Tired of countless calls from your current bank sextolling the virtues of their latest credit card offering? Amazed at how your bank preempted your need for a home loan with a pre-approved offer? Laughing your way to the bank because your financial advisor made you invest into tax saving equity mutual funds while you were doing a routine transaction? If you have experienced any of these emotions, you are riding on the wave of an imminent marketing revolution-cross-selling of financial products.
Cross-selling, in very simple terms, is the strategy of selling additional products and/or services to a company's existing customers. The rationale seems obvious - an organization has invested time, effort and money to acquire a customer, and having done the hard work, would like to deepen its relationship. What is not so obvious is that the significance of cross-selling for banks has evolved from being a mere "nice to do" to a critical strategic initiative driven by dedicated functional teams leveraging the latest technology to analyze existing customer information and banking behavior to create the most innovative offers in a bid to increase the customer's share of wallet. Make no mistake about it - cross-selling is the next marketing revolution.
Banks save significant marketing and sales acquisition costs in pursuing cross-sell banks need to prospect anywhere between 5-100 potential customers to generate 1 lead (an interested prospect). In the case of credit products like loans or credit cards, the bank itself has internal criteria which filter out over 20%-50% of these leads. Additionally, the mandatory Know Your Customer (KYC) norms to prevent Money Laundering requires banks to conduct significant due diligence for all new customers, which also has cost implications-such checks need not be repeated upon cross-sell to existing customers.
In saturated markets, a bank usually acquires a customer at the expense of another bank. While some customers move due to reasons like poor service, most move due to more attractive package offers - either on pricing (such as lower interest rates, lower service fees etc.) or product features (higher credit card limit or loan amount sanctioned). Such customers are often referred to as "switchers" and can hop across banks as long as they have a single product/service relationship.
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