The banking industry has an odd definition of the word on-boarding. Or at least to me it does, considering it’s not a real word in the first place.
To me, the term implies the process by which a firm helps a new customer become a satisfied new customer. To me, the concept implies that simply closing the sale isn’t enough — that some, if not many, customers need help when initially using, establishing, or setting up a product or service.
But why do so many banks seem to think that on-boarding means the process by which a firm tries to sell more products to new customers immediately after those customers purchase their first product or service?
The cover story on on-boarding in the December 2007 issue of the ABA’s Bank Marketing magazine says banks need to:
Create a structured program to cross-sell new people and lock them in — so that deposits don’t go out the back door as fast as they come in the front.”
My take: The logic behind this advice is sorely twisted.
It presumes that customers can be “locked-in.” This is an outdated notion. Sure, there was a time when it was a hassle to switch accounts from one bank to another. But this is increasingly not the case. Bank marketers have got to drop the notion that they can “lock customers in.” It’s a losing proposition.
In the course of some market research I did a few years ago, I noticed a not-insignificant percentage of bank customers who were very dissatisfied with their banks, yet very unlikely to switch. Why? Because, they said, it was just too much trouble to switch.
As consumers, we want to do business with firms we want to do business with, not firms we feel consigned to do business with because it’s too much trouble to go elsewhere. And as marketers, do we really want customers who remain customers because they feel they have to? I don’t think so.
There’s another side to the article’s advice to cross-sell that makes it wrong: It ignores the realities of what it takes to develop a customer relationship.
In many respects, developing a customer relationship isn’t very different from developing a personal relationship. There has to be some mutual trust, mutual benefit, and some degree of engagement.
Sorry for the crude analogy, but cross-selling new customers practically immediately after they become customers is like asking someone you just met at a bar back to your place. (Note: If this is accepted behavior among normal, well-adjusted single people please let me know, and I’ll delete this whole post). Granted, they might say yes, but that is not a relationship.
Here’s my advice to banks: Remove cross-selling from your on-boarding program. Focus on helping your new customers make the best use of the products or services they’ve ALREADY signed on for.
Cross-selling them as part of your on-boarding process potentially sends two messages: 1) You care more about selling them more products than you helping them with the ones they have, and 2) Your sales people are incompetent for not having suggested the products you’re trying to cross-sell (if they were good, they would have uncovered the need for the product already).
Today’s rule of bank marketing is this: You earn the right to cross-sell. You earn that right by delivering on the expectations that were established in the initial sales process — expectations that the product value will be as good as promised, and that the service provided will be as good as promised.
Technorati Tags: Marketing, Banking, On-boarding
Ron Shevlin's Marketing Whims 
I never thought of the sales and on-boarding processes as distinct – don’t the sales people also set up the new accounts and so forth? Or do they just hand people over to a service agent to do this? How do they build relationships if they don’t complete the circle?
Or am I just living in la-la land (still)?
Excellent points. Earning the right to cross-sell is difficult to digest if marketing is solely focused on targets and timelines. Every individual is different so that earned right is conditioned for the most part by a unique set of expectations. Establishing this process in your business culture takes constant work and refinement because ‘normality’ in product value and service just won’t do it. Lots of talk out there about exceeding expectations but not much delivery.
Building relationships takes time and is an art not a science. Could someone point me to the algorithm needed to build mutual trust?
@Jim: YOU’VE never thought of them as separate, but I assure you that in the majority of banks, they’re VERY separate processes.
@Gene: I’ve never seen the formula. But there is a site you should check out: http://trustedadvisor.com/blog
Ron,
Your link to the ABA Bank Marketing article actually takes you to a 4/07 article re: Umpqua Bank . . .
@Tom: Thanks, I think it’s fixed now.
Interesting notion, however as a banker, I slightly disagree with the premise that banks think the front line isn’t doing their job. Fact is, when a customer comes in to open a new account at a bank, they aren’t there for pleasure. It’s a necessity…sort of like going to the dentist. Customers usually have about 30 minutes to spend in opening an account and it’s generally either an investable instrument or Checking account, which can be time consuming to open.
POS folks generally do a good job and keep the customers’ attention long enough to sign them up for Debit Cards and On-Line Banking, natural extensions of the Checking account, however other products are more complex to explain and sell in a 30 minute timeframe.
That’s why some cross-selling in on-boarding makes sense, particularly if it’s done correctly by actually offering the customer something that is of benefit to them and their banking relationship. Of course, assisting them with existing purchases is also key and to your point should also be addressed in on-boarding. However, I think most banks rely on the front-line to establish the trust to “earn the right”. I also think that in most cases, this is happening, i.e., POS bankers are providing good service and meeting needs and therefore establishing the initial trust to cross-sell. If the banker tries to puque out all of the many options for cross-sell at the point of sale when the customer is not in a position to receive the “message”, then not only is trust not established, but actually broken.
On-boarding should not replace the on-going sales efforts of the branches to contact and refer products that make sense, but on-boarding does assist in focusing what’s right for the customer and providing focus to the banker to pursue — if done right.
I really believe that it is actually harder to move financial institutions today than it was in the past. Whether I like my credit union today or not, they’ve “sold” me enough services that it’s nearly impossible to leave. I can’t imagine having to change all of my auto-payments and online bill-pay services that I use to another institution.
If it’s done right, cross-selling as a part of the on-boarding process is as critical of a function that can take place. A credit union will rarely have as much face-time with the member as they get in the on-boarding process.
If it is approached from the perspective of a trusted advisor or consultant and not a “salesperson”, cross selling can have benefits for the member and the credit union.
I’ll agree that most FI’s do a terrible job of selling/consulting in the on-boarding process.
Onboarding has the potential to be the ultimate customer experience application if it is done correctly. Instead of focusing on selling the customer out of the starting gate, it is imperative to first help the new customer (or existing customer opening a new account) get fully engaged with their new checking, savings, loan or investment account and to feel good about their decision.
This may take the form of encouraging activation, utilization, or simply gaining a better understanding of their new relationship, but rarely involves expanding the relationship during the first 30 days. It may include a ‘thank you’ from the branch via email that arrives before the customer even gets home, or a call to make sure everything is OK.
In fact, if done correctly, this introductory period is the best time to gather additional insights from the customer around their needs and preferences. Why not find out who is the real user/decision maker on the account and the channel they prefer to be communicated with. Or maybe find out what the customer has at other banks so that future communication can be based on their needs and not the bank’s.
If the customer becomes fully engaged/active with their new relationship, then it is the time to build on that relationship using the new insight received. The objective of most onboarding programs is to stem the 35%+ attrition and to get the additional 15-20% of low activity accounts engaged. This is done through encouraging engagement first and selling second.
I disagree! Cross selling should be viewed and presented as extending service to customers to meet all their needs.
Yes-You must earn the right to “sell” more.BUT-Stop thinking of this as 2 seperate steps.Servicing and selling go together.This artifical demarcation line between selling and servicing degrades the customer experience.In my humble opinion there has been very little creative thought given to this age old problem with bankers.
@Glenn: Thanks for commenting. I have to say, trying to put myself in the shoes of a customer, that I have a hard time understanding how a cross-sell offer can be positioned as “extending service.” If I say “I have a problem or issue” and the bank says “here’s a product or service that might address that need”, then OK, maybe there’s some service there. But simply calling me up a a week after I open my checking account to “see how I’m doing” and asking me to buy more products is far from “extending service.”
Ron, are you telling me banks onboarding programs actually hit up customers for the next sale immediately?
Are you saying that banks never call the customer and thank them for opening their account and just simply reminding them all the ways they can contact the bank or to just simply ask do they have any questions regarding the account(s) or services they just opened?
On a side note I like the fact that old posts are being read and commented on so that they live again.
@dmgerbino
@David: If one to two weeks after opening an account is “immediately”… then, yes, that’s what I’m telling you.
But, no, I’m not saying that there aren’t banks that just call customers and thank them for opening their account.
However, I AM saying that not enough banks are applying a quantitative, analytics-driven approach to figuring when to contact new customers, how often to contact them, and what to say to them when they do. (and I hope to address that in a report I hope to write in Q1 2009).
@Ron, I could not agree with you more. I met with several vendors who provide onboarding services and none of them had what I call an analytically driven model. They had research but all they really offered was a basic matrix. So now I am building my own framework so I can have my own analytically driven model that includes triggers. Being a clasically trained marketer, analyst, and database pro with a very strong direct marketing background has its advantages. 2009 is going to be a fun year.
We are working on an onboarding campaign for our auto-dialer at the credit union. Ron and David, I would be very interested to here more about the analytics you recommend for these types of campaigns.
@Ron: Now we’re getting closer to the same page. I believe cross-selling is exactly what you described… You have multiple needs and we have multiple products for those needs. Having that type of conversation is the most important part of on-boarding in my opinion. The solution is not to stop doing cross-selling in on-boarding, but to stop doing it the wrong way.
@Ashli,
Onboarding can be made very complicated. Start with making sure you are managing the customer experience. If the call center is calling/auto dialing, follow-up at least every checking account opening with a call a day or two after the account is opened and thank the customer for their business and remind them of all the ways they can contact your institution.
If you can do this for every account opened they would be good but each call needs to be customized to the type of member. For example, a new to institution member needs to be handled one way while an existing member opening a new account gets treated another way.
This is just one suggestions. I hope to get others to contribute hear so maybe we could get a dialog going.
@dmgerbino
@dmgerbino
Thanks for the comment and good point about the message being specific to what type of product/service was opened.
I am also thinking that we probably need to exclude accounts that are linked to other accounts already existing at the credit union. Say someone opens an alternate checking account (our core processing system allows only one checking per primary account number), but really isn’t new to the credit union. We would not want to call them with the same message that we would call with a brand new member.
Definitely some additional thinking to do.
I have a radical new idea, probably too shocking to implement in the financial institution world, in regards to “onboarding.”
Instead of figuring out how we can sell more products to the customers, let us simply contact them, welcome them, and ASK if they have any questions for us. Then LISTEN. People with outstanding customer services skills will spot opportunities for additional sales IF they are present.
BTW, “onboarding” is my new most hated word in corporate crapspeak. And if I’m going to hate on it so much, I’d probably ought to offer an alternative. I offer WELCOMING, as in, what can we do to improve our customer WELCOMING process.
Any business that does not approach it as a welcoming process is not practicing what they profess if they say they want customer loyalty or to build the customer relationship. Then again, most businesses don’t really want relationships or loyalty, they want dollars.
In writing the above comment, I was looking only at the most recent comments, so I’ll add that I agree with Ron’s initial premise as well as Jim Marous and Gene Blishen.
@Morriss: I’ve got nothing against the term or practice of onboarding, and have no issue w/ firms trying to figure out how to sell more products to customers. But it would be nice if FIs’ onboarding efforts were more focused on who (if anyone) they should be selling more to, and more focused on figuring out what (if any) welcoming messages are needed for which customers.
@Morris,
in regards to this comment of yours:
“I have a radical new idea, probably too shocking to implement in the financial institution world, in regards to “onboarding.”
Instead of figuring out how we can sell more products to the customers, let us simply contact them, welcome them, and ASK if they have any questions for us. Then LISTEN. People with outstanding customer services skills will spot opportunities for additional sales IF they are present.”
It is my understanding that both the Harland Clarke and Deluxe onboarding programs lean towards this type of approach in parts of their program.
So to say it’s too shocking may not be totally true.
I have it on good authority that customers love being called and welcomed to their new BANK. It is something they do not expect.
@dmgerbino
Agreed. But, another equally important question is whether the Customer on-boarding help reduce customer churn?
New customer attrition within the first three to six months can be up to 200 percent higher than annualized rates. And the simple act of calling or sending a letter to new customers to thank them for their business and explain the features of the product they just purchased can go a long way in ensuring their satisfaction. Research shows that because customers with two or more services are 33 percent less likely to leave the bank, cross-selling should a major objective of an on-boarding program. Research also shows new customers are six times more likely to open new accounts when compared to prospects. And 75 percent of cross-sales from retail checking customers occur within 90 days of account opening. The cover story on on-boarding in the ABA’s Bank Marketing magazine says banks need to: “Create a structured program to cross-sell new people and lock them in — so that deposits don’t go out the back door as fast as they come in the front.” Here is an interesting article from the Bank marketing magazine: Interestingly Ron Shevlin has this take about how cross selling along with On-boarding is just such a bad idea! His view is that we should ensure that the on-boarding process focuses on “helping your new customers make the best use of the products or services they’ve ALREADY signed on for”. He goes on to add that “In many respects, developing a customer relationship isn’t very different from developing a personal relationship. There has to be some mutual trust, mutual benefit, and some degree of engagement. Sorry for the crude analogy, but cross-selling new customers practically immediately after they become customers is like asking someone you just met at a bar back to your place.” Read Ron’s interesting comments on cross selling At Cequity , we wonder how this process works out in the “growth markets”. Especially in under banked countries like India where there is just such a mad rush to acquire new customers that the entire notion of running a “welcome process” seems just so alien! And yet the On-boarding process is also so strongly linked to even “regulatory” processes like “Know your customer” which bankers are supposed to follow!