Virtually all our bank clients, whether the project centers on retail, small business, middle market, or wealth management, are currently focusing on cross-sell — in particular, how to grow non-credit sales. Yet most banks begin with a sizable handicap in increasing product penetration.
Senior management needs to diagnose why non-credit penetration levels are low and then address what FIC’s experience suggests are the major stumbling blocks they face.
Non-credit penetration is “pitiful”
Late last year we attended a group client meeting that centered on how to increase cross-sales. During that 20-person meeting, one middle market relationship manager commented with great conviction that he already sold his customers all the products they needed and would buy. Basically, he was saying that no cross-sell opportunities existed within his portfolio. While the top managers at that meeting may have been taken aback at his comments, everyone was either too thunderstruck or polite to challenge him.
In fact, executives at this bank admit that their cross-sell levels are “pitiful.” However, the RM saw no cross-sell opportunities because some of the non-credit product areas did not hit his personal radar; he simply never thought of them in the context of his customer and, therefore, no opportunity existed.
In another case, a bank with a national reputation for its cross-selling effectiveness struggles with how to increase the access of product specialists to customers. The specialists find themselves in a support role to RMs, one in which they need RM permission to approach opportunities they uncover. Sometimes that access is either slow to come or denied. They know they are not reaching all the potential targets.
Seemingly, this issue cuts across all bank areas: retail bankers take orders and excel at service and not sales, small business bankers focus on selling loan units, and wealth/private banking officers focus on investments or loans but not a holistic offer.
This is hardly a new problem, but it is one that, unless addressed, represents a major obstacle to revenue growth and customer retention. Getting this sales effort right is not optional.
Addressing the key roadblocks
Traditionally, the RM, the Small Business Officer, the branch platform staff, and the Private Banker have been expected to do it all. They are meant to sell the customers and then service them on an ongoing basis (what is inelegantly termed “find ‘em, mind ‘em, and grind ‘em). Frankly, this is an unrealistic expectation and one which leads to frustration for the both the line banker and management.
In recent years, bank management has been changing its job requirements for these customer-focused positions: the small business banking officer who was hired to generate loans is now supposed to diagnose the relationship; the teller whose expertise is on customer care is supposed to sell; the middle market banker whose life blood is lending is now supposed to downplay what his or her focus has been for decades. In most cases, these and similar expectations on the part of management are unrealistic; people do not or cannot change.
How are the best players addressing their need for increased cross-sell penetration? We see six different but related initiatives in the marketplace.
Job redesign. Banks like Bank of America and Wachovia have reexamined the RM and Wealth Manager roles and developed a team approach aimed at the customer. For example, a primary role of these RMs is to diagnose opportunities and bring in product specialists, one of whom is a credit sales specialist. Basically, these banks are enforcing a culture in which RMs, by their nature, are multi-product sales people.
Even if such a change is not possible, banks need to examine the activities of their key sales personnel and strip out tasks that can be performed by others. Administrative, maintenance, and underwriting are areas that bear examination and can free up front-line time for sales.
Alternative delivery. US Bank and Wachovia, among others, are leveraging phone-based sales and service staff to reach smaller-revenue customers who cannot economically justify a traditional business banker. These are professional phone-based bankers, not what we think of as telemarketers, and are intended to be a consistent contact for the customer.
Direct non-credit sales staff. Previously, we have written about Union Bank’s focus on non-credit customers. Perhaps realizing that their lending-oriented RMs would never effectively focus on non-borrowers, their cash management group calls directly on non-credit customers, assuming responsibility for them. Internal guidelines lead to cooperation and necessary linkages with the RM to take advantage of cross-sell.
If banks want to achieve outsized growth in a non-credit area, unleashing an “independent” sales force needs strong consideration.
Incentives. Banks must rethink the focus and amount of non-credit incentives as well as key salary metrics. To this day, non-credit-related compensation is typically inadequate as a spur for changing banker behavior. Banks need to tackle comp and communicate their commitment to non-credit sales by skewing incentives and base comp to send a clear message that credit, while still a relationship foundation, is only one piece of the profit puzzle.
Enhanced sales management. At many banks, bankers, in effect, determine their own jobs; depending on their inclination and strengths, they may concentrate on administration, underwriting, and (less frequently) sales. However, discipline and consistency are now replacing this free form approach. The best banks are executing on a fierce sales culture, one that may limit the banker’s freedom, but that greatly increases the quality and intensity of the sales effort.
Activities such as account planning should not be optional. Nevertheless, we still see banks introducing account planning and other excellent methodologies and then not enforcing their use. Other players are leveraging sales managers as well as bank-wide consistency to create an emphasis on sales. Look at Fifth Third and Citizens Bank for some best practices in this area.
Staff replacement. As job responsibilities change, banks are finding it desirable to upgrade their sales effort by bringing in new sales blood. This is occurring across all lines of business. When executed effectively, attracting bankers from the players mentioned above, among others, can increase the sales energy and stimulate longer-term staff.
Concluding Comment
The leaders in non-credit product sales are doing most of the above and more. Senior management willingness to act appears as a critical distinguishing factor. Without senior management evidencing a high level of understanding of the need for change and a willingness to take the steps required, non-credit products will remain “pitiful.”