Revenue growth through Revenue growth through cross sellingcross selling

Roy Andersen14 October

2002

Roy Andersen14 October

2002

Is cross selling a winning Is cross selling a winning strategy?strategy?

Cross selling has triggered financial services consolidation but analysts sceptical about benefits

Forms of cross sellingWhy cross sell?Bancassurance Models International experience Liberty experience

Conclusion

Forms of cross sellingWhy cross sell?Bancassurance Models International experience Liberty experience

Conclusion

Content

Cross selling is marketing additional products based on

current client relationships

Products could be manufactured by different entities

The perfect service

Investment product

Pension plan

Homeowners’ cover

Life Policy (to cover bond)

Home loan

Credit card

Current account

Agent exposes client to wider range of products

Can alienate client if:

Feels pressurised

One product fails

Client informed of additional products via statements or mail shotsDownside “junk mail anger”

Detracts from original point of contact

Direct cross selling

Indirect cross selling

Reduction in customer acquisition cost:

Costs shared over many more products

Electronic banking lowers costs even further

Reduction in customer acquisition cost:

Costs shared over many more products

Electronic banking lowers costs even further

Why cross sell?

Protection from competitors: Locks them out from clients Avoids defection to other one-

stop providers

Leverages off reputation: Clients trust certain institutions/

brands

Protection from competitors: Locks them out from clients Avoids defection to other one-

stop providers

Leverages off reputation: Clients trust certain institutions/

brands

Why cross sell?

Why cross sell?

Client convenience: One-stop service

Ability to leverage all distribution channels:

Channel must suit the economics of the product

Client convenience: One-stop service

Ability to leverage all distribution channels:

Channel must suit the economics of the product

Bancassurance

Bancassurance:

Selling of insurance products by banks

Assurbanking:

Selling of banking products by assurers

Bancassurance

Answer to:

Commoditisation of banking products

Squeezing of insurance/investment product margins

But margin is shared

Bancassurance models

Bank provides leads to insurers

Common to Europe

High advice products best

Insurer provides products to banks

Also common in Europe

Low advice products best

[1] [2]

Liberty / Stanbank hybrid of 1 and 2

Bancassurance models

Joint venture

Closer to assurbanking

All 4 models work

Full merger

Risks high compared to benefits

Don’t have to buy the cow

[3] [4]

Well established in Spain, France and ItalyBecoming relevant to Scandinavia, Belgium and NetherlandsIn USA restricted by previous Glass - Steagall ActHopeful signs from L & G/Barclays, Irish Life/Irish Permanent Building Society, CGNU/RBOS

Well established in Spain, France and ItalyBecoming relevant to Scandinavia, Belgium and NetherlandsIn USA restricted by previous Glass - Steagall ActHopeful signs from L & G/Barclays, Irish Life/Irish Permanent Building Society, CGNU/RBOS

International trends

Analysts sceptical

Low SA savings levels do not bode well (15% of GDP) - but Rich are getting Richer

High savings/pension reformImmature demand for

financial services

High savings/growth indisposable income

Absence of welldeveloped IFA network

Markets where bancassurance succeeds

Large bank client base

Smaller low cost insurer

Commitment by bank to open client base

The insurer manages the bank sales force (SBFC +18%)

Ingredients for success - bancassurance

Client profile synergy

“Embed” the simple products

Aligning employee incentivisation

Ingredients for success - bancassurance

It’s all about relationships

Stanbank Products

STANLIB/Ermi-tage Products

Liberty/Char-ter Products

Bank branches

Bank branches Bank branches

SBFC SBFC SBFC

e-Bank e-Bank e-Bank

Call centres Call centres Call centres

Liberty agents/franchises

Liberty agents/franchises

IFAs IFAs

Website Website Website

Stanbank / Liberty model

Growing bancassurance productionGrowing bancassurance production

680757

1 155

1 556

1 244

0

300

600

900

1 200

1 500

1 800

1997 1998 1999 2000 2001 J un-02

Rm

Bancassurance business up 81% at 30 J une 2002

1 661

Scale AUM R135bn Biggest unit trust company

Pooling of talentLeveraging of distribution channels using bank and insurance licences for product development

Scale AUM R135bn Biggest unit trust company

Pooling of talentLeveraging of distribution channels using bank and insurance licences for product development

Motivation for creation of STANLIB

Delivering more for retentionthan for new sales

CRM - Liberty experience

No one model

Success and profitability depend on

attitude and relationships

Conclusion