Revenue growth through
cross selling
Roy Andersen
14 October 2002
Is cross selling a winning
strategy?
Cross selling has triggered financial services
consolidation but analysts sceptical about
benefits
Content
Forms of cross selling
Why cross sell?
Bancassurance



Models
International experience
Liberty experience
Conclusion
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
Direct cross selling
Agent exposes client
to wider range of
products
Can alienate client
if:


Feels pressurised
One product fails
Indirect cross selling
Client informed of
additional products
via statements or
mail shots
Downside “junk mail
anger”
Detracts from
original point of
contact
Why cross sell?
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
Why cross sell?
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
[1]
Bank provides leads
to insurers
[2]
Insurer provides
products to banks
Common to
Europe
Also common in
Europe
High advice
products best
Low advice
products best
Liberty / Stanbank hybrid of 1 and 2
Bancassurance models
[3]
Joint venture
Closer to
assurbanking
[4]
Full merger
Risks high
compared to
benefits
Don’t have to
buy the cow
All 4 models work
International trends
Well established in Spain, France and
Italy
Becoming relevant to Scandinavia,
Belgium and Netherlands
In USA restricted by previous Glass Steagall Act
Hopeful signs from L & G/Barclays, Irish
Life/Irish Permanent Building Society,
CGNU/RBOS
Analysts sceptical
Markets where bancassurance
succeeds
High savings/pension reform
Immature demand for
financial services
Absence of well
developed IFA network
High savings/growth in
disposable income
Low SA savings levels do not bode well (15% of
GDP) - but Rich are getting Richer
Ingredients for success bancassurance
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
It’s all about relationships
Stanbank / Liberty model
Stanbank
Products
STANLIB/Ermi- Liberty/Chartage Products
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
Growing bancassurance production
Rm
1 800
1 556
1 661
1 500
1 244
1 155
1 200
900
680
757
600
300
0
1997
1998
1999
2000
2001
Bancassurance business up 81% at 30 June 2002
Jun-02
Motivation for creation of STANLIB
Scale


AUM R135bn
Biggest unit trust company
Pooling of talent
Leveraging of distribution
channels using bank and
insurance licences for product
development
CRM - Liberty experience
Delivering more for retention
than for new sales
Conclusion
No one model
Success and
profitability depend
on attitude and
relationships