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.
Suggested Resources: 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.
Photo credit: AndyRob