Published by BAI, The Quest for Deposits: The Ninety-Day Window of Opportunity, 2003

There is a window of opportunity for banks to lay the groundwork for more effective cross-selling and retention by emphasizing investment of capital and human resources at the beginning of a customer relationship rather than primarily on the mature customer base or eleventh-hour retention efforts. At best-practice banks, a significant portion of retention and cross-selling efforts is focused on the onset of new customer relationships based on simple products that fit customer needs and on a disciplined alignment of staff incentives and training with sales and retention goals.

Summary

Across the nation, banks seeking to create deeper relationships with their customers are focused on the mature account base rather than on their newest customers. According to key benchmarking and best practices profiles generated through BAI’s Quest for Deposits project, refocusing resources toward cementing bonds with the newest customers is a more reliable path to the durable, profitable relationships that banks seek. The research reveals that a significant portion of bank investments in CRM, lead management, cross-selling and retention aimed at the mature customer base might be misdirected. Why? One of the most striking findings in the performance metrics is that most cross-selling opportunities occur during the first few months of a customer relationship. And in a refrain heard repeatedly through dozens of executive interviews, senior bankers at many financial services companies said that customer attrition rates are significantly higher at the beginning of a relationship than when a relationship is six months old or older—sometimes as much as 100% higher.

The study argues that in addition to focusing cross-sell and retention efforts on mature customer relationships, banks need to refocus energies on the beginning of customer relationships and may need to reconfigure product packaging, sales efforts, lead management, service quality and incentive programs to do so.

The research data show that banks that touch their customers early and often in the relationship boast improved cross-selling results and lower attrition rates. In fact, the bank that displayed the best practices in developing a comprehensive new customer orientation program reported a product cross-sell ratio among new checking households that was 8% higher than the benchmark norm and 15% higher than the lowest performing bank in the study. While this may seem like a relatively modest level of differentiation between the top-tier, the average and the lowest performing banks, this is actually a very substantial performance differential when one considers that most large banks open hundreds of thousands of new checking account relationships per year. But in addition to cross-selling, the performance improvements that new customer orientation programs can generate in customer retention are staggering. This same top-performing bank reported that its checking customer attrition rate decreased by 50% as a result of its new customer orientation program.

Successful new customer orientation programs are built around a series of opportunities to touch the customer during the first 90 days of the relationship and are founded on simple products with transparent features and fees.

The research also revealed that the generation of breakthrough results through a new customer orientation program will only be achieved if the program is integrated with a handful of basic premises:

• Keep products—including rates and fees—simple so bank staff can explain them and customers can understand them.

• Sell customers products that fit their financial needs.

• Don’t underestimate how much realignment of corporate culture, incentives and training may be needed to reach retention and sales goals.