What it means
The idea is simple. A customer who buys a mortgage can also buy home insurance, open a savings account and receive tax advice from the same firm.
For the customer, this saves time and paperwork, and for the firm, it increases the revenue earned per customer. Financial firms pursue this model through cross-selling, which means offering additional products to existing customers.
It can be cheaper to sell a new product to a customer you already have than to win a new customer, because the firm already knows them and has built trust. Many banks track the number of products held by each customer as a key performance measure.
There are risks. A firm that tries to do everything may lack specialist skill in each area, and customers may find that the combined offer is not the best price for each product.
A conflict of interest can also arise when an adviser is paid more for selling the firm's own products than for recommending the best ones. Regulators watch this closely because aggressive selling has led to harm in the past.
Firms that set unrealistic sales targets for staff have, in some cases, been found to have pushed customers into products they did not need. Good governance means rewarding staff for service quality as well as for volume.
Outside finance, the term describes any business that bundles services, such as a building firm that handles design, permits and construction, or an accounting practice that provides audit, tax and consulting. The test of a good one-stop shop is whether the convenience is worth more to customers than the lack of choice.
Technology is making the model easier to deliver. A single app can now hold accounts, insurance, investments and loans, with one login and a combined view of the customer.
The challenge for managers is to keep the quality of every product high, because a weak service in one area can damage the customer's trust in all the others.
In practice
Real-world examples.
Example
A wealth management firm offers investment advice, tax planning, insurance and estate planning. A client with $1.2 million to invest can deal with one adviser instead of four. The firm earns fees from each service.
Example
A small accounting practice adds payroll, bookkeeping and tax preparation for local businesses. Owners pay one monthly fee of $900 and receive a single point of contact. The practice grows revenue by 25% without the cost of finding new clients.
Example
A retail bank sets a goal of increasing the number of products per customer from 2.2 to 2.8. Staff are trained to look for genuine needs, and the bank measures complaints alongside sales to make sure customers are not pushed into products they do not want.
Formula
Calculation
Products per customer = total products held / number of customers
Revenue per customer = products per customer x average revenue per product
Suppose a financial firm has 20,000 customers who hold 56,000 products between them, such as accounts, cards, loans and insurance policies.
Products per customer = 56,000 / 20,000 = 2.8.
If the average revenue per product is $150 a year, revenue per customer = 2.8 x 150 = $420.
If the firm raises products per customer to 3.4, revenue per customer becomes 3.4 x 150 = $510, an increase of 510 - 420 = $90 per customer, or 20,000 x 90 = $1,800,000 across all customers.Case study
Seen in the real world.
Harbour Lane Financial is an illustrative, fictional firm that started as a mortgage broker and later added insurance, savings and tax services. Its aim was to become a one-stop shop for first-time home buyers.
In the first year, products per customer rose from 1.4 to 2.1, and revenue per customer rose from $300 to $450. However, complaints also doubled, as some customers said they felt pressured to buy insurance they already had.
The chief executive changed the staff bonus scheme to reward customer satisfaction and the number of products kept after 12 months. Revenue growth slowed but complaints fell, and retention improved. The illustrative lesson is that a one-stop shop succeeds when it solves real needs and fails when it treats customers as sales targets.
Watch out
Common mistakes.
- Assuming that offering more products always raises profit, when poor quality or mis-selling can cost more than the extra revenue.
- Ignoring conflicts of interest, since advisers may favour the firm's own products over better alternatives.
- Measuring success by sales volume alone, when retention and complaints show whether customers are truly satisfied.
Questions
People also ask.
What is a one-stop shop in finance?
It is a firm that provides several financial services, such as banking, insurance and investing, in one place.
What is cross-selling?
It means selling additional products to existing customers, which is usually cheaper than winning new customers.
Is a one-stop shop always better for the customer?
Not always, because convenience can come at the cost of choice and sometimes price, so customers should compare offers.
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