Revenue Enhancement through Cross-Selling

(1)

Revenue Enhancement

through Cross-Selling

(2)

Decrease Costs 10-30% Increase Revenues 70-90% Increase in Overall Value

Valuing Customer Centricity

Cross/up-selling, target customer retention and target pricing strategy are the greatest value creators in retail banking

Source : Accenture

(3)

The critical value driver path

Increase Revenue per Relationship 60-80 % Increase Revenues 70-90% Grow Customer Base 20-40%

(4)

Increase Customer Referrals 20-40% Improve Marketing Effectiveness 60-80% Improve Customer Satisfaction 70-90% Set-up Switching

Costs for Customers 10-30% Increase Target Cust. Reactivation 20-40% Increase Target Cust. Retention 45-65% Attract New Customers 5-25% Grow Customer Base 20-40%

Valuing Customer Centricity

The critical value driver path

(5)

Increase Revenue per Product

Increase # of

Products p. Cust. 60-80%

Develop Targeted Pricing Strategy by Customer

Segment

50-70%

Increase Cross/

Up-Selling 50-70%

Foster Bundling Concepts with

External Partners 5-25%

Develop Personalized Product

Offerings 20-40%

Improve Sales Channel

Efficiency 5-25% Increase Overall Price

Level 20-30%

Increase Revenue

per Relationship 60-80 %

Increase Volume per

Customer 10-20%

Valuing Customer Centricity

The critical value driver path

Source : Accenture

(6)

Valuing Customer Centricity

Cross/up-selling, target customer retention and target pricing strategy are the greatest value

creators in retail banking

Increase Revenue per Product 20-40% Increase # of Products p. Cust. 60-80% Increase Customer Referrals 20-40% Improve Marketing Effectiveness 60-80% Improve Customer Satisfaction 70-90%

Set-up Switching Costs for

Customers 10-30%

Develop Targeted Pricing Strategy by Customer Segment

50-70%

Increase Cross/ Up-Selling 50-70%

Foster Bundling Concepts

with External Partners 5-25% Develop Personalized

Product Offerings 20-40% Improve Sales Channel

Efficiency 5-25% Increase Overall Price Level 20-30%

Reduce Marketing Cost Reduce Selling Cost Reduce Servicing Cost Reduce Credit Risk Cost

Increase Revenue per Relationship 60-80 % Increase Target Cust. Reactivation 20-40% Increase Target Cust. Retention 45-65% Attract New Customers 5-25% Decrease Costs 10-30% Increase Revenues 70-90%

Increase Volume per

Customer 10-20%

Increase in Overall Value

Grow Customer

Base 20-40%

The critical value driver path

(7)

• 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

Revenue Enhancement through Cross-Selling

(8)

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

Revenue Enhancement through Cross-Selling

(9)

… and design optimal bundles to sell at 3.4 3.2 1.9 1.7 Consumer loan Consumer loan Mortgage Mortgage Investment products Investment products Savings account Savings account over time…

Product combinations customers buy 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 …

Source : McKinsey

Revenue Enhancement through Cross-Selling

(10)

Deepening customer relationships through financial planning

*_{30% of AEFA new clients come from American Express card holder base}

Share of wallet Percentage •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

Client retention (4 years) Percentage Plan No plan Plan No plan 80 - 90 40 - 50 >90 ~70 Source : McKinsey

Revenue Enhancement through Cross-Selling

(11)

Financial planning creates sales opportunity

Citigroups' average cross - sell ratio is 3.6

rising to 6.7 when Citipro is used Citigroups' average

cross - sell ratio is 3.6

rising to 6.7 when Citipro is used Targets all mass market

customers

Uses multiple channels to reach new clients

• Statement inserts

• Call center (inbound, outbound) • Internet

Client provides his/her financial information

• 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

Source : McKinsey

Revenue Enhancement through Cross-Selling

(12)

11,712,000

3,229,402

Total working population

Tax-paying

population

Nedcor Retail Bank’s current target market is estimated at 3.2m individuals, constituting 28% of the total working population

Revenue Enhancement through Cross-Selling

Source : SARS (2001) Labour Force Survey (Sep 2000)

(13)

Nedcor Retail Bank – Derivation of Client Base

(as of May 2001)

Derivation of Nedcor Retail Bank Client Base

1,197,819 213,007 219,987 764,825 0 200 400 600 800 1,000 1,200 1,400

Unique clients Non-Active Dependents Total client base N umbe r o f cl ie nt s (t ho us ands ) Source : Nedcor

Revenue Enhancement through Cross-Selling

(14)

Nedcor Retail Bank’s overall penetration into the 3.2 million tax-paying universe is 24%

Nedcor Retail Bank Penetration into SARS Universe

Nedcor Retail Bank SARS Universe 0 -<R75K R75K- <R150K <R250K R150K- R250K- R500K R500K- <R1m >R1m Income categories N umbe r of pe opl e (t hou sa nd s) (% penetration) 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 21% 15% 22% 45% 60% 40%

Nedcor clients = 588 945 Nedcor clients = 93 876

Revenue Enhancement through Cross-Selling

(15)

1) PRIMARY CLIENTS 3) SECONDARY INTO PRIMARY CLIENTS

+

2) SECONDARY CLIENTS Primary Client Average TOTAL REVENUE POTENTIAL

The potential is the sum of primary and secondary average wallet depth and converting secondary clients to primary clients

Source : Nedcor

Revenue Enhancement through Cross-Selling

(16)

• Within customer segments

• Between corporate and individual

• Through third party relationships

Cross-Sell

(17)

• Current / Savings Account

• Term Deposit

• Mortgage

• Asset Finance

• Credit / Debit Card

• Personal Loan

• Garage Card

• Insurance

• Assurance

• Asset Management / Fiduciary

Cross-Sell

Within Customer Segments

Nedbank Retail 1.7 to 4.4

(18)

Cross-Sell

Wealth Management

Assets Under Management Assets on Balance Sheet Wills _Tax Trust Transactions

(19)

• BoE

• NIB Syfrets

• Cape of Good Hope Bank

• Nedbank

• Old Mutual

Cross-Sell

(20)

High net worth Top 300 listed corporates,

government, institutions

Businesses Medium size listed,

unlisted, professionals Owner managed Informal sector Individuals Middle income Mass market

BoE main areas of focus

Investment Managemen t Business Retail Banking Services Corporate Banking Services