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Revenue growth through cross selling

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

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Revenue growth through cross selling

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  1. Revenue growth through cross selling Roy Andersen 14 October 2002

  2. Is cross selling a winning strategy? Cross selling has triggered financial services consolidation but analysts sceptical about benefits

  3. Content Forms of cross selling Why cross sell? Bancassurance • Models • International experience • Liberty experience Conclusion

  4. Cross selling is marketing additional products based on current client relationships Products could be manufactured by different entities

  5. The perfect service Investment product Pension plan Homeowners’ cover Life Policy (to cover bond) Home loan Credit card Current account

  6. Direct cross selling Indirect cross selling

  7. Why cross sell? Reduction in customer acquisition cost: • Costs shared over many more products • Electronic banking lowers costs even further

  8. 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

  9. Why cross sell? Client convenience: • One-stop service Ability to leverage all distribution channels: • Channel must suit the economics of the product

  10. Bancassurance Bancassurance: Selling of insurance products by banks Assurbanking: Selling of banking products by assurers

  11. Bancassurance • Answer to: • Commoditisation of banking products • Squeezing of insurance/investment product margins But margin is shared

  12. Bancassurance models [1] [2] 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 Liberty / Stanbank hybrid of 1 and 2

  13. Bancassurance models [3] [4] Joint venture Closer to assurbanking Full merger Risks high compared to benefits Don’t have to buy the cow All 4 models work

  14. 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

  15. 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

  16. 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%)

  17. Ingredients for success - bancassurance Client profile synergy “Embed” the simple products Aligning employee incentivisation It’s all about relationships

  18. Stanbank / Liberty model

  19. 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

  20. CRM - Liberty experience Delivering more for retention than for new sales

  21. Conclusion No one model Success and profitability depend on attitude and relationships

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