selling fits into their bank’s strategic plan, he added.
Forte said a lot of community bankers have feared that offering other services and products would cannibalize the institution’s deposits. However, the opposite has proven true in many circumstances, he noted. The more reasons people have to go to the bank, the stronger their loyalty tends to be, according to Forte.
“Statistically, the more products you have, the lower the probability [is] of [your customer] ever leaving,” he said.
‘An Exclusive Approach’
When Fitchburg-based Fidelity Bank decided to take a serious step to improve cross-selling, the bank had about $180 million in assets. Five years later, Fidelity has roughly $340 million in assets.
Ed Manzi, president and chief executive officer of Fidelity Bank, said it took a clear strategy to create a cross-selling structure that would be sustainable. He said cross-selling really is not about pushing the product of the month, but understanding what products and services will work with your current customer base.
“It’s really about structure,” he said. “We have an exclusive approach we call LifeDesign.”
It’s not just a marketing slogan, said Manzi. The concept is to help the client make better and more informed financial decisions throughout the different stages of their lives.
About five years ago, Fidelity made a clear move to create an advisory culture throughout the bank. It meant breaking down the silos of expertise that had previously worked independent of each other and developing a team approach to banking, Manzi said.
“It works pretty well,” he noted.
Breaking out of the traditional roles bank employees are accustomed to requires new and ongoing training. Part of learning and testing product and service knowledge at Fidelity requires role playing. Manzi said it helps employees practice the skills they will need to be a part of the Fidelity team.
“The original challenges were breaking down the barriers of expectations. Banking jobs aren’t one-dimensional anymore,” he said.
According to Forte and Jones, cross-selling has to be a two-way street and internal referrals have to happen throughout different departments of a bank.
Offering a financial incentive of some sort also is part of making it work. Jones cited a cross-selling initiative attempted by one bank that ultimately failed after three months. During the first three months, the bank offered extra compensation when an employee successfully cross-sold a product. It was a trial period and seemed to be working, but when the bank yanked the financial incentive, the level of cross-selling activity proved not to be sustainable, he said.
“The right kind of compensation program is critical,” Manzi agreed.
Forte said some people argue cross-selling has yet to be fully embraced in the community banking arena.
“All banks can’t be all things to all people. Clearly, creating a culture of sales doesn’t happen overnight,” said Forte. “Like anything else, you have to walk before you can run.”
But more and more banks everywhere are looking to revamp cross-selling. An international study on banking recently released by Accenture – a global management consulting, technology services and outsourcing company – looked at new strategies being embraced at the retail banking level. Out of the bankers surveyed, 79 percent said strengthening cross-selling capabilities is a critical part of supporting growth.
“It is all about the delivery channels,” said Martie Dwyer, executive vice president and director of retail banking for Citizens Bank in Massachusetts.
Training the bankers to the level that they feel comfortable introducing customers to other products is critical, she said. While in-house training is part of the process, Citizens introduced online work-related courses, or e-learning, to its staff about 18 months ago, she said.
Technology also has played a role in the ability of banks to cross-sell products. Starting this year, bankers at Citizens have had the ability to pre-approve mortgage applications for their customers who enter the branches by logging onto the Internet. Dwyer said the service is fast and easy, and putting signs outside to announce the new service helped kick-start it.
“They didn’t necessarily know the branches could jump-start the process,” she said.
Dwyer said the misperception that people need to go to a mortgage company to get a mortgage still persists.
“We look at it as managing the needs of our customers. Generally, the customers will come in for a product need. It’s at that point we talk to them, start the conversation. I just want to make sure we do uncover the need,” she said. “It’s making sure we satisfy our customers. It sounds simple, but it’s not really simple.”
