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Revenue Enhancement through Cross-Selling

Revenue Enhancement through Cross-Selling. Valuing Customer Centricity. The critical value driver path. Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking. Increase Revenues. 70-90%. Increase in Overall Value.

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Revenue Enhancement through Cross-Selling

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  1. Revenue Enhancementthrough Cross-Selling

  2. Valuing Customer Centricity The critical value driver path Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking IncreaseRevenues 70-90% Increase in Overall Value DecreaseCosts 10-30% Source : Accenture

  3. The critical value driver path Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking Grow Customer Base 20-40% IncreaseRevenues 70-90% Increase Revenueper Relationship 60-80 % Source : Accenture

  4. Valuing Customer Centricity The critical value driver path Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking Increase Customer Referrals 20-40% 5-25% Attract New Customers Improve Marketing Effectiveness 60-80% Improve Customer Satisfaction 70-90% Increase TargetCust. Retention 45-65% Grow Customer Base 20-40% Set-up Switching Costs for Customers 10-30% 20-40% Increase TargetCust. Reactivation Source : Accenture

  5. Valuing Customer Centricity The critical value driver path Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking Develop Targeted Pricing Strategy by Customer Segment 50-70% Increase Overall Price Level 20-30% Increase Revenueper Product 20-40% Increase Volume per Customer 10-20% Increase Revenueper Relationship 60-80 % Increase Cross/ Up-Selling 50-70% Foster Bundling Concepts with External Partners 5-25% 60-80% Increase # of Products p. Cust. Develop Personalized Product Offerings 20-40% Improve Sales Channel Efficiency 5-25% Source : Accenture

  6. Increase Customer Referrals 20-40% 5-25% Attract New Customers Improve Marketing Effectiveness 60-80% Improve Customer Satisfaction 70-90% Grow Customer Base 20-40% Increase TargetCust. Retention 45-65% Set-up Switching Costs for Customers 10-30% 20-40% Increase TargetCust. Reactivation Develop Targeted Pricing Strategy by Customer Segment 50-70% IncreaseRevenues 70-90% Increase Overall Price Level 20-30% 20-40% Increase Revenueper Product Increase Volume per Customer 10-20% Increase Revenueper Relationship 60-80 % Increase in Overall Value Increase Cross/ Up-Selling 50-70% Foster Bundling Concepts with External Partners 5-25% 60-80% Increase # of Products p. Cust. Develop Personalized Product Offerings 20-40% Reduce Marketing Cost Improve Sales Channel Efficiency 5-25% DecreaseCosts 10-30% Reduce Selling Cost Reduce Servicing Cost Reduce Credit Risk Cost Valuing Customer Centricity The critical value driver path Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking Source : Accenture

  7. Revenue Enhancement through Cross-Selling • To date, cross-sell remains a case of more heat than light for most institutions – only a few banks have successfully created a systematic capability to grow their business in this way • Leading banks are using specific tactics to increase share of wallet • Offering tightly integrated product bundles • Using financial planning as a sales tool • Knowing what to offer and when based on life and other key events • Using a local market planning approach to drive cross-sell efforts Source : McKinsey

  8. Revenue Enhancement through Cross-Selling Retail banks are executing a variety of sales tactics to increase customer penetration 1. Account Opening 2. Product Bundling 3. Financial Planning 4. Event-based Targeting 5. Local Market Planning Source : McKinsey

  9. Revenue Enhancement through Cross-Selling 3.4 Consumer loan Consumer loan 3.2 Mortgage Mortgage 1.9 Investment Investment products products 1.7 Savings account Savings account Product combinations customers buy over time over time… Number of products cross - sold within 2 years if the first product is a … Number of products cross - sold within 2 years if the first product is a … … and design optimal bundles to sell at Source : McKinsey

  10. Revenue Enhancement through Cross-Selling • Leverage credit card transaction information and other corporate data to maximize customer knowledge and tailor financial planning approach* (e.g., corporate card, purchasing card, corporate travel) • Focus on client advice and matching customer needs by offering proprietary and third party products • Cater to consumer demand for advice during economic downturn Deepening customer relationships through financial planning Share of wallet Percentage Plan 80 - 90 No plan 40 - 50 Client retention (4 years) Percentage >90 Plan ~70 No plan Source : McKinsey * 30% of AEFA new clients come from American Express card holder base

  11. Revenue Enhancement through Cross-Selling Targets all mass market customers Uses multiple channels to reach new clients • Statement inserts • Call center (inbound, outbound) • Internet Citigroups' average Citigroups' average cross - sell ratio is 3.6 cross - sell ratio is 3.6 Client provides his/her financial rising to 6.7 when rising to 6.7 when information Citipro is used Citipro is used • Account statements • Tax statements • Debt statements – Mortgage/Education • Proof of Assets – Car/Home • Insurance Systems generate customized plan and propose Citibank products to fulfill it Financial planning creates sales opportunity Source : McKinsey

  12. Revenue Enhancement through Cross-Selling Nedcor Retail Bank’s current target market is estimated at 3.2m individuals, constituting 28% of the total working population Total working population Tax-paying population 11,712,000 3,229,402 Source : SARS (2001) Labour Force Survey (Sep 2000)

  13. Revenue Enhancement through Cross-Selling Nedcor Retail Bank – Derivation of Client Base (as of May 2001) Derivation of Nedcor Retail Bank ClientBase 1,400 1,197,819 213,007 1,200 219,987 1,000 764,825 800 Number of clients (thousands) 600 400 200 0 Unique clients Non-Active Dependents Total client base Source : Nedcor

  14. Revenue Enhancement through Cross-Selling Nedcor Retail Bank SARS Universe Nedcor Retail Bank’s overall penetration into the 3.2 million tax-paying universe is 24% Nedcor Retail Bank Penetration into SARS Universe 1,800 Nedcor clients = 93 876 Nedcor clients = 588 945 (% penetration) 1,600 1,400 1,200 Number of people (thousands) 1,000 800 600 21% 400 15% 200 45% 22% 40% 60% 0 0 -<R75K R75K- R150K- R250K- R500K- >R1m <R150K <R250K R500K <R1m Income categories Source : Nedcor

  15. Revenue Enhancement through Cross-Selling The potential is the sum of primary and secondary average wallet depth and converting secondary clients to primary clients Primary Client Average TOTAL REVENUE POTENTIAL + + 1) PRIMARY CLIENTS 2) SECONDARY CLIENTS 3) SECONDARY INTO PRIMARY CLIENTS Source : Nedcor

  16. Cross-Sell Macro Opportunities • Within customer segments • Between corporate and individual • Through third party relationships

  17. Cross-Sell Within Customer Segments • Current / Savings Account • Term Deposit • Mortgage • Asset Finance • Credit / Debit Card • Personal Loan • Garage Card • Insurance • Assurance • Asset Management / Fiduciary Nedbank Retail 1.7 to 4.4 (Wealth Management Products Add 2.5)

  18. Cross-Sell Wealth Management Wills Tax Assets Under Management Assets on Balance Sheet Trust Transactions

  19. Cross-Sell Wealth Management • BoE • NIB Syfrets • Cape of Good Hope Bank • Nedbank • Old Mutual

  20. Investment Management Business Corporate Banking Services Retail Banking Services Cross-Sell Between Corporate and Individual Top 300 listed corporates, government, institutions High net worth Medium size listed, unlisted, professionals Middle income Owner managed Mass market Informal sector BoE main areas of focus Businesses Individuals

  21. Cross-Sell Joint Ventures • Imperial Bank • Pick ‘n Pay • JD Group • Old Mutual Bank

  22. Conclusion • Extract value through cost reduction and synergies • Cross sell to significant client bases previously untapped Nedbank is uniquely positioned to:

  23. Thank youQuestions?

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