What is Cross-Selling?

Cross-selling refers to the act of offering customers complementary products and services, particularly to those who have been making purchases. The idea behind cross-selling is to enrich the shopping experience of customers by proposing items that would completely satisfy their overall purchase.

How does Cross-Selling Work?

Cross-selling is a sales technique which serves companies of different sizes including multinationals and neighborhood businesses. Apart from getting suggestions from vendors, customers have the option of visiting any retailer store and wait in line to have contact with complementary products of a different nature. The complementary products or services are usually strategically positioned to add to customers the products that they had chosen. Using a cross-selling technique is a unique way that brands can use to increase sales. The technique focuses on selling to current customers that are always aware of a brand, and trust the business. Using an example of fast foods, a business may decide to use a simple cross-selling strategy to increase income since it is more likely that most of the customers are not aware of all food options offered by the restaurant.

Cross-selling in financial services

Many financial institutions use the cross-selling technique to promote their products and services. Several customers have more than one account with the same bank. In other instances, banks offer their customers packages of financial products including checking and savings account, credit cards, debit cards, and overdrafts. These techniques not only attract more customers but also enhance the overall revenue. The financial world is fully composed of cross-selling. In both the US and Europe, traditional financial institutions rely on this technique as a means of generating income and promoting growth. And this never promotes the client. The technique of cross-selling is used in many sectors from catering and fashion to the automotive and insurance industries. In a recent study conducted by Pegas Moment of Truth, it was found that 68% of banks know their customers extremely well, but only 41% of customers believe in the assertion. Moreover, 16% of the customers believe that banks do not cater to their needs at all. This is an indication that traditional banks focus on unilateral benefits, without considering the needs of the clients. After the recent Wells Fargo scandal, government measures are being put in place to stop cross-selling techniques that can harm the user. In 2016 September, Well Fargo dismissed 5,300 employees due to the accusations surrounding the falsification of over 2 million accounts. The employees created false accounts for clients in order to reach the objective set by the company and in turn make more commission. CNN reported that the term cross-selling appeared five times in the earnings report of Wells Fargo which aimed at increasing its products per households from 6.1 to 8 which could only be possible through cross-selling. However, cross-selling is not common among the new financial players, particularly those in the Fintech sector. This is because Fintech was born to provide better financial services compared to the existing traditional setups. Because of this, the products and services offered must be 100% focused on the needs of consumers. Because of the massive implementation of the cross-selling technique in the financial sector, ESMA, a European markets supervisor, published ten guidelines on the cross-selling practice which were summarized in 6 obligations aimed at protecting small investors. These include:

• Every financial firm must reveal the prices and costs of their products and services
• Provide the characteristics of products as well as risks associated with the price
• There must be communication in case the purchase of a product can be made independently
• Entities must train commercials that engage in the distribution of combined packs.
• Entities must allow their customers to cancel product without being disproportionately penalized.

Because of Fintech and its mission to change the traditional finance sector structure, cross-selling practices are increasingly becoming regulated, and new financial companies are offering services that are focused on customers intrinsic needs. It is very crucial to know the needs of every customer and what funding sources suit these needs.