TD Aims at the Elusive Cross-Sell in U.S. Expansion

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Toronto-Dominion Bank (TD) is trying to improve its cross-selling capabilities in the U.S. as it aggressively expands here.

The elusive and often-discussed art of selling additional products to existing customers has become an important part of many banks’ strategies to boost business. Banks have struggled in recent years to increase revenues, as customer loan demand remains weak in the sluggish economy, low interest rates have persisted and new regulations have cut into profits.

As it expands its U.S. presence, TD is hoping to emulate its cross-selling success in its home country of Canada, where it does "incredibly well," Chief Financial Officer Colleen Johnston said in a recent interview.

"There is a huge opportunity with customers… to say you have a bigger share of wallet and there are other products that you need," Johnston says, adding that TD needs to "have good capabilities at being able to approach you and talk about other opportunities that are appropriate for you."

The Toronto bank is planning to open more than 50 branches in New York City within four years, in a bid to compete with the biggest U.S. banks for affluent customers.

But analysts are skeptical that TD will be able to cross-sell to its American customers as well as it has to Canadians. Since six large banks dominate most of the market in TD's home country, Canadians simply have fewer choices, according to Morningstar analyst Dan Werner.

"In the U.S., there is a lot more competition with other banks and other providers for things like insurance and wealth management," he says. "The choices are more limited in Canada, so it is more convenient to go into one of the six large banks there and get all of your services."

TD is only one of many banks in the U.S. trying to grab more business from their customers. Wells Fargo (WFC), for example, has regularly touted the high average number of products it sells to each customer.

Many banks are in the early stages of "putting muscle behind their cross-selling," says Mary Beth Sullivan, a managing partner at Capital Performance Group.

Johnston says that TD was somewhat slow to boost its U.S. cross-sales in part due to its 2008 acquisition of Commerce Bancorp of Paramus, N.J. Commerce was a "deposit-centric organization" that was concerned about "creating an efficient, enjoyable experience for customers in the branch," she says.

TD has tried to hold onto Commerce's customer-friendly reputation, in part by adopting the acquired bank’s "America's Most Convenient Bank" slogan. But Sullivan says that while that sort of marketing can help attract first-time customers looking to open a checking account, it may not work well beyond that first relationship.

TD needs to get better at "cultivating primary relationships to make sure they are bringing in additional business," Sullivan says, adding that the bank needs to do a better job of telling customers why they should have multiple TD products.

TD's Johnston says the bank has invested in its wholesale management system in its branches to help incentivize the "right behavior at the front line and making our branches in the U.S. more sales orientated, as well as service oriented."

Analysts say that banks trying to sell more products to existing customers should change their incentives system for branch employees and salespeople, by rewarding them for developing relationships with customers instead of merely pushing product sales.

Bank employees are "trained like a car salesman" and are so focused on the sale that they forget the human side of the transaction, says Paul Schaus, president of CCG Catalyst Consulting Group.

"Customers are looking for someone who is caring and knowledgeable," he adds. "If employees have those qualities, you'll buy more products from them."

Bolstering those customer relationships will become increasingly important as customers visit branches less frequently and do more business online. Schaus says that banks’ attempts to cross-sell online are easily ignored, as customers "tune out that marketing on online banking Web sites."

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Consumer banking