Cross Selling and Upselling
In the good old days, there was a saying that banking is a 3-6-3 business, meaning that banks accept deposits at 3%, lend at 6% and down the shutters 3 p.m.; work for couple of hours and then leave. However, today the situation is totally different and the work culture has undergone a tremendous change especially post 2001, after the emergence of new private sector banks in the country.
With the increased competition amongst different banks and its different branches, we witness a new aggression in the banking system today. Banks are competing for more customers and higher amount of deposits within their system. Nowadays, in order to make profits, it has become important for banks to undertake various cross selling and up selling opportunities that may come underway.
We will first try to understand the meaning of and difference between cross selling and up selling.
Cross selling refers to selling to an existing customer certain products that may support or complement the products purchased from us. It may also involve certain products which are of similar nature that the customer already possesses but serve a different purpose. So if a customer purchases a computer, then cross sales opportunities available for the vendor would be anti-virus, webcam, speakers etc.Cross selling increases the revenues of the firm and ultimately results in added profits.
Up selling means convincing a customer who is interested in a particular product to buy a better or higher variant of the same product. The seller needs to convince the buyer of the additional benefits that the higher variant of the same product would provide to the customer.
For ex. if a customer wants to buy a smart phone worth Rs. 10,000, then the seller could also introduce a smart phone worth Rs. 12,000 or more and convince the customer about its various features like higher resolution pictures, more battery life, extra memory etc. compared to the original product he wanted to buy.
Thus, cross selling and up selling both involve added revenue from the same customer through selling something extra. However, up selling involves making the customer spend more money on the same type of product whereas cross selling will provide some extra accessories or support functions for the same product, thus adding value to it for an extra amount.
In banking industry also, there are various products which should be used for cross selling or up selling. Let us discuss them in detail as under:
Credit card is one of the most widely used products for cross selling mainly with savings accounts or even fixed deposits. Conversely, many a time’s consumers applying for credit cards are often asked to book fixed deposits. Likewise home loan borrowers are pitched term insurance and also house insurance.
Smart officers often capitalize on the months of November, December and January to sell life insurance and other tax deductible products. They also sell gold coins during festive seasons like Diwali, Dussehra, Akshay Tritiya etc.
Also there are up selling opportunities available as every bank now has multiple variants of savings, current and fixed deposit accounts. These accounts have various additional features based on their category. Most of the savings and current accounts are classified into different categories as per their minimum balance requirements. Higher the balance requirements, better would be the features available in the particular category. Let us consider Bank A which has 2 product variants with balance requirements of Rs.10000 and Rs. 25000. Now, if there are 3 free withdrawals at ATMs of other banks for the first variant, then 10 free withdrawals at other bank ATMs can be provided for the second variant. Similarly, the third part cash deposit limits can be higher for the second variant.
There can be other incentives provided as well like better reward points etc.