In case you extended your Labor Day holiday and took all of last week off, Wells Fargo was fined $185M for practices that led to the creation of over 2 million accounts that consumers may not have known about. You can catch up on the details of that news here.
There have been a number of great pieces talking about different aspects of this scandal and if you’re interested, I’d encourage you to read both this Bloomberg piece from Matt Levine as well as this Snarketing post by Ron Shevlin on the Financial Brand.
In a nutshell, Wells Fargo employees appear to have been creating fake accounts as a way to meet sales quotas. This has some pretty big implications on the idea of cross-selling, which is why I’m weighing in. To be clear, I’ve never worked for Wells Fargo Bank, so I don’t have intimate knowledge of their cross-selling practices. I do however, know about cross-selling at Financial Institutions, though, because:
- I work for a company that builds software to help credit union’s automatically cross-sell relevant products to new and existing members.
- I’ve personally spoken with hundreds of credit unions and community banks about the topic of cross-selling, specifically, over the past year and a half.
So in light of my credentials on the topic, here are three takeaways that I’ve gathered from Wells Fargo, in case you’re on the fence about developing a cross-selling capability.
Start with Leads
One of the reasons cited by the Los Angeles City Attorney last year for the systemic increase in fake accounts at Wells Fargo had to do with foot traffic.
“The quotas imposed by Wells Fargo on its employees are often not attainable because there simply are not enough customers who enter a branch on a daily basis for employees to meet their quotas through traditional means.”
Marketing’s function is to drive people into branches and onto the website. Whether you’re into the idea of building a sales culture or not, if you want to grow then your marketing needs to be able generate interest.
Organizations we work with have the most success opening new accounts when marketing is using data to drive people into the branches with relevant and timely offers. Here are two examples:
New Members – Create an onboarding and cross-selling process throughout the first year of the relationship. This gives you the second chance opportunity to continue to cross-sell all of the accounts your credit union pushes during account opening. It’s also a great way to stay in front of new members with offers that are relevant to them based on the account(s) they already have open.
Closed Accounts – Find people that used to have specific products with you, like CDs or Auto Loans, but no longer do… and offer them that same product using rate promotions. Sending out teaser rates to people who have already done business with you is a great way to get eyeballs on your website and warm bodies in your branches.
Once marketing is sufficiently bringing in leads on a steady basis, then you’ll need a way to be able to measure sales success.
Sales Closing Ratio vs Quotas
In the Wells Fargo case, the Los Angeles City Attorney went into further detail about quotas imposed on employees:
“Wells Fargo has strict quotas regulating the number of daily “solutions” that its bankers must reach; these “solutions” include the opening of all new banking and credit card accounts. Managers constantly hound, berate, demean and threaten employees to meet these unreachable quotas. Managers often tell employees to do whatever it takes to reach their quotas. Employees who do not reach their quotas are often required to work hours beyond their typical work schedule without being compensated for that extra work time, and/or are threatened with termination.”
Whenever a new internal policy is created, especially one around quotas, you’re always going to want to understand the behaviors it incents. One emerging idea in sales, is an understanding of the distinctly different roles needed throughout the sales process.
We touched on the connection between marketing and sales in the first takeaway. But there are different ways your credit union may be handling sales.
If your front line staff is supposed to be making outbound phone calls every day, then a quota on the calls they make may be appropriate. If your front line staff is completely dependent on foot traffic to hit a quota, then a quota on daily closed deals will likely incentivize the wrong behavior, as it appears to have done at Wells Fargo.
One sales metric that we’re using ourselves at Onovative is the Sales Closing Ratio. This metric takes into account the number of opportunities that an employee has and measures their close rate against those opportunities. What we like about this metric is that it understands there are going to be ebbs and flows in sales opportunities, and measures employees based on their actual performance.
Now, by no means is the Sales Closing Ratio the end all, be all metric. Employees can still game this metric by closing sales with people who aren’t a good fit for a given product. That’s where monitoring what happens after the sale comes into play.
What Happens After Account Opening Matters, A lot
It turns out that looking at account activity, post sale, is really important. Here’s how the Los Angeles City Attorney described one of the practices of opening fake accounts:
“In the practice known at Wells Fargo as “pinning,” a Wells Fargo banker obtains a debit card number, and personally sets the PIN, often to 0000, without customer authorization. “Pinning” permits a banker to enroll a customer in online banking, for which the banker would receive a solution (sales credit). To bypass computer prompts requiring customer contact information, bankers impersonate the customer online, and input false generic email addresses such as email@example.com, firstname.lastname@example.org, or email@example.com to ensure that the transaction is completed, and that the customer remains unaware of the unauthorized activity.”
In general, having a process for identifying corrupt behavior, is a great way to stop it before it gets out of control. With Wells Fargo, it looks like it could have saved a lot of heartache.
Everybody understands that your financial institution has nothing to gain by opening credit or debit cards for people who don’t use them, let alone creating fake credit and debit card accounts.
That’s why it’s crucial to take activity after the sale into account, always.
With credit and debit cards, in particular, it’s easy to measure actual sales success by looking at the ratio of people who have activated their cards within a certain period of time… let’s say 14 days. Then, set a threshold number of monthly transactions and identify the ratio of members meeting your activity threshold vs. the number of members who are not meeting it.
If, after looking at your data, you find that you have either a low activation or low usage rate, then it’s time to start digging into your data to find out why. One way to do this is to look for trends such as:
- The branches with low card activation rates
- The employees with low card activation rates
- The members with low card activation rates
Are there any common denominators?
Not only will this type of analysis help you identify and avoid the next fake account creation scandal, it will also let you know if you’re actually achieving the goals that you’ve set out to achieve. Remember, the goal isn’t to open X new credit cards that nobody uses. The goal is to open X new credit cards that generate Y in monthly revenue.
There could be any number of reasons for cards not being activated or used. And if cards are not being activated or used, then you will need to take action.
In this case, taking action could be as simple as sending out reminder communications. Or it could mean altering internal processes and incentives, changing overall marketing messaging or working to refine your lead generation process, altogether.
The Bottom Line
In order to cross-sell effectively, you need leads and a way to measure sales success both at the point of sale and after the sale. In short, you need good practices in both of these areas:
Leads – How good are you at identifying and generating opportunities?
Measurement – How well are you selling to people who ultimately use your products?
If you think that software can help you accomplish this task, I’d love to talk with you.