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Cross-Selling Called Industry Imperative

Anchoring mortgage customers by cross-selling them an additional bank product is so important to the RBC Financial Group and its major Canadian bank, RBC Royal Bank, that it won't pay its commissioned loan originators until after the customer is introduced to bank products beyond the mortgage, according to company vice chairman James T. Rager.

Mr. Rager made his comments in a session at last week's Forrester Finance Forum here, where he told the audience that cross-selling was an imperative for his and all financial institutions.

Anchoring, Mr. Rager said, was the process of selling additional bank products to the customer. RBC's research indicates that the more bank products a customer owns, the less likely that customer is to defect.

"Anchoring is extremely important. So when we get a mortgage through a commissioned salesperson, we're not going to pay that person unless they go through a proper routine to anchor that client in the branch," Mr. Rager said. "A good predictor of defection is if the customer only has one product."

Canadian customers utilize their branches differently than Americans, he said. "About 70% of our customers go to a branch at least once every three months," he told the audience. That makes it important for bank customers to be anchored there. While the bank works to provide all the channels a customer would want to use to interact with the institution, its customer segmentation strategy works to identify those channels most likely to be utilized. Actual behavioral data is used to determine what different channels cost the bank and then efforts are made to lure customers to lower-cost channels. But, despite the fact that it costs more than the online channel or the call center, branches are very important to RBC's customers.

"In Canada, 90% of the routine transactions are handled out of the branch," Mr. Rager said. "So we use our branches for other things, like offering advice."

Mr. Rager said this makes it easier to satisfy bank customers.

Forrester's research confirms that Canadian bank customers are more satisfied than their American counterparts. In a study, Forrester concluded that when researching new financial services products, Canadian customers were satisfied 81% of the time, Americans only 68% of the time. When it came to buying new products, Canadians again felt better about the deal, 84% to 75%. Likewise, when solving account products, Canadian customers were more likely to walk away feeling satisfied - 81% to only 76% of Americans.

To realize even more cost savings, Mr. Rager said RBC is now working on making it possible for customers to schedule appointments with personal bankers in their local branches from the bank's website.

The key to effective cross-selling is to know more about your customers and to segment them appropriately. But the segmentation must be granular, he said.

As an example of the kinds of opportunities that can be missed, the bank found that it has lumped together too many of its most profitable customers into one category. These wealth accumulators were actually not all that similar. In fact, one subgroup the bank found upon digging deeper into its own data consisted of some 700,000 snowbirds that were holding mortgage loans on property in Florida. The bank immediately launched a cross-border initiative and began to more actively serve this segment. RBC Financial Group operates 1,132 branches and 60 business banking centers in Canada. The firm also serves 1.9 million online clients.

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