How To Increase Cross-Selling in Insurance?
Cross-selling is selling a consumer-related or complementary item. Cross-selling is a powerful marketing strategy.
Cross-selling in the financial services industry refers to offering different assets or products to investors or providing retired tax preparation services.
If a bank customer has a mortgage, salespeople may attempt to cross-sell a personal line of credit or CD.
Main Points to Understand
- Cross-selling is when you sell more products to customers you already have. This is often done in the financial services industry.
- Most of the time, financial advisors can make more money by selling other products and services to their existing clients.
- To stay out of trouble with regulators and protect the client’s best interests, this needs to be done correctly. Advisors who just give referrals to get extra bonuses may get customer complaints and be disciplined.
- Upselling is a way to sell a product or service by promoting an upgrade or a higher-end version of it.
For its cross-selling scandal, Wells Fargo was fined more than $185 million and had to give back more than $2.8 million to customers.
Read: How Insurance Works, Its Definition, and Main Types of Insurance
How Cross-Selling Works
Cross-selling to existing customers is one of the best ways for businesses, like financial advisors, to make more money.
This may be one of the easiest ways for them to grow their business, since they already have a relationship with the client and know what their goals and needs are.
Advisors should be careful when using this strategy, though.
Cross-selling a mutual fund that invests in a different sector can be a good way for a money manager to help a client diversify their portfolio.
If a financial adviser attempts to offer a customer a mortgage or other product they don’t know much about, they’re doing the client a disservice and harming the business relationship.
Cross-selling can bring in a lot of money for stockbrokers, insurance agents, and financial planners if it is done well.
Licensed tax preparers can sell insurance and investment products to the people who hire them to do their taxes. This is one of the easiest sales to make.
Cross-selling is a good way to run a business, and it can also help you plan your finances.
Upselling is the act of selling a more complete or high-end version of the current product. It is not the same as cross-selling.
How to Become Good at Cross-Selling
Cross-selling advisors must know their goods well.
A stockbroker who sells mutual funds will require extensive training to sell mortgages.
A simple referral to another department that sells and processes mortgages could lead to referrals that aren’t needed because the broker might not know when the customer needs this service but is still motivated to get a referral fee.
Advisors need to know how a new product or service fits into their client’s financial picture in order to make a good suggestion and follow rules about what is appropriate.
FINRA may use the data to limit cross-selling.
In addition to financial goods, advisers must know their company’s offerings. Imagine a new employee entering a firm who doesn’t know all of its advisory services.
The new recruit must get acquainted with the organization to recognize cross-selling possibilities.
Cross-Selling in Finance Industries
Before the 1980s, banks offered savings accounts, brokerage firms sold stocks and bonds, credit card companies pitched credit cards, and life insurance companies sold life insurance.
Prudential Insurance Company, the world’s largest insurer at the time, bought Bache Group, Inc. to expand its services.
Wells Fargo & Co. and Bank of America merged with Wachovia Securities and Merrill Lynch & Co. in 2008. Both banks had dwindling earnings, and the brokerages were in financial trouble.
By buying existing brokerage distribution channels, they hoped to expand its retail distribution arms and make banking and investing products and services work better together.
Few merging firms used cross-selling. Bank of America lost Merrill Lynch brokers because it made them sell other bank products to people who were investing.
Wells Fargo’s cross-selling has been more successful after its merger with Wachovia.
Large companies often struggle to integrate goods. When H&R Block Inc. bought Olde Discount Broker to help its tax clients invest, it was a mistake.
The business chose to abandon brokerage and concentrate on taxes. H&R Block sold Olde for $315 million, less than a decade after buying it for $850 million.
Difference Between Cross-Selling and Upselling
Cross-selling and upselling are used to sell more. Differences exist.
Upselling is the process of getting customers to buy a more expensive or better product or service. Maximize profitability and improve customer service.
This could make the customer feel more important and increase their customer lifetime value (CLV), which is the total value they bring to a business.
Existing customers are 60%–70% more likely to buy than new ones.
Existing customers are easier to upsell than new ones. Existing consumers trust the brand and respect its products and services.
Upselling relies on trust. If a client trusts a brand, they’ll trust it when it offers a superior choice.
Cross-selling is a sales technique that encourages clients to buy related or complementary things.
Recommending, discounting, and combining similar items are cross-selling methods. Like upselling, the corporation wants to boost perceived value by fulfilling consumer demands.
Advantages and Disadvantages of Cross-Selling
One of the most successful sales methods is cross-selling. Cross-selling takes more than simply providing clients with alternative items.
The company must understand customer demands and how complementary items meet them.
Customers buy trusted, well-reviewed brands.
Existing customers are simpler to market to than new ones. Existing customers buy related or complementary products more often.
As more people use a brand’s goods, they grow loyal.
Cross-selling hurts client loyalty. If done wrong, it might seem forceful and self-seeking.
This happens when a salesperson tries too hard to sell a similar product or doesn’t understand what the customer wants. This hurts the brand’s reputation and sales.
Cross-selling to the wrong customers might be ineffective.
Some customers expect better service as their purchases increase.
As service expectations rise, so do expenses.
Some buyers return or exchange things often. This category is unprofitable for cross-selling.
Their purchases bring in a lot of money at first, but they usually return them or don’t pay for them, which costs the company more than it made in sales.
- Increase sales of less popular commodities to boost income.
- Customers exposed to more of a company’s goods may boost brand loyalty.
- May fulfil a customer’s needs, preventing them from going to a competitor.
- May result in increased service-related costs as it may be more expensive to cross-sell compared to other strategies
- May negatively impact relationships if the cross-selling technique is found to be pushy
- May result in a negative public perception of requiring or demanding multiple products be paired together
In 2013, Wells Fargo workers in Southern California created bank and credit card accounts without permission. Cross-selling quotas motivate them.
More than 30 workers were fired after an inquiry.
Wells Fargo has recruited an outside consulting company to assess new accounts since 2011.
They also introduced new training programs and security systems.
Over two million accounts were illegally formed in five years, and 115,000 suffered costs. Over 3.5 million fake accounts were found.
Wells Fargo gave impacted customers $2.8 million and fired 5,300 staff. John Stumpf resigned without explanation. 2016’s crisis cost Wells Fargo $185 million.
How to improve cross-selling?
Cross-selling is successful using numerous tactics. Introduce complementary items and services via a drip email campaign.
Wait until you’ve proven yourself to the consumer. Make sure your goods and services meet client objectives. Unnecessary offerings might reduce consumer satisfaction.
Cross-selling do’s and don’ts
Consider repeat consumers when cross-selling. Build campaigns to market more items to happy consumers. Train employees to detect satisfied clients’ demands.
Don’t presume buyers know your other products. Educate them on the items’ worth. Personalize your customer interactions to avoid seeming like a sales pitch.
Unhappy consumers might further separate them from your brand.
Cross-selling is an ethical way to increase sales. Cross-selling isn’t designed to deceive customers; it’s supposed to educate them about alternate products.
It’s smart business to discuss winter coat sales with a skier.
eBay’s Cross-Promotional Connections program connects vendors.
Buyers may view the seller’s other listings and relationships when they win a bid. eBay has a free cross-selling tool that promotes similar items.
Sellers may advertise similar products or bulk discounts. This function was withdrawn and is only available to certain users.
Cross-selling may boost a company’s bottom line and client loyalty. It may erode earnings, dissatisfy consumers, and ruin a company’s brand if done improperly.
Cross-selling may enhance income and meet a customer’s unmet demands.