Table of Contents
- What Is a Cross-Sell?
- Key Takeaways
- How Cross-Selling Works
- Becoming Proficient at Cross-Selling
- Cross-Selling in Financial Services
- Cross-Selling vs. Upselling
- Advantages and Disadvantages of Cross-Selling
- Cross-Selling Example
- How Can You Increase Your Cross-Selling Effectiveness?
- What Are the Do's and Don'ts of Cross-Selling?
- Is Cross-Selling Ethical?
- What Is Cross-Selling on eBay?
- The Bottom Line
What Is a Cross-Sell?
Let me explain to you what cross-selling means. To cross-sell is to offer related or complementary products to a customer you already have. I see it as one of the most effective marketing approaches out there. In the financial services sector, this could mean selling various investments or products to investors, or even tax preparation to clients planning for retirement. For example, if someone has a mortgage with a bank, the sales team might push a personal line of credit or a savings option like a CD.
Key Takeaways
You should know that cross-selling involves marketing extra products to your current customers, and it's common in finance. Financial advisors can boost their revenue by doing this with their existing clients. But you have to handle it right to avoid regulators and ensure it's in the client's best interest. If advisors just refer for incentives, they risk complaints and discipline. Remember, upselling is different—it's about promoting upgrades or premium versions. And don't forget the Wells Fargo case from 2013, where they got fined over $185 million and refunded $2.8 million for their cross-selling mess.
How Cross-Selling Works
Cross-selling to your existing clients is a main way to bring in new revenue for businesses, including financial advisors. It's straightforward because you've already built a relationship and know their needs and goals. However, you need to be cautious with this strategy. Selling a mutual fund in a new sector can help diversify a client's portfolio, which is beneficial. But if you try to sell something like a mortgage outside your expertise, it could harm the client and your relationship. When executed well, cross-selling leads to big profits for stockbrokers, insurance agents, and financial planners. Even licensed tax preparers can easily sell insurance or investments to their clients—it's one of the simplest sales. Overall, effective cross-selling is solid business and good financial planning.
Becoming Proficient at Cross-Selling
If you're an advisor cross-selling financial products, you must be fully familiar with what you're offering. A stockbroker used to mutual funds needs serious training to sell mortgages. Just referring to another department might lead to unnecessary pushes for fees, without understanding client needs. You have to know how the product fits the client's financial situation to make effective, compliant referrals. FINRA might use inquiry data to create new rules on cross-selling. Beyond products, understand your company's full range. Picture a new employee not knowing all services—they need to learn to spot cross-selling chances.
Cross-Selling in Financial Services
Before the 1980s, financial services were simple: banks did savings, brokerages sold stocks, credit cards were separate, and insurance was just that. Then Prudential bought Bache Group to broaden offerings. Mergers like Wells Fargo with Wachovia and Bank of America with Merrill Lynch in 2008 aimed to expand retail through brokerages during crises, seeking synergy in banking and investments. But cross-selling often failed in these mergers. Bank of America lost brokers by forcing bank product sales on investment clients. Wells Fargo did better due to cultural similarity. Large firms struggle integrating products—H&R Block failed with Olde Discount Broker, buying for $850 million in 1999 and selling for $315 million less later, refocusing on taxes.
Cross-Selling vs. Upselling
Both cross-selling and upselling aim to get customers to buy more, but they're distinct. Upselling persuades buyers to go for an upgraded or pricier version to maximize profits and improve experience, boosting customer lifetime value. Companies are 60-70% more likely to sell to existing customers than new ones at 5-20%. It's easier with trust in the brand. Cross-selling, however, entices with related or complementary items, using recommendations, discounts, or bundles to earn more and meet needs.
Advantages and Disadvantages of Cross-Selling
Cross-selling boosts revenues effectively, but it takes skill in understanding consumer behaviors and how products add value. Selling to trusted existing customers is easier than new ones, increasing loyalty as they use more products. On the downside, poor cross-selling can seem pushy, damaging loyalty and reputation if needs aren't considered. It can raise service costs with demanding customers, and selling to those who return items often leads to losses.
Pros and Cons
- Pros: May increase revenue through more sales, especially of less popular items; can build brand loyalty with broader product exposure; fulfills all customer needs, reducing competitor reliance.
- Cons: Could hike service costs; might harm relationships if seen as pushy; can create negative perceptions of forced product pairing.
Cross-Selling Example
Take the 2013 Wells Fargo scandal: employees opened unauthorized accounts to meet quotas, leading to over 30 terminations initially. An independent review found over two million fraudulent accounts from 2011, with 115,000 incurring fees, totaling 3.5 million. They refunded $2.8 million, fired 5,300, and CEO John Stumpf resigned. The fine was $185 million in 2016.
How Can You Increase Your Cross-Selling Effectiveness?
To make cross-selling work, use email campaigns to introduce complements after building a relationship and proving value. Ensure products align with customer needs—offering irrelevant items hurts satisfaction.
What Are the Do's and Don'ts of Cross-Selling?
Focus on loyal, satisfied customers for campaigns and train staff to assess needs. Educate customers on how products add value personally, not salesy. Avoid unhappy customers to prevent worsening relations, and don't assume they know your offerings.
Is Cross-Selling Ethical?
Yes, cross-selling is ethical when it informs about fitting alternatives, like suggesting winter coats to a ski buyer—it's just good business, not trickery.
What Is Cross-Selling on eBay?
eBay's Cross-Promotion Connections let sellers link, showing other listings after a win. They had a free tool for promoting related items or discounts, but it's discontinued except for select users at times.
The Bottom Line
Done right, cross-selling boosts your bottom line and loyalty; done wrong, it erodes profits, dissatisfies customers, and harms reputation. It's a tool for revenue and meeting needs regardless.
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