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‘Bundling’ Key To Cross-Selling Banking Products

Author Tom O’Rourke shares his experience building “checking bundles” as part of the onboarding process while at Wells Fargo. He says replicating the success Wells Fargo found is an easy four-step process.

By Tom O’Rourke
Director, Loyalty & Relationship Marketing at Dave Bocks & Associates Marketing

“The greatest
acquisition strategy
in financial services
today is cross-selling.”
– Forbes (February 2012)

“The greatest acquisition strategy in financial services today is cross-selling.” What a surprise! You could have read this same quote from Forbes (February 2012) 10 or 15 years ago. It’s amazing that financial institutions are still averaging just a 2.10 cross-sell ratio to new customers (Forrester Research, October 2011). Wells Fargo boasts a ratio that is more than double the industry average. If Wells Fargo can do this, so can you. And, it’s easy as 1,2,3,4. Really.

1. Understand the Core of the Problem

The majority of customers do not see visiting a bank as a beneficial or valuable experience. They want to go in, get their new checking accounts and debit cards, and get out as quickly as possible. Most have no interest in having a detailed conversation with “a banker.” And in many instances, bankers are not all that interested in conversing with them. Hence, the dismal cross-sell ratio. As a result, 50%-60% of new customers end up leaving the bank within the first 12 months.

In order to actively engage customers in the sales process, you must quickly articulate a compelling value proposition or they will scurry out the door. Getting consumers to open an account is only the first step in winning the long term relationship. But in order to do this, you need to assemble checking product packages — or “bundles” (checking plus three additional products or services) — and provide some incremental, monetized value. That’s how you ask them to give you more of their business.

In Wells Fargo’s Q4 2011 earnings report, the bank says that 86% of all new customers purchase a package of products. Based on average cross-sell ratios in the financial industry, the average bank probably has no more than 10%-15% of new customers purchasing four or more products.

You don’t have to run the math to quickly recognize the phenomenal impact that moving from 10% up to 86% would have on your bottom line. Simply jumping from 15% to 30% can double your sales and profits. That’s the kind of improvement that’s off the charts.

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2. Duplicate What Works

Hey, if Wells Fargo can do it… so can you. The requirement of purchasing four or more products is the ideal place to start. This target represents a relatively small commitment from financial consumers, yet the retention difference between those with 4+ products versus those with just 1-3 products is astounding.

It is paramount that customers understand the value of any bundled packages they are presented. Think McDonald’s with their Happy Meals and Value Meals. Customers purchase these bundles of 3-4 products because they feel like they are getting a deal vs. purchasing each item individually.

Creating your checking packages should be as easy as pulling 4-5 database reports related: product penetration, onboarding cross-sell, customer retention, and profitability. It could take no more than a few hours analyzing these reports before you determine your package mix and how to quantify the consumer value proposition in monetary terms.

3. Merchandise and Market the Heck out of Your New Value Proposition

Provide sales support, merchandising, point-of-sale, lapel stickers, and communication materials that generate customer interest and make it easy to understand the benefits and value of the bundles. You will find new customers much more engaged in the sales process as they actively seek out the package best for them. This results in more engaged, productive, and successful bankers …and bigger sales and profits.

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4. Create an Accountable, Package-Selling Culture

Applying a “package” approach should be relatively easy to do, especially if you are profiling customers with an assessment of their needs during the sales process. Front line staff can easily grasp the “bundle” strategy, and see its value — both to the organization and to consumers. It’s intuitive, resulting in fewer “coaching moments” and more “attaboys.”

Of course, for this to work you must establish clearly defined, measurable goals. Here’s a reasonable place to start: Take the percentage of new customers acquiring 4+ products in their first 12 months, and double it. Make that your goal. Take a look at this example:

  • Before “bundled” packaging: Bank XYZ opens 25,000 new checking accounts annually. 15% of those are opened with three additional products, with an average profit per product of $40. 3,750 DDA’s x 4 products x $40 = 15,000 sales and $600K profits.
  • After “bundled” packaging: 30% of checking accounts are opened with three additional products with an average profit proxy of $40. 7,500 DDAs x 4 products X $40 = 30,000 sales and $1.2M in profits.

As you can see, engaging customers leads to mutually beneficial conversations, which in turn lead to significant increases in sales, profits and customer retention. Start packin’ them in.


Tom O’Rourke is Director, Loyalty & Relationship Marketing at Dave Bocks & Associates Marketing. As the architect of Wells Fargo’s Checking Packages, he has done the 1,2,3,4 and takes great pride in seeing this concept reach the heights of 86%.

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Comments

  1. Tom – you are wrong. People don’t mind buying their financial products a la carte anymore because of aggregators like Mint.com. People prefer just to cherry pick the right depoist account from this bank, the right loan from this credit union, etc. Get a clue.

  2. In Tom’s defense, his article makes no mention of what consumers prefer nor what they want. His article is about what a bank or CU wants, what’s good for the financial marketer.

    And please, keep comments polite and impersonal.

  3. Eddie – the proof is in the puddng. Did you miss the Wells Fargo results mentioned in the article? That’s the clue to tell you this is the only way to go.

  4. Carolyn Jordan says:

    Tom, there’s no doubt that Wells Fargo has been successful. I read another article that points out their positive growth of deposit dollars at the end of second quarter despite declining in overall deposit accounts. I have a question as to what your article qualifies as a product or service. Obviously, it’s checking, savings and loan accounts but does it also include services such as debit cards, online banking, mobile banking, etc? Would you elaborate on this? Raddon CEO Strategies only counts products such as checking, savings, credit cards, loans and investments in their products per household calculation and many credit unions use this measurement as a benchmark. Thanks for your insights and thanks to Jeff for featuring your article on the Financial Brand.

  5. Good question Carolyn. It’s frustrating that the cross-selling/onboarding discussion doesn’t have accepted definitions of what’s a product. There are some studies that count online banking, bill pay and e-statements as “products.” It seems more appropriate to call those “features” or “add-on services.” I’m with you: checking, savings, credit cards, loans — those are real products.

  6. Here are some more articles and resources on the subject of cross-selling and Wells Fargo:

    The Art Of The Cross-Sell

    Our strategy: How we’re going to get there (on Wells Fargo’s website)

    Sales Keys to Cross-Selling Success

    Wells Fargo: Underpriced Growth And Total Return Potential

  7. Tom O'Rourke says:

    Carolyn – thanks for the question and I apologize for the delayed response. “Core” products or products that provide profit proxy are included in my definition. This does include things like debit cards, credit cards and online banking, but not “softer”/ancillary services such as online statements, mobile banking….

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