When it comes to using behavioral science to increase outcomes, the retail industry has always pushed the boundaries on innovation. Retail companies have pioneered the concept of cross merchandising to increase AOV (Average Order Value) and maximize sales. Amazon has redefined the concept of cross-sell through its algorithms by displaying related products that shoppers are most likely to add to their existing shopping cart.
Amazon often displays entire categories of products that a shopper is most likely to buy based on his/her previous purchases, what’s currently in their shopping cart and what products complement their purchase, or the concept of “better together”. It also displays products that other shoppers have purchased, leveraging the concept of “social-proof” to maximize sales.
Given their extremely low margins, retailers spend lots of money and resources optimizing Marketing tactics and shopping experience in order to increase AOV and maximize sales. This quest for the optimization holy grail leads to a wealth of best practices that banks can (and should) borrow from the retail industry.
The shopping cart concept is NOT one of them.
Consumers don’t shop for financial services the same way they shop for tools on Amazon or household goods at Target. Unlike magazines strategically placed at the checkout line, or a heavily discounted pair of shoes throughout the store that customers will happily throw into their shopping cart without thinking about it, banking products are not an impulse buy. Consumers are starting to do more research on banking products before they’re ready to “buy” and often make their purchase decision way before they ever hit their bank’s website.
During the shopping experience for banking products, consumers are usually focused on a specific product with a specific outcome. The classic retail concept of “better together” doesn’t work for banking. No one will throw in a CD account into their shopping cart while they’re applying for a loan. Their focus is singular at that particular moment. And so should be your online experience.
Using the shopping cart approach and adding multiple choices to online account opening flows actually lowers conversions on financial products and increases abandonment. But why? The more choices you give your customers during their shopping experience, the less likely they are to make a decision on what is right in front of them. They’re overwhelmed by the paradox of choice.
Keep in mind that shopping for banking products is not second-nature to consumers for many reasons:
Bankers are often concerned that focusing their online account opening flow on a single product will yield lower conversion, lower product adoption and cross-sell and ultimately higher cost of deposits. Many banks and credit unions offer 3-5 different checking accounts or multiple options for savings accounts during their online account opening flow when generally there is little if any functional difference between those products. This abundance of choice increases confusion and anxiety among customers and leads to high shopping cart abandonment rates.
We’ve seen the complete opposite among our customers. Having a singular focus during the online account opening flow significantly improves the customer experience and increases conversion as a result. Keep in mind that consumers likely have already done some research before they come to your website. Introducing more choices forces customers to go back to their research process instead of moving them towards finishing the purchase.
That’s one of the reasons why Neobanks are opening 25% of new accounts in the U.S. They usually provide a single product and their online account opening flow is optimized for maximum conversion for that product, nothing else. They’ve done an incredible job eliminating the mental load required by traditional banks and credit unions to choose among several products during the onboarding process. This single focus gives customers an easy gateway into Neobanks’ offering, where cross-sell is introduced after the consumer is already hooked on using the product and therefore more open to upgrades or upsell.
Providing a singular focus during the online account opening experience doesn’t mean you can’t cross-sell. You just need to change the timing in which these options are presented to consumers.
The concept of cross-sell is to sell (a different product or service) to an existing customer, not a new one. Once you’ve converted a browser into a customer and offered a good experience, then you can identify ways to cross-sell. Remember one important rule of consumer behavior: they’re more likely to purchase adjacent products from companies they already do business with. So don’t be afraid to wait for the right moment until your customer is ready for a cross-sell. You will get better results that way.
At MANTL, we believe that you should focus on converting a prospect into a customer before you should cross-sell. Data shows that will lead to higher conversion and subsequent customer satisfaction scores.
Learn more about how you can increase conversion with MANTL’s best-in-class online account opening software.