Building a Toolbox for Bundling Services

For many financial service providers (FSPs), offering only credit is becoming a less and less valuable proposition. Fierce competition in many markets drives FSPs to seek to gain and retain market share. Offering non-credit services can be a solution.

Deposits can cut funding costs. Insurance, payments and other services can help diversify revenues with commissions and fees. FSPs can benefit from offering their target clients a wider range of financial products and services, particularly “sticky” ones that keep clients around until they or perhaps their friends and families do need a loan.

FSPs are generally well positioned to bundle financial services. They can leverage the cost of distribution and payments to offer more cost-effective one-stop shopping that can help reduce the marginal cost of offering new products. But one-stop shopping is not as easy as it sounds. It relies on effective sales strategies, which will become more and more critical for FSPs that serve low-income clients as they broaden their product offerings.

In 2015, working with the Microinsurance Center with a grant from CGAP, our team had the opportunity to test some sales strategies for non-credit products with the microfinance institution, Crezcamos, in Colombia. We designed and implemented a randomized control study to measure the effect of bundling versus not bundling voluntary crop insurance with loans (see a working paper on the study, "Responsible Bundling of Microfinance Services: A Mixed Method Evaluation of the Impact of Timing, Pressure, and Information").

As part of the study, we needed to train Crezcamos loan officers to sell, and equip them with a standardized approach to selling a complex product so that we could eliminate possible bias resulting from different approaches. And here’s where it gets interesting.

FSP loan officers are not sales people by training – they have not had to be. Trained to offer the largest possible loan that meets criteria for responsibility, Crezcamos’ loan officers ride motorcycles and chicken buses to get to some of the most remote areas in Colombia and offer money (in the form of credit) where money is scarce. The “hard” part of their job is not sealing the deal as much as it is identifying farmers to lend to, getting to the farm safely, and ensuring that the loan will be paid back.

Where offering loans can be “easy,” offering voluntary crop insurance products is not. Loan officers must overcome their fear of selling and being rejected, for one. They also need to know and retain a lot of complex information about a product that they have limited experience with. Finally, they need to explain the product so that their clients can simply understand the relevance it might have to their financial resilience.

In collaboration with Crezcamos, our team developed a standardized sales protocol for the insurance borrowed from traditional sales methods, invented in 1887 by the famed founder of the National Cash Register Company, John H. Patterson. The protocol served two purposes. First, the protocol and associated tools support loan officers in selling a complex new product both effectively and responsibly. Second, standardization helped to ensure loan officers took a consistent and successful approach to each sale, allowing us to isolate the effect of the bundling intervention for our study.

To help, our team collaborated with Crezcamos and MAPFRE, who provided the insurance, to develop an informational video that loan officers downloaded to their smart phones. The video explains the main covered crops and events, pricing and coverage examples and offers a brief client testimonial. This was the critical information loan officers needed to effectively explain the product and ensure clients made a sound and conscientious purchase decision. Loan officers and clients found the video helpful, and even entertaining (see the quotes and photos below).

“He showed me the video, and then I saw that, yes, I could really benefit from this insurance.”

-Client, describing his reaction to seeing the video when the insurance was offered

“The video is very didactic, and it gives clients more confidence about the product.”

-Loan officer, reflecting on how the video supports sales

“Clients like the video and it helps them understand the product, but they don’t really pay attention to the calculations.”

-Loan officer, explaining how the video supports client understanding (vs. other tools)

The randomized control study was aimed at measuring the effect of bundling versus not bundling voluntary crop insurance – not the effectiveness of the video and sales process. But the video and sales process suggest promise: We found that 23% of clients approached bought the insurance. This figure falls on the high end of take up of voluntary crop insurance products worldwide. Crezcamos has since tweaked the video and embedded it into their sales process permanently, a testament to the value of the tool.

As financial service providers broaden their offering of products and services, they will leverage the relationship and outreach of their existing sales force more and more. Yet placing too much of the burden of sales on this staff may lead to their providing inconsistent or insufficient information for consumers to make sound decisions. Designing effective front office tools to support sales can help to ensure that customers receive a standard and appropriate amount of information they need to make informed decisions while ensuring that the last-mile delivery of services can be cost-effective and financially viable for FSPs.