By Mark Gibson
Most bank marketers and executives have heard this mantra: “It’s a lot easier to sell to an existing customer than acquire a new one.”
However, ABA’s recent survey of bank marketers suggests that they spend much more time and money on acquisition than on cross-sell. On average, bank marketers reported spending 33.7 percent of their budget on new customer acquisition and only 22.9 percent on existing customer retention. And our experience with community and regional banks suggests that significant cross-sell potential remains untapped.
This article explores why this disconnect exists within many banks, how to take advantage of this significant growth potential more fully within your customer base and several specific-use cases that can add value to your organization in 2025.
How big is the ‘prize’?
Before we talk about how to take advantage of this opportunity, let’s address why you should even bother. The short answer to this is: The opportunity is larger than most bankers can even imagine. Why? The simple truth is that most customers deal with more than one bank, and three or four is not unusual. This means that typical customers have less than 50 percent of their deposits or loans with one bank. That translates into the fact that, over time, a bank could double its deposit and loan balances by convincing existing customers to consolidate their products at one institution.
To make matters even more interesting, the ‘marketing ROI’ of existing customer cross-sell efforts is typically 10X that of new customer marketing. How can this be? Two factors explain it. First, it is much less expensive to market to your existing customers. Typical channels are e-mail, banker conversations and (optionally) direct mail. No expensive TV or digital advertising is needed.
The second factor is that existing customers already know you, trust you, and do business with you. As a result, the response rate for customers is likely to be 5-10X that of a prospect.
Other important benefits to cross-selling
There are two additional financial benefits to deepening relationships with existing customers.
First, by consolidating relationships from other banks to your institution, you become the primary bank for more of your customers. This increases retention and makes it more likely that your customer will choose you for their next financial product.
Second, by increasing the number of products and balances with your institution, and improving retention, the lifetime value of the customer increases substantially. It is common for lifetime value to double for customers who are positively impacted by an effective cross-sell program.
So, the opportunity presented by effective cross-selling is incredibly significant, and the marketing efficiency is tremendous. Why aren’t more institutions fully capitalizing on this opportunity that resides within their four walls?
Common barriers to successful cross-selling
If the benefits are so compelling, why don’t more banks optimize cross-selling? There are several barriers standing in the way of banks achieving the full benefits of cross-selling.
The ‘sales mindset’ – The biggest barrier is that a salesperson (and marketer) feels that their job is done when a new customer is brought on board. But research shows that a new customer is typically just ‘testing the waters,’ moving a small part of their business to the new institution to see if it is truly better than the previous bank. By considering the job done and moving on to the next conquest, Sales and Marketing are leaving much (if not most) of the revenue on the table. Effective on-boarding and cross-selling unlocks that additional revenue.
Incentives – Typically, both sales and marketing metrics and incentives are structured around new accounts and balances. They are easier to measure and, well, most lines of business are focused on a pipeline of converting new customers. See the ‘sales mindset’ above.
Data analytics – Effective cross-selling requires banks to know who their customers are, and what they currently have with you. Many banks have not effectively householded their customers, so they cannot answer this basic question. That is a real problem. If you do not know that a given customer is a millionaire and that she only has $20,000 in checking and savings with you, then you are unable to expand her relationship. Additionally, powerful third-party data exists that can tell you what loans your customer has elsewhere, and what their investable assets are. If you have not appended that data to your customer base, you are not able to go after those assets.
Building the foundation to effective cross-selling
There are four critical elements needed for a successful cross-selling effort: Customer insight; targeted marketing and sales campaigns; effective execution and measurement; and appropriate incentives.
Customer insight refers to the fact that you need to have sufficient data about your existing customers to know what they have with you and what they are likely to have with other financial institutions. Much of this is knowable from your existing customer file, while some of it needs to come from third parties. As mentioned above, you need to aggregate your accounts by customer and household to understand their relationship with you. By doing this, certain obvious cross-sell opportunities will become apparent. For instance, which checking customers are primary and which are secondary? Which checking customers do not have savings accounts? Which business loan customers do not have deposit relationships? You already possess all this information, but many banks have not organized it in a way that allows them to act.
In addition to the ‘first party’ data that you already have, companies such as Acxiom and Experian have valuable information on every single one of your customers. What other loans do they have? What other deposit and investment products are they likely to own elsewhere? This data is readily available and inexpensive. Innovative banks of all sizes append this data to better inform which specific products they should offer to each of their customers.
An important realization is that you do not have to do all this yourself. “While data analytics can seem overwhelming, it’s something we deal with every day,” said Brian Reilly of BankBound, an agency specializing in bank cross-sell programs. “We help banks combine their customer data with third-party data and prioritize specific opportunities for deposit and loan growth.”
Based on the insight provided by this data, marketing can target customers very precisely based on their personal product ownership and needs. This is important for three reasons. First, it significantly improves response rates and ROI. Second, it improves customer satisfaction since communications are more relevant and less annoying. Third, precise targeting allows the bank to maximize new balances while minimizing repricing, which optimizes margins.
The third critical component of an effective cross-sell program is execution and measurement. Marketing needs to tailor the key messages to each customer segment’s needs and buying behavior. Banks need to have email addresses for most if not all customers. E-mail systems need to be able to measure delivery, open rates and actions taken by customers. And sales team members need to follow up with customers by telephone or email to let them know about the exclusive offer. Every part of this needs to be measured and reported so that sales managers can inspect and coach their teams.
“We have found that for cross-sell programs to be truly successful, they need to be always-on,” said Stephanie Yaniga Erickson, senior managing director, consumer bank marketing at Webster Bank. “We partner with third-party vendors to analyze client data, helping us prioritize opportunities and optimize campaigns for better results. Our approach includes a mix of direct marketing and digital channels, which allows us to retain and deepen relationships with our most valuable clients and grow deposit balances.”
Finally, both marketing and sales incentives must be designed to encourage the deepening of existing customer relationships. New commercial loan with no operating account? No full payout. Gaining $100,000 in deposits from an existing consumer customer? Both Marketing and the branch employees win! As we all know, people do what we pay them to do. Incentive plans need to be aligned to encourage the deepening of existing relationships. If your institution is typical, you have less than 50 percent of your customers’ ‘share of wallet.’ Build your incentive plans to get the other 50 percent!
Optional enhancements take it to the next level
Everything we have talked about requires no sophisticated technology other than third-party email platforms such as Mail Chimp or Constant Contact and an Excel spreadsheet. However, certain tools can improve both the effectiveness and efficiency of these programs.
Marketing automation is a fancy email system that allows you to automate many email campaigns, allowing you to run more of them and measure their success simultaneously.
CRMs allow marketing to load the customer leads into the system, so sales team members can receive them, work them, and report their actions. This increases accountability and allows the team to measure success and continuously follow up on outstanding opportunities.
Finally, trigger event programs allow marketing and sales to identify specific customer opportunities in a timely manner and follow up with the customer. This can dramatically increase success rates. Examples include customers searching online for a new deposit or loan product, or customers significantly reducing their deposit balances.
Low-hanging fruit
While the phrase has been overused, it has never been more appropriate than for existing customer cross-sell. Customer have selected your institution, they like your institution, yet, through simple inertia, half their relationship resides elsewhere. Given the right marketing and sales actions, they are willing to move more business to you. There is no more efficient, higher ROI marketing and sales action on the planet. While not easy, it is infinitely easier and less expensive than bringing in that next prospect who is a stranger to your organization.
It is time that every institution sharpened its saw and got its cross-sell machinery in motion. Alternatively, the other institution your customer is dealing with will do it first.
Mark Gibson is a senior consulting associate at Capital Performance Group, a strategic consulting firm that helps financial institutions maximize the ROI of their marketing efforts. He can also be reached on LinkedIn.
