CROSS SELLING (With Special Reference to State Bank Of India)

INTERNATIONAL JOURNAL OF SOCIAL SCIENCES & INTERDISCIPLINARY RESEARCH Vol.1 No. 6, June 2012, ISSN 2277 3630

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CROSS SELLING (With Special Reference to State Bank Of India)

MR.ANURAG KUMAR Research Scholar, M.J.P.Rohilkhand University,Bareilly & Assistant Professor, Accurate Institute of Advanced Management,Greater Noida, U.P

ABSTRACT

This paper mainly emphasis on the concept of Cross Selling. Why cross selling is very necessary for any business enterprise to accelerate the profit? How it operates in many large organisations? How Cross selling is applicable in banks and how the banks are capable to increase their profit by using the concept of Cross selling This paper also tells us about the meaning, existence, types, scope, , benefits, limitations of Cross selling and also include suggestions to improve cross selling Cross selling is a strategy of pushing new products to current customers based on their past purchases. Cross selling is designed to widen the customer reliance on the company. In other words cross selling means to offer additional but relevant products to the existing customers. Cross-selling is a marketing device used to increase sales by displaying products to the customers that are closely related to the product he or she is interested in purchasing. It allows the business to promote similar products that the customer may not be aware of, or offer a complimentary product that the customer may be interested in as an impulse buy.

INTRODUCTION With the beginning of era of globalization, liberalization and privatization, the domestic as well foreign market has

become more competitive .As a result of which the profit margin of business units engaged in different sectors of economy started declining .So it become imperative for these units to search new ways of earning profit .It is in this context the technique of cross selling came into existence and business units started using this technique as a means of increasing their profitability.

CROSS-SELLING The cross selling is a strategy of pushing new products to current customers based on their past purchases. Cross

selling is designed to widen the customer reliance on the company. In other words cross selling means to offer additional but relevant products to the existing customers. Cross-selling is a marketing device used to increase sales by displaying products to the customers that are closely related to the product he or she is interested in purchasing. It allows the business to promote similar products that the customer may not be aware of, or offer a complimentary product that the customer may be interested in as an impulse buy.

Cross selling is based on personal relationship, which is built slowly with the customer. For example, Banks not only sell core banking products (saving a/c, current a/c) , but also sell additional products such as credit cards, insurance products, mutual fund plans , govt securities. By selling these additional products they reduce per customer cost and increase the per customer earning. Similarly Post office also sells insurance products, saving products, etc besides providing postal services. .In case of electronic goods eg computer/laptop, sales executive offers various types of software, cordless mouse / keyboard, ear phones, etc

UP SELLING AND CROSS SELLING Up selling:- Up selling means selling same product at a higher price to a customer. In other words Up selling occurs when the customer goes to buy something & the seller sells the similar product but the costlier one .Up Selling is the up gradation to a higher product but of the similar item. For example:-

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(a) Customer goes to buy HCL laptop but seller offers Apple laptop (which is more costly), it will be termed as up selling.

(b) Customer goes to buy 15 inch colour T.V of PHILIPS but seller offers 21 inch colour TV of the same company. Cross selling

On the other hand cross-selling is a technique of offering related products to a customer besides the basic or core product. Cross selling simply means that seller can increase the size of the customer's order by offering other related items which may be used alongwith the product already purchased by customers.. For example, if the customer goes to buy mobile phones, seller may also offer mobile cover, ear phones, memory card etc

SCOPE OF CROSS SELLING More and more business units are adapting the technique of cross selling and up selling, with a view to increase their profit margin.. This is the reason why the scope of these techniques is spreading day by day. Probably in every of type of business activity these techniques are being used. .We can study the scope of Cross Selling under the following heads:

Banking Sector: After Liberalization, many multinational banking companies stated opening their branches in different countries. This caused cut throat competition among banking companies reducing their profit level substantially. Hence many banking companies started searching new ways to increase their profit margin. Cross selling proved to be a significant tool in this direction. Banks started offering various additional and relevant products to their existing customers such as credit cards, insurance products, mutual fund plans, Govt. securities etc

Insurance sector:With the entry of multinational companies, this sector too became more competitive. For example, in our country, the insurance sector in 1999 was open globally. As a result many private sector insurance companies, ((both domestic and foreign) started joining the Indian insurance sector making the insurance business more competitive and lowering its profitability. This necessitated the units engaged in insurance business to adopt the technique of cross selling to increase their profit margin. Hence insurance companies in our country too started offering various customised plans along with medical riders to the existing as well as to new customers.

Automobile Sector:In automobile sector, various automobile companies offer MP3 player, LCD display, central locking facility and

other car accessories which make the purchasing of car more attractive Electronic Sector:-

In case of electronic sector, many computer /laptop dealers try to offer various types of software ( Anti virus software, Kundli software, Games software, etc), cordless mouse, cordless keyboard, pen drive, earphone, laptop cover, web camera, etc. to the customers along with their main product (computer or laptop). Similarly Refrigerator dealers may cross-sell stabilizers and mobile pone dealers may offer Memory Card, Sim Card, Mobile Cover, lamination facility, etc to their customers.

Footwear and Garment Sector : Cross-selling is popular in these sectors also In case of footwear business; shoe dealers may offer socks, polish, laces, etc to their target customers. Similarly, in garment business if any body purchases a Pant or Jeans, dealer may offer him T-

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Shirt, Half Pant, Trousers, Under-garments, etc. Micro Insurance Sector:

IRDA has issued the micro insurance regulations under which a life insurance company makes a tie up with a non life insurance company for distribution of insurance products to improve the penetration of insurance in the rural area. "The regulation allows cross selling of insurance products (1). As per this regulation the Self Help Groups (SHGs), Micro Finance Institutions and Govt. organisations are allowed to act as micro insurance agents and cross-sell insurance products.

BENEFITS FROM CROSS SELLING The major benefit is in terms of cost reduction for any business unit. The cost of contracting a new customer is

much higher than to serve an existing customer. It may be unto 3 or 4 times. Cross- selling considerably reduces customer acquisition cost and also serving, marketing and communication costs and thereby substantially increases the profit earning capacity of the concerned unit. Further, through cross-selling the benefits of economies are also available which reduces the cost further and increases the profit margin. Another additional advantage is that cross selling helps in building brand value, if the loyalty of the customer could be ensured for the brand. It is a well understood fact that greater number of products held by customer decreases the probability of his shifting the business dealing to another business concern.

CROSS- SELLING IN BANKS Cross-selling with reference to banks stands for being able to offer to the existing bank customers some additional banking products or services. (2) The basic purpose behind using the technique of cross-selling by banks is to expand banking business, to reduce the per customer cot of operations and to provide more satisfaction and value to the customer. For example, when a bank is in a position to sell to a deposit customer (say saving bank or term deposit), a loan product such as housing loan, credit card, personal loan or vice-versa, this results into additional business for banks also reducing the per customer cost and increasing the per customer earning. This is the reason why more and more banks are using the cross-selling strategies as marketing approach to expand their footprints and to increase their customer base. In our country many private sector banks (like ICICI bank) are offering to their customers a variety of products and generating more business through cross selling. However for most of the public sector banks, in particular, this concept is still in its evolutionary stage.

STRATEGIES FOR CROSS-SELLING The existing client base of the bank can be used for the purpose of cross-selling after carefully examining the profile

of customers. For this purpose the bank can undertake studies for various products and various geographical areas to understand the potential availability for cross- selling. The banks may take some of the following steps 1. Preparation of data base:- The bank should collect the required data and prepare the data base of customers. The required information can be collected from the concerned customer when he comes to the bank for opening an account in the bank. It is the data base of customers on which the entire exercise of cross-selling is based. With the data-base banks can assess the credit worthiness of the customer with more accuracy. Moreover, it is easier and cheaper to get customers from one's own data- base than going out for getting new customers. 2. Identification of Customer:-On the basis of data-base and bank's relationship with customers, possible customer for cross-selling should be identified. In the same way the product should be identified which can be offered to the customer.

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3. Selecting target customers:- After identification of possible customers, the targeted customers should be selected and efforts should be made to narrow down the product-range. If required, even new products may be developed to meet the specific need of the group of customers.

4. Proper Training to Staff:- Proper training should be imparted to the staff entrusted with the task of cross-selling. It not only creates team spirit but also enables the staff to meet the customer's needs in a better way. It also enables them to understand the complexities of product and to identify the appropriate product to suit the specific requirement of the customer.

5. Proper selection of tools - Based on the market size, tools selected for targeting the customer also matters. For large banks with large number of customers tools may be CRM (Customer Relationship Management), Profitability Analysis, Complete Activity Management, Information Support System, etc. Effective and economical tools should be selected keeping in mind the market size, customers' preferences, etc.

6. Motivation and Incentives- Having proper tools and systems to cross-sell does not end the process of selling. Getting the bank employees involved in this exercise and motivating them to sell is also an important aspect. It is important for banks to provide reward for the cross sale that is commensurate with profitability of the product to the bank. Efforts should also be made to involve the staff in coming out with innovative campaign and also ideas which will stimulate them to sell newer products.

7. Cross-selling as a part of employees' appraisal - As an initiative for employees involvement for cross-selling, cross-selling can be made a part of an employee's performance appraisal along with monetary and non-monetary rewards for employees.

8. Periodical Analysis of Data-Base - Cross selling is a continuous process. In order to make cross-selling success, not only to complete customer data should be maintained but it should also be analysed periodically so as to ascertain the number of customers visited the bank during a particular period, how many of these customers did the sales representative meet, in how many of these meetings was a cross-selling opportunity identified, how many of these were referred and what was the outcome of these referrals. This process enables the bank management to set objectives, monitor performance and take necessary action to make cross selling more effective and successful.

9. Effective Delivery of the Product - Every possible effort on the part of the bank should be made to ensure the timely and proper delivery of the product purchased by the customer.The more relationships a bank has with a customer, the more loyal the customer will be and the bank will be able to know more about the customer through these relationships. The credit quality of the customer can be assessed in a better way. At the end it will be a win-win situation for both the banks and customers. However, bank management should exploit this situation carefully keeping in mind the overall profitability of the bank.

BENEFITS FROM CROSS-SELLING IN BANKS

Cross selling exists almost in every type of banks in general and in private banks in particular. Cross-selling is beneficial not only for banks but also for its customers and insurance companies. We can study the benefits from cross selling under the following headings:

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(A) BENEFITS TO BANKS

Cross-selling is beneficial for banks in many ways(1) Under cross-selling existing customers are approached and cost of approaching existing customer is much less than

acquiring new customers. It reduces per customer cost and increases the per customer earning. (2) Benefits of economies are available which reduces the cost further and increases the profits. (3) It helps in building the brand value, if the loyalty of customer can be ensured for the brand. In that case the likelihood

of shifting the business dealings by the customer to another bank is reduced substantially.

(B) BENEFITS TO CUSTOMERS

Bank customers too are benefited from cross selling in the following ways: (1) The major benefit to the customers from cross selling is that they get all their financial needs fulfilled at one place.

For example a bank customer can fulfil his banking, insurance and mutual fund needs from the same bank. (2) Customers get the opportunity to opt any other bank which proves to be more trustworthy for them. (3) Cross selling helps in building a good relationship between customers and employees because both bank and bank

customers are well acquainted with each other.

(C) BENEFITS TO INSURANCE COMPANY

Following are the main benefits which an insurance company gets from the cross-selling: (1) Insurance companies don't need to establish separate outlet for selling insurance products, only they have to

establish separate wing for selling insurance products. (2) Insurance companies are not required to hire the large personnel for the purpose of selling insurance products.

After the completion of IRDA training, bank employees themselves can sell the insurance products. (3) Bank database of existing customers is of great use. It can be used for designing customised products and

generating the leads for insurance products.

CROSS-SELLING IN STATE BANK OF INDIA State Bank of India has been using the technique of cross-selling for the last several years. Through cross selling it has been offering a banquet of the best financial and insurance solution in addition to its vast array of banking products. The Bank as a corporate agent offers mainly life insurance products of SBI Life Insurance Company, general insurance products of SBI General Insurance Company, mutual fund products of SBI Mutual Funds and Credit Cards of SBI Cards. A brief description about these companies will not be out of place:

SBI LIFE INSURANCE COMPANY SBI life insurance Private Company Ltd. Is a joint venture between State Bank of India (SBI) and Cardif S A, a leading insurance company of France and a wholly owned subsidiary of BNP Paribas Assurance. SBI owns 74% of the total equity capital of SBI Life Insurance and the remaining 26% has been contributed by BNP Paribas Assurance. SBI Life Insurance has an authorised capital of Rs.2000 crores and has an unique multi-distribution model comprising of bancassurance, retail agency, brokers, institutional alliance, group corporate channels for distribution of insurance products. SBI Life Insurance provides a good platform to SBI for cross selling insurance products along with its numerous banking products. SBI Life Insurance has designed and developed various insurance products. These products can be classified under its three plans, namely, Individual Plans, Health Plans and Group Plans. A detailed

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