Revenue growth through cross selling Roy Andersen 14

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Revenue growth through cross selling Roy Andersen 14 October 2002

Revenue growth through cross selling Roy Andersen 14 October 2002

Is cross selling a winning strategy? Cross selling has triggered financial services consolidation but

Is cross selling a winning strategy? Cross selling has triggered financial services consolidation but analysts sceptical about benefit

Content Forms of cross selling Why cross sell? Bancassurance Ø Ø Ø Models International

Content Forms of cross selling Why cross sell? Bancassurance Ø Ø Ø Models International experience Liberty experience Conclusion

Cross selling is marketing additional products based on current client relationships Products could be

Cross selling is marketing additional products based on current client relationships Products could be manufactured by different entities

The perfect service Investment product Pension plan Homeowners’ cover Life Policy (to cover bond)

The perfect service Investment product Pension plan Homeowners’ cover Life Policy (to cover bond) Home loan Credit card Current account

Direct cross selling Agent exposes client to wider range of products Can alienate client

Direct cross selling Agent exposes client to wider range of products Can alienate client if: Ø Ø Feels pressurised One product fails Indirect cross selling Client informed of additional products via statements or mail shots Downside “junk mail anger” Detracts from original point of contact

Why cross sell? Reduction in customer acquisition cost: Ø Ø Costs shared over many

Why cross sell? Reduction in customer acquisition cost: Ø Ø Costs shared over many more products Electronic banking lowers costs even further

Why cross sell? Protection from competitors: Ø Ø Locks them out from clients Avoids

Why cross sell? Protection from competitors: Ø Ø Locks them out from clients Avoids defection to other one-stop providers Leverages off reputation: Ø Clients trust certain institutions/ brands

Why cross sell? Client convenience: Ø One-stop service Ability to leverage all distribution channels:

Why cross sell? Client convenience: Ø One-stop service Ability to leverage all distribution channels: Ø Channel must suit the economics of the product

Bancassurance: Selling of insurance products by banks Assurbanking: Selling of banking products by assurers

Bancassurance: Selling of insurance products by banks Assurbanking: Selling of banking products by assurers

Bancassurance Answer to: Ø Commoditisation of banking products Ø Squeezing of insurance/investment product margins

Bancassurance Answer to: Ø Commoditisation of banking products Ø Squeezing of insurance/investment product margins But margin is shared

Bancassurance models [1] Bank provides leads to insurers [2] Insurer provides products to banks

Bancassurance models [1] Bank provides leads to insurers [2] Insurer provides products to banks Common to Europe Also common in Europe High advice products best Low advice products best Liberty / Stanbank hybrid of 1 and 2

Bancassurance models [3] Joint venture Closer to assurbanking [4] Full merger Risks high compared

Bancassurance models [3] Joint venture Closer to assurbanking [4] Full merger Risks high compared to benefits Don’t have to buy the cow All 4 models work

International trends Well established in Spain, France and Italy Becoming relevant to Scandinavia, Belgium

International trends Well established in Spain, France and Italy Becoming relevant to Scandinavia, Belgium and Netherlands In USA restricted by previous Glass Steagall Act Hopeful signs from L & G/Barclays, Irish Life/Irish Permanent Building Society, CGNU/RBOS Analysts sceptical

Markets where bancassurance succeeds High savings/pension reform Immature demand for financial services Absence of

Markets where bancassurance succeeds High savings/pension reform Immature demand for financial services Absence of well developed IFA network High savings/growth in disposable income Low SA savings levels do not bode well (15% of GDP) - but. Rich are getting Richer

Ingredients for success bancassurance Large bank client base Smaller low cost insurer Commitment by

Ingredients for success bancassurance Large bank client base Smaller low cost insurer Commitment by bank to open client base The insurer manages the bank sales force (SBFC +18%)

Ingredients for success bancassurance Client profile synergy “Embed” the simple products Aligning employee incentivisation

Ingredients for success bancassurance Client profile synergy “Embed” the simple products Aligning employee incentivisation It’s all about relationships

Stanbank / Liberty model Stanbank Products STANLIB/Ermi- Liberty/Char-ter tage Products Bank branches SBFC e-Bank

Stanbank / Liberty model Stanbank Products STANLIB/Ermi- Liberty/Char-ter tage Products Bank branches SBFC e-Bank Call centres Liberty agents/franchises IFAs Website

Motivation for creation of STANLIB Scale Ø Ø AUM R 135 bn Biggest unit

Motivation for creation of STANLIB Scale Ø Ø AUM R 135 bn Biggest unit trust company Pooling of talent Leveraging of distribution channels using bank and insurance licences for product development

CRM - Liberty experience Delivering more for retention than for new sales

CRM - Liberty experience Delivering more for retention than for new sales

Conclusion No one model Success and profitability depend on attitude and relationships

Conclusion No one model Success and profitability depend on attitude and relationships