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Revenue growth through Revenue growth through cross sellingcross selling
Roy Andersen14 October
2002
Roy Andersen14 October
2002
Is cross selling a winning Is cross selling a winning strategy?strategy?
Cross selling has triggered financial services consolidation but analysts sceptical about benefits
Forms of cross sellingWhy cross sell?Bancassurance Models International experience Liberty experience
Conclusion
Forms of cross sellingWhy cross sell?Bancassurance Models International experience Liberty experience
Conclusion
Content
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)
Home loan
Credit card
Current account
Agent exposes client to wider range of products
Can alienate client if:
Feels pressurised
One product fails
Client informed of additional products via statements or mail shotsDownside “junk mail anger”
Detracts from original point of contact
Direct cross selling
Indirect cross selling
Reduction in customer acquisition cost:
Costs shared over many more products
Electronic banking lowers costs even further
Reduction in customer acquisition cost:
Costs shared over many more products
Electronic banking lowers costs even further
Why cross sell?
Protection from competitors: Locks them out from clients Avoids defection to other one-
stop providers
Leverages off reputation: Clients trust certain institutions/
brands
Protection from competitors: Locks them out from clients Avoids defection to other one-
stop providers
Leverages off reputation: Clients trust certain institutions/
brands
Why cross sell?
Why cross sell?
Client convenience: One-stop service
Ability to leverage all distribution channels:
Channel must suit the economics of the product
Client convenience: One-stop service
Ability to leverage all distribution channels:
Channel must suit the economics of the product
Bancassurance
Bancassurance:
Selling of insurance products by banks
Assurbanking:
Selling of banking products by assurers
Bancassurance
Answer to:
Commoditisation of banking products
Squeezing of insurance/investment product margins
But margin is shared
Bancassurance models
Bank provides leads to insurers
Common to Europe
High advice products best
Insurer provides products to banks
Also common in Europe
Low advice products best
[1] [2]
Liberty / Stanbank hybrid of 1 and 2
Bancassurance models
Joint venture
Closer to assurbanking
All 4 models work
Full merger
Risks high compared to benefits
Don’t have to buy the cow
[3] [4]
Well established in Spain, France and ItalyBecoming relevant to Scandinavia, Belgium and NetherlandsIn USA restricted by previous Glass - Steagall ActHopeful signs from L & G/Barclays, Irish Life/Irish Permanent Building Society, CGNU/RBOS
Well established in Spain, France and ItalyBecoming relevant to Scandinavia, Belgium and NetherlandsIn USA restricted by previous Glass - Steagall ActHopeful signs from L & G/Barclays, Irish Life/Irish Permanent Building Society, CGNU/RBOS
International trends
Analysts sceptical
Low SA savings levels do not bode well (15% of GDP) - but Rich are getting Richer
High savings/pension reformImmature demand for
financial services
High savings/growth indisposable income
Absence of welldeveloped IFA network
Markets where bancassurance succeeds
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
It’s all about relationships
Stanbank Products
STANLIB/Ermi-tage Products
Liberty/Char-ter Products
Bank branches
Bank branches Bank branches
SBFC SBFC SBFC
e-Bank e-Bank e-Bank
Call centres Call centres Call centres
Liberty agents/franchises
Liberty agents/franchises
IFAs IFAs
Website Website Website
Stanbank / Liberty model
Growing bancassurance productionGrowing bancassurance production
680757
1 155
1 556
1 244
0
300
600
900
1 200
1 500
1 800
1997 1998 1999 2000 2001 J un-02
Rm
Bancassurance business up 81% at 30 J une 2002
1 661
Scale AUM R135bn Biggest unit trust company
Pooling of talentLeveraging of distribution channels using bank and insurance licences for product development
Scale AUM R135bn Biggest unit trust company
Pooling of talentLeveraging of distribution channels using bank and insurance licences for product development
Motivation for creation of STANLIB
Delivering more for retentionthan for new sales
CRM - Liberty experience
No one model
Success and profitability depend on
attitude and relationships
Conclusion