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Saturday, Aug 10, 2002

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Marketing - Strategy

Cross-selling, the new mantra for pvt banks

Poornima Mohandas

MUMBAI, Aug. 9

CROSS-selling is a concept all private sector banks seem to be harping on, but is it worth all the din?

Retail banking being the new mantra for all private sector banks, cross-selling - selling of products/services to an already existing customer - is taking centre-stage.

Aggressive players in the market were using cross selling as a logical marketing approach to expand their retail segments, said a senior IBA official.

"Three is the ideal number of relationships we would like to have with the customer. At present we stand at 1.1, i.e. number of products sold per customer,'' confesses a senior official in ICICI Bank. A long road ahead, indeed.

Private banks even go as far as offering free credit cards and loans at preferential rates to their existing customers. The attempt is to grab a larger `share of the wallet' of the customer.

The success of this much hyped concept can only be gauged by calculating `profitability per customer'. However, banks today are satisfied merely counting the number of products sold per customer without getting into any mathematical acrobatics.

Cross-selling comes with its advantages, of course. It considerably reduces customer acquisition costs, servicing, marketing and communication costs and thereby substantially increases spreads for banks, says a senior banker.

Therefore one sees bank statements loaded with newsletters that trumpet new schemes and services that the customer can avail of from his bank.

Phone calls to sell loans or plastic cards that the customer does not desire may often end up annoying him. Analysing the customer database and then putting the right customer relationship management strategies in place is essential to ensure that the cross-selling effort does not backfire.

The more relationships a bank has with a customer, the more loyal the customer will be. The more will be the inertia to move to another bank, explains a private banker.

The bank could also get to know the customer through several relationships, thus the assessment of the credit quality of the customer can be bettered.

Banks even venture out into new businesses looking at cross-selling opportunities ahead. For instance, HDFC Bank entered commercial vehicle financing in February with intent to tempt fleet operators to avail of cash management services and personal banking services along with vehicular finance. Only time will tell the results of these endeavours.

Through cross-selling, the bank enjoys a readymade database it can use for every new extension of the product line.

A pay roll account with a corporate for instance, gives the bank a multitude of opportunities to cross-sell savings bank accounts, personal loans, locker facilities and even financial advisory services to all employees of the company.

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