What is 'Cross-Sell'

To cross-sell is to sell related or complementary products to an existing customer. Cross-selling is one of the most effective methods of marketing. In the financial services industry, examples of cross-selling include selling different types of investments or products to investors or tax preparation services to retirement planning clients.

BREAKING DOWN 'Cross-Sell'

If done efficiently, cross-selling can translate into significant profits for stockbrokers, insurance agents, and financial planners. Licensed income tax preparers can offer insurance and investment products to their tax clients, and this is among the easiest of all sales to make. Effective cross-selling is a good business practice and is a useful financial planning strategy, as well. Often, up-selling is confused with cross-selling. Up-selling is the act of selling a more comprehensive or higher-end version of the current product. Cross-selling is the act of selling a different product than what exists to provide an additional benefit to the customer.

The Emergence of Cross-Selling in Financial Services

Until the 1980s, the financial services industry was easy to navigate, with banks offering savings accounts, brokerage firms selling stocks and bonds, credit card companies pitching credit cards, and life insurance companies selling life insurance. That changed when Prudential Insurance Company, the most prominent insurance company in the world at that time, acquired a medium-sized stock brokerage firm call Bache Group Inc. Prudential’s purpose was to create cross-selling opportunities for its life insurance agents and Bache’s stockbrokers. It was the first significant effort at creating broad service offerings for financial services. Subsequently, other big mergers followed, such as Sears Roebuck (credit cards) and Dean Witter (stocks, bonds, and money market funds), and American Express Company (credit cards) with Shearson Loeb Rhoades (stocks and bonds).

The mergers of Wells Fargo & Co. with Wachovia Securities and Bank of America with Merrill Lynch Wealth Management occurred at a time of declining profits for both banks. The acquisitions held the intent of achieving greater scale in the sale of their banking products. To a large extent, they were aiming to expand their retail distribution arms by buying large and established distribution channels. Both banks placed a heavy emphasis on cross-selling as a strategy to regain profitability.

With few exceptions, cross-selling failed to catch on within many of the merged companies. Conflicting sales cultures and resentment among sales representatives, forced to sell outside their area of expertise, have been challenging obstacles to overcome. As an example, Bank of America lost Merrill Lynch brokers through insistence that the brokers cross-sell bank products to their investment clients. Wells Fargo is more effective instituting cross-selling, because its merger brought together two similar cultures.

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