Cross-selling sounds like the perfect cure for banks still ailing from the financial crisis. Net interest margins are at significant lows, and banks are trimming expenses to keep profits at meaningful levels. So adding new sales to old customers should be the perfect fix. But – not all banks are created equal. As such, cross-selling won’t work effectively for every bank.
Bank of America Corp (NYSE:BAC) is a great example. Recently the bank implemented a Merrill Lynch-Bank of America cross-selling strategy that is bound to miss expectations. To explain why it will fail (see below for why) we must first look at the cross-selling success stories. Then we will examine those who failed to execute the strategy and why Bank of America Corp (NYSE:BAC) will also fail to meet its marks.
Wells Fargo & Co (NYSE:WFC) is the go-to example of successful cross-selling. It has consistently sold an increasing number of products to households each year.
Wells Fargo’s achievement comes from its well-developed strategy and organizational commitment to cross-selling. Many other firms struggle to imitate this strategy, but few have nailed it down. One of the keys to Wells Fargo’s strategy is the successful integration of Wachovia. The integration included three key efforts:
1. Assimilate IT
2. Keep the structure flat
3. Stick to one business model
Through these three steps, the two large banks came together as one united group, giving Wells Fargo an even broader audience to whom it could cross-sell business and consumer products.
BB&T Corporation (NYSE:BBT) is another example of successful cross-selling. Its corporate culture integrates all of its business units (such as business banking, commercial real estate, investments, and insurance). Each unit is a functioning part of the whole, rather than operating within its own “silo”. The bank’s consistent effort to bring all these business units together allows for effective cross-selling.
BB&T’s strategy also permits the bank to keep profit-per-customer high, even when its lending margin is shrinking (from the Fed’s bond buying program). The obvious result is that BB&T is able to procure “sticky”, profitable relationships with its customers without having to increase loan volume during a time when long-term rates permit little profit. The graph below depicts how BB&T retained a consistent profit margin in comparison with big banks that did not effectively cross-sell.
Wells Fargo and (NYSE:WFC) BB&T teach us that a bank must have the right corporate culture and IT infrastructure to successfully execute a cross-selling strategy. Next we look at banks that lacked these traits.