Posted by Anita Gardeva
Cross-Selling – The practice of selling a new product to established clients who are currently using other products, (e.g. when a financial institution markets a loan to savings account holders).
When done correctly, cross-selling can offer advantages to both clients and providers; new products increase revenue lines and customer loyalty while customers receive access to a wider product range from a provider they know. Cross-selling can also decrease customer acquisition costs. Unlike product bundling, cross-selling does not require clients to purchase services they might deem unnecessary.
Spotlight Fact: Small savings services are arguably the most important financial service for the poor, yet they are costly to provide. A new CGAP study by Glenn Westley and Xavier Martín Palomas shows that cross-selling increases the viability of small savers. As the paper states, “If the MFI earns a profit on the [cross] sale of [other] products, this profit may partially, fully, or more than fully compensate for the high operating costs of small savings.” The study highlights ADOPEM, an MFI in the Dominican Republic, where cross-selling loans and insurance products to small savers earns the institution a total of US $1.34 million in profits. Without its small savers ADOPEM would lose 30 percent of its profits.
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For more details about how cross-selling can improve the business case for small savers, see: Glenn D. Westley and Xavier Martín Palomas, “Is there a Business Case for Small Savers?,” CGAP, Occasional Paper No. 18.
For more financial inclusion terms, please visit the Financial Inclusion Glossary.
Flickr credit: AndyRob
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November 11, 2010 at 6:59 pm
Ros Grady
Cross selling may well improve the business case for small savers and, indeed, have many favorable outcomes for the institution concerned. However we need to remember that there may well be data protection principles which need to be considered before personal information is used for cross selling purposes. For example, Principles 9 and 10 of the the OECD Guidelines on the Protection of Privacy and Transborder Data Flows state that:
“Purpose Specification Principle
9. The purposes for which personal data are collected should be specified not later than at the time of data collection and the subsequent use limited to the fulfilment of those purposes or such others as are not incompatible with those purposes and as are specified on each occasion of change of purpose.
Use Limitation Principle
10. Personal data should not be disclosed, made available or otherwise used for purposes other than those specified in accordance with Paragraph 9 except:
* a) with the consent of the data subject; or
* b) by the authority of law.”
Another example is the Privacy Principle in the SMART Campaign’s Client Protection Principles which states:
“Privacy of Client Data. The privacy of individual client data will be respected in accordance with the laws and regulations of individual jurisdictions, and such data cannot be used for other purposes without the express permission of the client (while recognizing that providers of financial services can play an important role in helping clients achieve the benefits of establishing credit histories).”
The extent to which such principles apply in a particular case will, of course, depend on local law and any relevant industry standards and codes of conduct have been adopted by the institution concerned.
The bottom line is that the applicability of data protection principles should be front of mind before any decision is made to cross sell.