Cross-Selling, Consolidation, and Aggregation: Progress Report for Financial Convergence MacroMonitor Marketing Report Vol. VI, No. 10 August 2004

Deregulation combined with the general consumer acceptance of the Internet as a financial channel has allowed institutions to pursue various forms and permutations of one-stop financial shopping: universal banking, cross-selling, account consolidation, account aggregation, and so forth. By increasing the number of products per customer, institutions not only gain immediate additional revenues but, at the same time, achieve customer "stickiness" (that is, the more products that customers have with an institution, the harder it is for them to leave).

But successful cross-selling of noncore (nontraditional) products remains a challenge for many financial institutions. This MacroMonitor's analysis of consumer attitudes toward one-stop shopping and actual use of financial products across industry lines provides a progress report on banks', investment companies', and insurance companies' progress in cross-selling and some guidelines in developing effective strategies toward deepening institution-customer relationships and increasing the institution's products-per-customer ratio.

Cross-selling has not been an overnight success for most financial institutions. They not only face the challenge of training their employees to become knowledgeable and conversant about the various product lines that the institutions offer or distribute, but they also need to provide incentives for their employees to go beyond providing basic customer service. In addition, institutions need a staff with the sales and marketing skills necessary to be able to identify potential customers and close the sale. The key to cross-selling is the successful matching of customer needs to products.

Consumer Attitudes toward One-Stop Shopping

Consumer Attitudes toward One-Stop Shopping

The MacroMonitor data show that consumers prefer one-stop shopping. But although consumers are willing to cross industry lines, they are not quite ready to consolidate their financial products with their primary institution. Whereas simplification and convenience are key deciding factors for customers wanting to limit the number of financial institutions they have to deal with, trust and need for diversification (not putting all eggs in one basket or institution) are the countervailing forces working against customers' consolidating with a single institution. In the aftermath of recent industry scandals, institutions must earn the loyalty and trust of their core customers by providing products and services that serve their customers' best interests.