STAMFORD, CT, July 21, 2004 — Cross-selling ranks as a top strategic priority at financial services companies, but numerous barriers, including lack of product knowledge and sales manager support, stand in the way of success, according to a new survey from Towers Perrin.
The research found that 74% of respondents agreed that cross-selling was either an �extremely� or �very� important strategic priority, but only half (52%) noted that their cross-selling success met expectations.
�Cross-selling implementation plans often look promising on paper, but their success varies widely,� said Mark Flavin, principal and leader of the firm�s HR Services business sales force rewards consulting practice. �In general, they fall short of producing the intended results, especially when the incentive plans are not properly targeting the right employees, which we found to be an extremely common problem.�
The research, entitled the Towers Perrin Cross-Selling Incentives in Financial Services Survey, polled 75 respondents from 61 financial services organizations, of which more than half were banks. Respondents included compensation professionals (51%), other HR professionals (17%), sales line management (13%), finance professionals (8%) and business unit heads (5%).
Cross-Selling Rewards and Goals — Common, but Not Universal
Some 63% of respondents have compensation packages that reward specifically for cross-selling. Most of these programs are in place for sales employees, but nearly a quarter (24%) of respondents offers cross-selling incentives to all employees. For about half (49%) the rewards are an add-on to existing compensation, compared to 13% that carve out an existing pay slice, although 38% do some of both.
Referral incentives are offered at 59% of the respondents� companies. These are typically for products that do not require a license to sell, and compensation is paid most often only if a sale occurs. Only 8% of the respondents said their companies paid for referrals regardless of the outcome.
Respondents are almost evenly split on the idea of establishing cross-selling goals for salespeople, with 47% having established goals and 53% without. Those having goals typically earn somewhat more compensation when they reach this goal (43%). For 17% of respondents the goal serves as a threshold, while for 11% it has no direct impact on compensation.
�Our experience with sales incentives has found that incentives that are linked to specific, quantifiable goals or quotas are far more effective at motivating behavior and driving results,� according to Ron Burke, principal and sales force rewards practice consultant. �This observation was supported by survey respondents � those with cross-selling goals were substantially more satisfied that their cross-selling incentives were aligned with their strategy and driving the desired results.�
Barriers to Effective Cross-Selling
The respondents as a group reported that the largest barriers to cross-selling are not compensation-related, but include:
- Salesperson product knowledge (59%)
- Lack of trust (35%)
- Lack of sales manager support (27%).
Perhaps not surprisingly, sales managers had different points of view on why cross-selling initiatives often don�t pan out. According to this audience, the top two barriers were:
- Lack of overlap in target customers (40%)
- The availability of competitive products (30%).
Satisfaction With Cross-Selling Incentives
�The survey tells us that compensation is generally not seen as a major barrier to effective cross-selling, but that does not mean that companies feel they are maximizing the effectiveness of their cross-selling incentives,� according to Burke. �The survey found a significant satisfaction gap where seemingly well-conceived plans did not produce expected results.�
Some 70% of respondents were satisfied that their incentive plans aligned with business strategy and selling roles. At the same time, only 51% of respondents felt similarly satisfied that their incentive plans drove desired behavior, and only 47% of respondents said such plans achieved desired results. Interestingly, this gap was far greater for plans that were open to all employees. Although a gap was still found for plans that only targeted salespeople, this gap was much narrower.
�The survey suggests that companies feel they have the right concepts in place, but are not implementing them effectively,� said Burke. �Successful companies have overcome this problem through a more judicious and targeted use of cross-selling incentives. Incentives work quite effectively when they align with the role of the job and create a good line of sight.�
�Effective cross-selling will only continue to grow in importance as financial services customers become more sophisticated and selective in the ways they purchase products and services,� concluded Flavin. �To steer employees toward offering their customers broad-based, multiproduct solutions, a company must not only develop an aligned compensation strategy but also the infrastructure to support the desired sales behaviors.�
About Towers Perrin
Towers Perrin is a global professional services firm that helps organizations improve their performance through effective people, risk and financial management. Through its HR Services business, Towers Perrin provides global human resource consulting and administration services that help organizations effectively manage their investment in people. Areas of focus include employee benefits, compensation, communication, change management, employee research and the delivery of HR services. The firm�s other businesses are Reinsurance, which provides reinsurance intermediary services, and Tillinghast, which provides management and actuarial consulting to the financial services industry. Together, these businesses have over 8,000 employees and 78 offices in 76 cities in 24 countries. More information about HR Services is available at www.towersperrin.com/hrservices