Customer Service or Customer Selling

The recent news that Wells Fargo and Bank of America Corp. are pushing their customers to buy more brokerage, savings and banking services from them as the weak economy and new regulations make it harder to earn money from investment banking and loans should come as no surprise.

Known as cross-selling, the concept has been pursued for decades by bankers eager to expand their business without having to find new customers. Now, banks are counting on cross-selling to replace some profit lost after the financial crisis. According to Accenture Plc, which estimates that returns on equity have dropped 21 percentage points from pre-crisis levels to 5 percent.

Profit is under pressure after bank assets shrank by a record 5.3 percent last year and consumer credit dropped 6.6 percent in 16 months, the most since World War II. Now Congress is preparing new regulations on fees, credit cards, securities and capital that may cut income at the 26 largest banks by $21 billion, according to Barclays Capital.

If you have ever called into a bank to see if a check cleared and was asked if you wanted to add identity theft coverage, know what I mean. It isn't limited to banking. Ever call AT&T or Comcast with a service question and be asked, or rather be told you should add our phone/video/internet service, we can save you money (and we can make money.)

"The reason cross-selling has developed such a sense of urgency in banking is that they are just getting hammered on all of their traditional sources of income," said Tony Plath, finance professor at the University of North Carolina at Charlotte. Cross-selling is so central to Wells Fargo that managers mentioned it 108 times at last month's two-day investor conference, said Barclays analyst Jason Goldberg.

San Francsico's Wells Fargo is using slogans like "Eight is Great" as it exhorts employees to cross-sell at 6,590 branches, the most in the United States. It's boosting staff 20 percent at some of the 3,254 Wachovia Corp. outlets, acquired in 2008, where customers average 4.85 products per household, compared with 6.02 at Wells Fargo.

Of course cross selling did not start in the banking industry. Remember being asked at McDonald's or Burger King if you wanted some fries to go along with that hamburger?


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