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Maximizing Growth and Retention
With Cross-sell

Use your existing account
base to generate profits

Ask any marketing executive about business growth strategies, and you are likely to hear the tried-and-true advice that it is easier to keep an existing customer than it is to acquire a new one. In the banking industry, this wisdom rings especially true during this recession. A February 2009 survey conducted by Forrester found that more than 60 percent of consumers say they are now less likely to switch their primary banking provider, making account acquisition that much harder. This leaves cross-selling products and services to existing account holders as the most viable growth strategy for financial institutions these days, according to Grover Pagano, vice president for Analytics and Business Intelligence at Harland Clarke.

Are You Optimizing Your
Cross-sell Universe?

Optimization, also known as predictive modeling, can help your institution create cross-sell marketing strategies that yield a higher return on investment. Using sophisticated mathematical models based on actual account holder behavior and demographic data, you can select the most profitable account holders toward which to direct your cross-sell efforts.

However, the vast majority of financial institutions — even large ones — do not have the internal resources and expertise to conduct predictive modeling in-house. Often it is more efficient in terms of budget, speed and experience to use an outside vendor.

If your bank or credit union has more than $1 billion in assets, it may be worth considering the benefits of a product such as Harland Clarke's Stratics™, a predictive suite of models that can help you more effectively cross-sell to your account holders. This suite, which can be customized, enables you to predict:

  • Which account holders may purchase a specific product
  • The next product a household has the greatest likelihood to purchase
  • Account holder propensity to diminish balances

"Optimization works," says Pagano. "Our clients are seeing excellent results from their existing account holder marketing initiatives."

To learn more about how Stratics can help you cross-sell to your existing account holders, contact your Harland Clarke account executive or visit

Several factors are at work here, including an overall reduction in acquisition marketing activities. “Interests rates are down and free checking isn’t always offered,” Pagano says. “If you can’t compete on rates and price, it’s tough to get potential new account holders to take notice.”

So if rates are not a key factor, you are competing more on affinity — that is, a feeling of positive connection with an organization. “Who has more affinity to your bank or credit union: a current account holder or a prospect?” asks Pagano. The answer, of course, is the existing account holder. Another benefit of cross-selling is that it addresses a key reason that account holders may switch to another banking provider: their concern about an institution’s financial stability in today’s uncertain economic environment. Offers for products and services, by default, also communicate soundness and stability to account holders. Consumers perceive a monetary investment in advertising and marketing to be a sign of strength. While a consumer may not purchase a particular product at a particular moment, the message is clear: My financial institution is in good shape. In fact, it is thriving.

There is an additional reason to consider ramping up your cross-sell efforts. “It costs a lot less to mail to 10 percent of your best account holders than it does to mail to 100,000 prospects,” says Pagano. “These days, you have to do more with what you have.” Indeed, many bank and credit union marketing departments are slashing budgets, some by about 30 percent, according to Pagano.“If you’re communicating with your account holders at a time when your competitors aren’t, your impressions stand out that much more.”

Two Cross-sell Strategies

The strategies that financial institutions use in assessing cross-sell opportunities will

differ depending on the size and reach of the bank or credit union. Generally there is a formal and quantified analysis and segmentation process in larger banks (more than $2 billion in assets), which often includes industry benchmarking. "For example, if 56 percent of your account holders have a checking account, but the industry average is 73 percent, you’ve got to figure out why you’re trailing,” says Pagano. “Is it the product itself or the competition or some other factor?” The answers will help determine the type of promotion and to which account holders it is directed.

“While a consumer may not purchase a particular product at a particular moment, the message is clear:
My financial institution is in good shape. In fact, it is thriving."
For large banks and credit unions, the key step in selecting account holders for cross-sell promotions is to optimize the institution’s database. Thus, these large institutions must filter their account portfolios to weed out less profitable account holders, as it is inefficient for a national institution with, say, a million accounts to mail every account holder a cross-sell promotional piece each month. Often these institutions outsource this optimization process because it is too inefficient to handle in-house (see sidebar, “Are You Optimizing Your Cross-sell Universe?").

Community banks and local credit unions with assets of less than $2 billion do not necessarily need to rely on a formal market segmentation process before embarking on cross-sell activities. Pagano explains that these institutions likely know their local account base quite well, and their account holders generally have a strong affinity for their hometown institution. What this means is that these banks and credit unions can afford to be less targeted in cross-sell campaigns, yet they still can generate a good return.

Smaller institutions generally find it more efficient to simply cross-sell within product families. “If account holders have a checking account, it’s easier to talk to them about a debit card or a CD than to try to sell life insurance,” says Pagano.

Measurement Made Easy

Smaller financial institutions need not forgo cross-sell marketing just because they might not have access to the sophisticated measurement tools used by large national institutions. “It is relatively easy for community banks and local credit unions to measure success by reviewing components of their account holders’ portfolios, such as product penetration and average balance, and then look at quarterly increases or decreases and compare their data to industry averages,” explains Pagano.

He adds that, for small institutions with little experience using direct mail as a cross-sell channel, it is more important to just get the process in place. “Learn the fundamentals. Don’t expect immediate success. And worry about measurement later.”

Pagano has noticed an influx in cross-sell deposits, in part because consumers are saving more these days and are less likely to want to experiment with unknown financial services providers, and in part because there are fewer institutions competing for new accounts. The simple truth, he says, is that when there are fewer ways to split the account holder pie, cross-sell success rates rise.