For years, cross-sell has been the Holy Grail of banking. Firms have spent billions of dollars integrating their systems, products and channels to provide a “single view of the customer” to facilitate cross-sell.

However, despite all these investments, the results are mixed at best. Recent studies by Forrester and others show that the cross-sell number has stayed relatively unchanged between two and three products per household, or 20 to 35 percent of potential, since the late 1990s.

A number of explanations exist for this “cross-sell” failure. Industry experts commonly cite product silo-based organizations, frontline bankers’ poor sales skills, and difficulty for branch representatives to know and understand the multitude of products the bank offers. As a result, the systems-integration solution to create a single view of the customer has always been touted as the panacea for weak cross-sell.

But is the “comprehensive single view of the customer” really the enabler of higher sell it is touted to be? We contend it is not, but rather an erroneous goal banks often strive to reach. Even the best single view of a customer will only provide information on products and services the customer has with that institution. It provides zero insight into what other relationships this customer may have with competitors.

For example, two customers who have the same number and size of accounts with a bank will appear to be identical from the internal-only data. In reality, one of these customers may do 90 percent of their business with the bank, while the other does only 10 percent. Without an external perspective, the bank may view both customers as being of equal value when in fact, one of them is significantly more valuable.

Even with most systems and processes integrated, banks do not know enough about the motivations, needs, and underlying demand of their existing and potential customers to compel them to do business with the bank. Here lies the true opportunity. Through understanding underlying customer demand – existing, emerging, and latent – banks would be able to better, and more profitably, satisfy customers’ needs by more successfully aligning existing products, bundling, cross-selling, and new product development. In other words, banks will be able to offer the right products to the right customers at the right time, via the right channels.

An Understanding Of Customers

It is no surprise among American financial institutions that USAA, which is a leading financial services provider to active and former members of the military and their families, is the leader in cross-sell. Its average cross-sell ratio is 3.9 products per customer, ahead of the industry average, and even Wells Fargo, which is renowned for its cross-sell efforts. USAA is successful because the company intimately knows and understands the needs of its customers — the military and their families. USAA actively pursues ways to further its knowledge of their consumers, such as by asking engaging “Quick Questions” online, providing the staff an ability to follow up later with personalized offers.

The demand-driven approach enables a deeper understanding of consumer attitudes, motivations, attributes and behaviors. It also lends itself to economic analysis illustrating where the profit lies. This knowledge of fundamental consumer demand illuminates where cross-sell will be welcomed, and where it will not. It will direct where adjusting the attributes of your existing products, modifying your identification tactics, adding a different offering, or even timing the sale to an event trigger would drive profitable growth. Moreover, it builds the foundation to cement its relationship with the most attractive customers so they have no reason to consider banking with competitors.

Following this straightforward approach takes significantly less time and effort than any major system integration.

For example, a bank may conclude that it would like to increase the cross sell of mortgages to deposit customers in order to increase its profitability. However, this internal “supply side” view of customers does not take into account the fact most consumers are wary of having their mortgages with the same bank where they have their checking and savings accounts.

Rather, these customers’ demand is for additional savings products and services for their rainy day, college education and retirement needs. The bank focusing on this more comprehensive view of deposit and savings products is better aligned with underlying consumer demand.

However, there are conditions, tactical and strategic, required for successful execution of this approach.

First, a top-down cultural change is required, from the traditional, internal product-focused view of the business to the outside in, consumer demand-driven view of the world. This perspective change may only mean shifting towards cooperation of different banking businesses, or it may require a more radical change in organization.

Second, in the institutions which determine that they may not require integration (or require only a limited one), this acceptance of reoriented IT priorities may result in different IT budgets. The freed-up resources could then be redirected in newly-reprioritized investments in systems (e.g. which products should be highest priority) or other parts of the bank such as service & sales (including call centers), marketing & advertising (including CRM), and risk management (including underwriting).

Third, as clearer picture emerges of what roles banks need to play to win the demand of the most profitable customers and prospects. It will not only underscore new product and service development for the bank, but will also point to new relationships the bank should foster to best serve its customers.

As a result, the demand-approach can drive significant customer growth and loyalty while simultaneously creating tremendous economic value.

Vladimir Resnick is a project director and John Rountree is a principal at The Cambridge Group, a growth strategy consulting firm that is part of Nielsen.