Small business customers' low-cost deposits are crucial for increasing Community Banks' revenue and profitability. However, the significance of small business customers extends beyond just deposits. By cross-selling additional products and services to their current small business customers, Community Banks can create a mutually beneficial situation that fosters growth for both parties. For instance, small businesses may initially open a checking and savings account with a Community Bank. As their business expands, they may require additional products like loans, lines of credit, or credit cards.
To effectively cross-sell, you need to know your small business customers on a personal level. While this may seem like basic advice, many banks find it challenging to put into practice. A recent study from Accenture found that just 23% of banking customers rated their primary bank as highly competent when it comes to giving personalized financial advice. In the same survey, just 30% of customers rated their customer experience with their primary bank as “excellent.”
This means there is a massive opportunity for Community Banks that can master the art of delivering personalized experiences to cross-sell their small business customers.
Why Cross-Selling in Banking Matters
Here are some reasons why Community Banks should focus on cross-selling, along with tips for implementing it effectively.
1. Revenue Growth: Small business customers are not just about deposits; they have diverse financial requirements ranging from checking accounts and loans to payroll services and merchant processing. By being a comprehensive provider that can address these needs and more, you can enhance revenue and improve profitability. Understanding a specific business's needs from the start enhances the possibility of establishing a stronger and more valuable relationship across different product offerings.
2. Strengthened Customer Loyalty: The more of your products business customers use, the more they will come to rely on you for all of their financial needs. We all know what a pain it can be to switch financial institutions, especially for small businesses that have multifaceted needs. As long as you are providing valuable products, services, and service, your small business customers will remain loyal, leading to long-term recurring revenue.
3. Improved Customer Satisfaction: Cross-selling doesn’t mean trying to up-sell each customer with every additional product or service your Community Bank offers and hoping for the best. Instead, effective cross-selling in banking is about understanding and fulfilling your customers’ unique needs. Only cross-sell solutions that will genuinely benefit your customers’ small business operations (more on how to do that in a minute). This will increase the customer experience and their overall satisfaction.
4. Risk Mitigation: Community Banks are undoubtedly subject to external pressures beyond their control. Relying heavily on a single line of business (such as the current overexposure to CRE) can be precarious if market conditions shift. Expanding product and service offerings to small business customers can help your Community Bank buffer against economic downturns and industry-specific challenges.
5. Save Money on Marketing Resources: Acquiring new customers costs five times as much as marketing additional products to existing ones. Cross-selling allows Community Banks to leverage existing relationships, which reduces your marketing and acquisition costs. This efficient use of resources translates into higher profitability and better operational efficiency.
Strategies for Effective Cross-Selling
Ok, so that’s why you should be cross-selling to small business customers. But how, exactly, can you achieve this without compromising your existing customer relationships? Here are some ideas.
1. Customer Segmentation and Personalization: Every small business is unique. Understanding your business customers’ diverse needs is crucial for effective cross-selling. Being able to efficiently acquire knowledge to build this understanding up front and being able to track the ongoing needs of a customer drastically increases your ability to offer the most relevant, valuable product mix. Crux Analytics can be your secret weapon here, providing detailed insights about individual businesses that allow you to start conversations with small business owners about the products and services that would be most beneficial to them today, and continue to drive value through early identification of risk and opportunity, and alignment of the best products as relationships evolve.
2. Employee Training and Empowerment: Frontline employees are the linchpin of successful cross-selling efforts. They interact directly with customers and can identify opportunities for additional products and services. Empower your employees to efficiently engage in meaningful conversations about customers' evolving needs by equipping them with specific knowledge and actionable insights to build relationships and drive better outcomes.
3. Integrated Product Offerings: By using Crux Analytics to derive detailed insights into the specific needs of small businesses, you can identify patterns that can help you create bundles. For example, you might start offering a business checking account bundled with merchant services and a line of credit to qualifying small business customers. Better yet, you can immediately understand the best custom bundle on a business-by-business basis. These integrated solutions add personalized value and make it easier for customers to adopt multiple products that serve their needs best.
4. Leveraging Technology: Tech is at the heart of business today, and banking is no exception. Leverage tech tools like Crux Analytics to get detailed analyses of the market surrounding each specific small business, then empower your team to use those insights to forge meaningful relationships with your small business customers.
5. Building Trust and Transparency: Trust is the foundation of any banking relationship. Community banks must ensure their cross-selling efforts are transparent and ethical. Customers should feel that your Community Bank is always acting in their best interest, not just pushing products for profit. Clear communication about the alignment of needs, benefits, and costs of additional products is essential for building trust and long-term relationships.
Cross-selling is more than just a sales tactic; it's a strategic approach to deepening customer relationships and driving growth for small businesses in your community. For community banks, it offers a pathway to increased revenue, enhanced customer loyalty, and diversified risk. Get detailed insights into your small business customers’ needs with Crux Analytics. To learn more, get in touch with us today.
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