Mining the Gold in your Customer Base
This concept of cross-selling is neither new nor rocket science, but in this extreme business climate – more than ever – it is the lowest risk route to growth and higher profitability. That is, if you can do it well.
“The cost of us selling a product to an existing customer is only about 10% of selling the same product to a new customer.” – Dick Kovacevich, former CEO of Wells Fargo
US adults overall have 8.2 financial services products. On average they have 2.5 products with any single provider. Even the best banks service only 3.4 products per customer. Only 1 in 4 respondents would be uninterested in keeping all of the financial products and accounts with one firm. – North American Technographics benchmark Q1 2009
Mr. Moynihan’s strongest attempt to present a new vision for the bank revolves around more cross-selling to customers. – Wall Street Journal quote of Brian Moynihan, new CEO of Bank of America
Sounds drop dead easy. You know – or should know – existing customers better than a new customer. Thus it follows that an existing customer is a lower marketing risk than using outside data to seek new customers. With no acquisition cost, you have a lower cost to market to them. You also should be able to provide a more-targeted offer than the competition. As the study referenced above shows, there is a high propensity for them to accept.
The reason many retail banks – as evidenced by the statistics above – fail to capitalize on this obvious strategy is that understanding your customers well enough to effectively cross-sell to them requires actions and capabilities often very difficult for many financial institutions.
Specifically, one must be able to view all the data about each customer in one place. This is essential to generating the understanding necessary for developing marketing strategies at a segment level.
A thorough understanding of current offerings and their success – or lack thereof – leads to creating the next, best action based on the individual customer’s propensity to buy and their response to the new model.
Additionally, achieving better relationship-based pricing similarly requires a thorough consideration of all the variables, from competition to your own value and price equations. Arriving at the best price through all these constraints and objectives also requires optimization techniques.
This brings us back to the essential necessity for technology that lets you consider all your data on each customer in one place.
For example, a retail bank that Equifax works with wanted to find additional methods of identifying profitable customers to supplement traditional credit data-centric marketing programs. They were not effectively leveraging their marketing data warehouse investment. They needed to expand beyond credit card to include other products. They could not readily identify consumers who also own a small business or have a demand deposit account in order to expand cross-sell capabilities.
Working with us, the company was able to key all customer and small business data in a manner that gave them access – in one place – to everything relevant to any given customer. They were able to implement a portfolio-analysis capability that helped them automate treatment plans, including the ability to make decisions around credit line increases, decreases and freezes. They were able to segment the population, identify credit-based “hot lists” and prioritize the contact queue.
All of these helped them get a reliable 360 degree view of the customer, giving them an understanding of the entire relationship for the first time. This enhanced their risk-management analytics and resulted in successful cross-selling of new products across all channels.
If you want to talk to an Equifax specialist about mining the gold in your customer base, click here to send us an email. If you would like future updates automatically sent to you, please sign up for our monthly newsletter. It summarizes the new articles in our blog.
This post was contributed by:
Karthik Mani brings 17 years of experience in Banking, Retail, and Manufacturing across analytics, optimization, and decision management. Currently he is responsible for strategy, new product innovation, and marketing for the technology and analytics solutions at Equifax.
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