Introduction
Cross-selling stands for being able to offer to the existing bank customers, some additional banking products, with a view to expand banking business, reduce the per customer cost of operations and provide more satisfaction and value to the customer. For instance, when a bank is in a position to sell to a deposit customer (say saving bank or term deposit), a loan product such as housing loan, credit card, personal loan or vice-versa, this would result into additional business and lead to low per customer cost and higher per customer earning.
The question arises What is cross-selling? Cross-selling is nothing more than team-selling with other specialists within your company, all working in partnership on behalf of the customer's best interest. It's a proactive, ongoing sales process designed to provide your existing customers with a full range of your company's products and services.
The good news is, cross-selling is one of the most profitable and least risky endeavors a company can undertake. The bad news is, if your cross-selling program is not properly administered and monitored, you run the risk of losing customers and creating conflict within your sales team.
Not surprisingly, two of the key elements that make cross-selling work are trust and convenience. Your customers already possess a degree of trust in your company, and this can be converted into additional sales that are not directly related to their existing products. Some might suggest that customers are irritated by cross-selling and perceive it as an aggressive sales approach. Interestingly enough, consumer research indicates that the reverse is actually true. Most customers prefer a full spectrum of products and services and appreciate the convenience that is provided through a comprehensive cross-selling approach.
The key to wealth in the past two decades or so has not been access to productive capacity, but rather access to monetary liquidity. This recent economic expansion has been fed by the secular trend toward greater financial sophistication, which in turn has led to a massive expansion of liquidity. The changes include things like automated teller machines and electronic banking. Credit analysis has gotten more sophisticated, though not more accurate (the major credit agencies were slow in calling the problems at Enron, World com, and elsewhere), as has advertising. Consumers can now be identified with almost pinpoint accuracy and are pursued ruthlessly through targeted appeals that include affinity marketing and telemarketing. Preapproved credit cards are an example of this trend. In the old days, no credit could ever be granted unless the lender had first met the borrower. This most important factor in the credit decision was the lender's evaluation of the character of the borrower. This character evaluation could be undertaken only in a face-to-face meeting. But a preapproved credit card skips the face-to-face process and thereby omits the most important part of the credit analysis. Consider the case of a man who, in the space of six months, had received preapproved credit cards for his four-month-old son, his dog, and his computer (which had a cybermoniker). All of these entities had excellent "negative" credit histories (no records of previous problems). But credit was approved to them on the basis of information that was otherwise incomplete. These mistakes would not have been made face to face. In response to the soaring bankruptcy rate, the credit card companies have pushed for new laws to limit bankruptcy proceedings. But the credit card companies are the last entities who should be making this argument, because they are a significant part of the problem. They have no real interest in people being more careful in incurring debt. Instead, they use the most sophisticated forms of market segmentation and advertising to encourage spendthrift behavior, and then harness the force of the law to force unsophisticated borrowers to pay the full price for loans that they were foolishly induced to take. In essence, their mode of operation is similar to that of a narcotics dealer who wants his "collection" activities to be backed by the force of law, when they are, in fact, receiving the natural consequences of risks that they willingly, even eagerly, took on. And yet, this profligacy has been a key ingredient in world economic growth, first in the United States, then Europe, and most recently in Southeast Asia.
In the present day context, the cross selling has come into focus, as some of the new private banks (ICICI Bank) have been able to offer to their customer a variety of products and thus generate more business through cross selling. But for most of the public sector banks, in particular, the concept in its new form, is still at its evolutionary stage. Current assets and liabilities are turned over much more rapidly than the other items on the balance sheet. Short-term financing and investment decisions are more quickly and easily reversed than long-term decisions. Consequently, the financial manager does not need to look so far into the future when making them. The nature of the firm's short-term financial planning problem is determined by the amount of long-term capital it raises. A firm that issues large amounts of long term debt or common stock, or which retains a large part of its earnings, may find that it has permanent excess cash. In such cases there is never any problem paying bills, and short-term financial planning consists of managing the firm's portfolio of marketable securities. We think that firms with permanent cash surpluses ought to return the excess cash to their stockholders. Other firms raise relatively little long-term capital and end up as permanent short-term debtors. Most firms attempt to find a golden mean by financing all fixed assets and part of current assets with equity and long-term debt. Such firms may invest cash surpluses during part of the year and borrow during the rest of the year. The starting point for short-term financial planning is an understanding of sources and uses of cash.32 Firms forecast their net cash requirements by forecasting collections on accounts receivable, adding other cash inflows, and subtracting all cash outlays. If the forecasted cash balance is insufficient to cover day-to-day operations and to provide a buffer against contingencies, the company will need to find additional finance. The search for the best short-term financial inevitably proceeds by trial and error. The financial manager must explore the consequences of different assumptions about cash requirements, interest rates, sources of finance, and so on. Firms are increasingly using computerized financial models to help in this process. The models range from simple spreadsheet programs that merely help with the arithmetic to linear programming models that help to find the best financial plan.
