Let the Customer Lead the Way in Cross-selling

March 03, 2017


For decades, the banking industry has incentivized branch and call-center employees to persuade customers to sign up for products like credit cards and services like bill pay. Even though the push-based sales model has endured for years, we cannot discount its serious flaws.

Sales goals have driven personal bankers to sell unneeded products, and in some cases, unknown services to their clients. Not to mention, the risk, complexity and psychological biases related to financial products make them ill-suited for push-based selling tactics altogether.

Institutions can never accurately predict a customer’s banking needs and pitch the right product 100% of the time — an imprecision that leads to inappropriate suggestions that may annoy the customer. In the worst-case scenario, a bank’s sales effort is so aggressive, intrusive or discriminatory that it ends up breaching regulations or ethical standards.

The use of push-based sales tactics in banking also leads to another problem: bad decisions. We, as consumers, have a heightened tendency to deviate from logical, rational thinking when it comes to money. We prefer immediate gratification to long-term results. Our rationality is also affected by a more acute fear of loss when dealing with financial-based products and we are easily overwhelmed.

Shrewd sales executives have played into these psychological biases. They use predatory tactics to pressure unsuspecting customers into buying financial products and services that are inappropriate. There is an unavoidable element of self-interest where the seller’s recommendations seek to maximize commissions more than align with the clients’ needs.

To be sure, brokers often argue that investment products have to be sold — and not bought — because of consumers’ inherent risk aversion. However, the fact is investment products should be “recommended” by a qualified financial professional with a fiduciary duty to protect his or her client’s interest ahead of commissions.

This is not to suggest that push-based cross-selling strategies outside of banking are wrong and should be eliminated altogether. In industries like books or movies, it is a helpful sales strategy. In these industries, inaccurate and poorly executed push-based recommendations don’t lead to calamitous outcomes. Also, people overwhelmed by the immense number of media content choices actually appreciate personalized recommendations even if the suggestions sometimes miss the mark.

With bank products and services, however, the push-based sales model does not work to the benefit of consumers. Instead, banks should use their digital channels for “pull-based” cross-selling. In this model, banks can invest in intelligent and intuitive digital designs to make it easy for customers to configure and control the banking relationship. For example, banks can use interactive tools to encourage customers to experiment with different bundling and product combinations. Banks can nudge them toward certain combinations with attractive rewards like cash back, miles or points.

Banks can also consider using a familiar pull-based technique: free-trial periods. Here, customers have the option to sign up for a test drive on services like premium banking. At the end of the assessment period, the customer can choose whether or not to keep the service.

Pull-based cross-selling empowers the customer with experience and information. Instead of steering a customer down one path, banks present available choices in a coherent and easy-to-follow manner, encouraging customers to actively engage in banking decisions and nudging them to think about their relationship with the bank.

With this approach, we will get fewer run-ins with the law and still have success with cross-selling.


This article was also posted on the American Banker