UBSW ITALIAN FINANCIALS CONFERENCE
“CROSS-SELLING: REALITY OR MIRAGE?”
Rome, - February 7 th , 2002

 Today in Italy many banking and non-banking players, such as insurance companies and
“utilities” (i.e. Poste Italiane,
Italgas, AEM), leverage on crossselling in order to sell financial services
 This trend creates higher competition and market overshoot, supporting the belief that crossselling is at the same time the most important factor and measure of success
THIS RAISES TWO QUESTIONS:
 IS IT SO EASY TO MAKE A
SUCCESSFUL CROSS-
SELLING?
 IS CROSS-SELLING
REALLY SO IMPORTANT
IN ORDER TO DETERMINE
BUSINESS SUCCESS?
2

Agenda
Is it easy to make a successful cross-selling ?
Requirements for a successful cross-selling
How to manage a successful cross-selling
Is cross-selling so important to succeed?
Conclusions
3

WE IDENTIFY AT LEAST THREE PILLAR-
REQUIREMENTS FOR AN EFFECTIVE AND
SUCCESSFUL CROSS-SELLING:
 A clear customer segmentation and identification of clients’ needs
 The development of a single IT platform and of an efficient CRM to support a multi-channel distribution
 A wide range of tailored products
4

Mass market
(< Euro 75,000 financial assets)
Affluent
(from Euro 75,000 to Euro 500,000 financial assets)
Private
(> Euro 500,000 financial assets)
Small Business Corporate
(Revenues < Euro
1.5 -2.5 mln.)
(Revenues > Euro
2.5 mln.)
Cash management and transactional services
Investment products & services:
 Simple
 Sophisticated
Financial Advisory
Pure Lending
Structured Finance and ALM services
5

OUR MULTI-CHANNEL DISTRIBUTION NETWORK CAN
LEVERAGE ON A SINGLE IT SYSTEM AND AN EFFICIENT
CRM TO IMPROVE CROSS-SELLING AND REDUCE
ATTRITION RATES
CRM
A single CRM platform in order to:
 Improve effectiveness of sales through:
 better identification of targets
 optimisation of cost / profit rate per contact
 definition of best media
/ channel mix
In 2001, for instance:
 12 campaigns for Credito
Italiano
 More than 1,200,000 contacts resulting in 24,400 sales
Service platforms
Headquarter
CRM
Multichannel
Network
UCI-Retail
BackOffice
IT
MULTI-CHANNEL NETWORK
 2,939 branches in Italy as at end 2001
(around 2,800 for UCI-Retail after S3)
 1,774 PFAs as at 31.12.2001
 Phone Banking: 44,000 active clients in 2001
 Internet Banking: 302,500 clients as at 31.12.2001
IT PLATFORM
Seven banks moved to the same IT platform in 3 years in order to:
 Improve customers’ understanding through:
 monitoring of financial assets / liabilities
 check of products / services bought / sold
 control of number and type of transactions, flows, ecc.
6

UNICREDIT
ASSICURA
 Innovative commercial banking product packages for families and small businesses
 More than 190 mutual funds distributed all around the world
 Hedge funds, capital guaranteed products* and segregated accounts
 Bancassurance
More than Euro 3.9 bn new premiums written in 2001
 Investment banking, structured finance and derivatives for corporates
More than 27,000 transactions in 2001
 More than 1,200 CW and derivatives for retailers
 Capital guaranteed products*
 Revolving credit cards
 Leasing for corporate clients
* Jointly engineered by Pioneer, UBM and TradingLab
7

Agenda
Is it easy to make a successful cross-selling ?
Requirements for a successful cross-selling
How to manage a successful cross-selling
Is cross-selling so important to succeed?
Conclusions
8

WE THINK THAT CROSS SELLING IS SUCCESFUL WHEN IT MAXIMISES:
 CUSTOMER SATISFACTION, strictly linked to real value perceived by the client
 PROFITABILITY FOR THE
PROVIDER OF FINANCIAL
SERVICES
BOTH VARIABLES CAN BE MAXIMISED THROUGH THE ADOPTION OF
DIFFERENT DISTRIBUTION APPROACHES FOR DIFFERENT PRODUCTS:
High
Targeted sales of standard products
(i.e. in 2001 segregated accounts in Funds)
Targeted sales of tailored products
(i.e. Pension funds,
Cap. Guar. Products)
Low
Single products and packages sold through direct channels
Packages
Low High
Value perceived by the client
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 6 financial products in 1 package (1) at a fixed monthly rate - Euro 14.49 (1)
(Current account, Custody for securities, Safety box, Debit card, Credit card, Consumer finance)
 Free access to direct channels (phone and Internet banking)
 Non-banking benefits (Discount on travels, hotels, restaurants, newspapers, medical services, insurance policies, ecc.)
 4 financial products in 1 package (2) at a fixed monthly rate - Euro 46.48 (2)
(Corporate current account, Corporate credit card,
Easy access to leasing, Additional current account for the enterpreneur)
 Free access to direct channels (phone and
Internet banking)
 Many non-banking benefits (Easy rates on telephone calls, ticket restaurants, fuel, carrenting. Fiscal and Legal Advisory. Telepass, ecc.)
(1)
(1)
 Lower distribution charges (compared with selling 6 products individually)
 More than 685,000 subscribers since launch
 Higher customer satisfaction and
loyalty (lower drop-off rates)
 Enhanced profitability and NPV per client
Data referred to Genius Extra
Data referred to Imprendo Gold
 Lower distribution charges (compared with selling 4 products individually)


Enhanced customer satisfaction
(125.000 clients since launch)
Chance to attracting the enterpreneur as an affluent or private customer
10

MAIN GENIUS PERFORMANCES (1) :
Clients with Clients without
Genius
2.26
4.48
% Ch.
+98.2% Cross-selling
Drop-off Ratio
Customer Satisfaction (2)
Av. Yearly Margin per client
7.0%
58.6%
Euro 837
2.7%
65.7%
Euro 1,056
-4.3%
7.1%
+26.2%
Gross NPV per client (in %) (3) 100.0% 165.6% +65.6%
(1) Source: MKS (UCI-Strategic Marketing), on 1999 and 2000 data
(2) Measure of satisfaction towards the Bank (Credito Italiano) resulting from an EURISKO market research
(3) Calculated as sum of revenues generated by each client on a 25 year timeframe, discounted at UCI’s cost of equity (8.95%) and taking into account drop-off ratios of each category. Data re-based in % terms.
11

PENSION PRODUCTS ARE A TYPICAL HIGH MARGIN FOR
THE BANK - HIGH VALUE FOR THE CLIENT SERVICE,
FOR WHICH A SUCCESSFUL CROSS-SELLING WILL
REQUIRE TAILORED FINANCIAL ENGINEERING ...
Reasons to save for “Social Security” purposes
Main findings of a IAMA-DOXA market research (Dec.2000)
(% of interviewees)
To buy one’s own house 84%
To integrate State-based pension programs
To guarantee medical care in the old age
To bequeath financial assets to sons
To guarantee son’s education
To warrant against the unforeseen
87%
78%
69%
83%
93%
0% 20% 40% 60% 80% 100%
Being successful in the
“pension industry” will require complex products specifically engineered to meet all these customers’ needs
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COMMUNICATION
New communication models:communication models currently used in Italy are clearly inefficient
PERSONAL FINANCIAL PLANNING
PFP approach redesign: new philosophy, new mechanism for performance measurement, new targets
NEW PENSION
PRODUCT
DISTRIBUTION
APPROACH
CUSTOMER
SEGMENTATION
New variables
(besides wealth and income) becoming more and more important
13

... BASED ON A COMPLETE REDESIGN OF PERSONAL
FINANCIAL PLANNING, IN ORDER TO FULLY MEET
CUSTOMERS’ SOCIAL SECURITY NEEDS
NEW PERSONAL FINANCIAL PLANNING:
Customer
Segmentation
 From pure risk-profile analysis to focus on multiple variables (i.e. level of employment and of contributions paid to State-based pension programs)
Fiscal
Optimisation
Wealth-trend
Simulation
Customer
Understanding
Product
Selection
 Fiscal optimisation becoming not only a target, but also a key driver for product selection
 From simulation based on time series to multistage statistical models, taking into account different financial market scenarios
 Individual social security and retirement gaps measurement
 Deep analysis of customers’ attitude towards
“innovative” products (like “defined contribution” or capital guaranteed products)
 Pension funds, Capital Guaranteed and Life
Insurance products becoming a key pillar for an efficient asset allocation
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1,400
1,200
1,000
800
600
400
200
0
OUR BRILLIANT RESULTS FROM CAPITAL
GUARANTEED PRODUCTS CONFIRM THE ABILTY IN
ENGINEERING AND DISTRIBUTING SOPHISTICATED
PRODUCTS TO SATISFY NEW NEEDS
CAPITAL GUARANTEED PRODUCTS: EURO 7.46 bln NET INFLOWS IN 2001*
(Euro mln)
407
465
MAR
2001
16
298
8
257
381
251
236
197
991
1,050
774
172
MAY
2001
214
JUNE
2001
Fund & Index
Linked Notes
260
JULY
2001
208
AUG.
2001
Segregated
Accounts
SEPT.
2001
OCT.
2001
NOV.
2001
Unit Linked
(UNISTAR)
378
204
693
DEC.
2001
(1) Net of Euro 91 mln. inflow from a joint BANK PEKAO / TRADINGLAB Capital Protected Note issued in October
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Agenda
Is it easy to make a successful cross-selling ?
Requirements for a successful cross-selling
How to manage a successful cross-selling
Is cross-selling so important to succeed?
Conclusions
16

 Cross-selling
 Up selling
 Customer penetration
 Price sensitivity
WE IDENTIFY FIVE MAIN VALUE
CREATION DRIVERS:
 Sale of many different products to the same client in order to increase the profitability related to each customer
 Shifting customers’ product mix towards products with higher value both for the clients and the bank
 Share of wallet for private clients
 Share of total financial services used by Small Business and Corporate clients
 The higher the appreciation of the value associated to the product, the lower customers’ price sensitivity
 Customer relationship period
 The longer the customer relationship period, the higher the customer NPV
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Mass market Affluent Private Small Business Corporate
Cross-selling
Up-selling
Customer penetration
Price sensitivity
Customer relationship period
Cross-selling is the most important value driver for Mass market and Small Business, while share of wallet, up-selling and customer relationship period are key-factors for affluent and private customers
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UP-SIDE POTENTIAL FROM CROSS SELLING IS MUCH
HIGHER FOR MASS MARKET AND SB CUSTOMERS
WHO SHOW THE LOWEST AVERAGE NUMBER OF
PRODUCTS
MARGINAL PROFITABILITY RELATED TO CROSS-SELLING
Marg. Profitability of an additional sale
400%
320%
240%
160%
80%
0%
100%
3-4 5-6
CROSS-SELLING LEVEL
SB
Mass
Affluent
Private
 Internal studies on
Credito Italiano data show that the marginal profitability coming from the sale of an additional product decreases with higher levels of crossselling
75%
50%
25%
> 8 pdt
7-8 pdt
5-6 pdt
3-4 pdt
1-2 pdt
 Respectively 95% and
80% of SB and Mass
Market clients own less than 5-6 products
0%
SB Mass Affluent Private
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THE HIGHER ASSETS MANAGED BY UCI, THE HIGHER PROFITABILITY FOR UCI
(Euro)
3,000
2,500
2,000
1,500
1,000
500
0
< 25,000 25-75,000 75-
150,000
150-
250,000
250-
500,000
500-
1,000,000
TOTAL MANAGED ASSETS (DEPOSITS, SECURITIES IN CUSTODY AND AUM)
> 1,000,000
Source: UCI CRM on Credito Italiano data for affluent and private clients
For Private and Affluent customers, already showing high crossselling levels, a large share of wallet and up-selling are much more important in order to enhance profitability
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Agenda
Is it easy to make a successful cross-selling ?
Requirements for a successful cross-selling
How to manage a successful cross-selling
Is cross-selling so important to succeed?
Conclusions
21

IN ORDER TO BE SUCCESSFUL IN THE CURRENT COMPETITIVE
SCENARIO ALL PLAYERS SHOULD REMEMBER THAT:
 Cross-selling is an important value driver, but it is not the only one and not always the most important
 The success of cross-selling policies should not be measured by the number of products sold to the same client, but by their profitability and their capability to maximise both customers’ satisfaction and relationship period
 Specialised players with critical mass will have a strategic advantage vs. competitors, thanks to their deep knowledge of the customer base and their increased focus
 With its strategic and operational tools UCI has made crossselling a profitable reality and the creation of 3 segment banks will help to fully exploit the potential of this value driver
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