One of the most challenging strategies in any business is to create related sales (in ancient sales language, cross-sell).
In financial services it has been the Holy Grail of most all-finanz solutions providers, but how does it impact upon the medium-sized financial services firm?
The first step in the process is the decision of whether selling more than one core service is within the strategic intent of your business plan. Assuming that it is, then some basic rules need to apply.
First of all the organisation needs to ensure it can demonstrate a value proposition that links its core service to the proposed related service. It is important that the link be obvious to the potential and existing customer in the everyday interaction with the organisation. The related service and sale must form part of the solution provided by the core product.
In the case of financial planning, one could argue that other finance products and/or services are naturally related. However, in such a model you would be adding to the complexity of the relationship transaction with the customer and could run into areas of dissatisfaction not related to the core financial planning process.
There is logic that says that if you are offering a related service you must not dilute the competence of what you offer the customer. This is often seen in practice when two financial services firms agree to share a customer database for cross-selling services to their customers. Each of the providers sharing that customer should use the due care necessary to ensure that quality and integrity of the service is retained.
In any related sales strategy two disciplines must be maintained:
• The ability to retain quality of service.
• The ability to sustain and demonstrate capability.
If this were maintained then one would have to believe that the financial planning practice can expand beyond its core product and advisory services.
The marketing of the firm’s ability to service the customer’s total financial services planning needs is also important. Therefore a firm should have a clear marketing strategy to align its capabilities with the market offering.
So in communicating the related sales and services to a customer base one should consider:
• Will the customer see the link in the competencies the firm claims to have?
• Will the customer appreciate the value in purchasing the range of services from the one provider?
Over the last two decades many advisory firms have worked at developing a composite service delivery model, many others have gathered together into professional clusters to cross-sell their respective customer databases.
Many industries, including the financial services industry, have for some time seen the attractiveness of personalised cross-selling.
The two most obvious reasons for this attractiveness is that it increases the per customer revenue, and it is proven that selling more products to existing customers is more cost efficient than selling to new customers.
It is well documented that by applying cross-selling within a financial planning model through successful techniques, the firm can turn challenges into growth opportunities.
The upshot of expanding your product offering beyond the core product and/or service is the ability to do it in a way that supports your business growth and service management strategy.
The model often used to explain this concept is called the ‘competency image maximiser’.
The primary competency is what wins the customer and allows the firm the opportunity to exhibit expertise in other areas.
The secondary competency allows the firm to meet the needs of the customer without moving too far from the core.
Consequent competencies within the firm begin to envelop the customer making defection to other related service providers a difficult and unnecessary change in the customer’s mind.
In this latter situation, we begin to appreciate the value of growing the business outside the primary markets.
This logic is transferable across markets, meaning that if an organisation wants to move from one market segment to the next it can do so by moving its competencies up and down the order to suit the target market.
Moving outside the primary markets raises the bar on expectations of competency, expertise and service delivery from the customer, while simultaneously raising demand for more and more services. This gives rise to the concept of the one-stop financial services shop.
The challenge remains in the ability of any organisation to create the perfect model for related sales and services taking it beyond its chosen primary markets.
The successful business will achieve customer growth and retention, which arguably is impossible to duplicate and more importantly it will have a sustainable competitive advantage over similar players in the same markets.
Max Franchitto is the ManagingPrincipal of MGF ConsultingGroup.
