13th of February 2020

By Professor Byron Sharp Director Ehrenberg-Bass Institute

Could the Wells Fargo debacle have been predicted?

“There is little difference in cross-selling metrics between competing brands, and the small differences that do exist tend to reflect market share – not whether or not they have dedicated cross-selling programs.”

— “How Brands Grow”, Sharp (2010), Oxford University Press.

In September 2016, Wells Fargo, America’s largest retail bank, announced it had fired 5,300 employees for fraudulently opening more than 2.5 million accounts. Wells Fargo will pay US$185 million in fines to regulators and $5 million will be returned to customers who paid fees on accounts they did not ask to have. The bank said it would be unable to recover the performance pay and sales bonuses that had been paid to these staff when they hit their targets of new product sales though creating false accounts.


These ‘dummy accounts’ did nothing to improve sales revenue but they did improve the bank’s cross-selling metrics, i.e. the number of products held by the average customer. Wells Fargo had long boasted to Wall Street about its prowess in selling multiple products to its customers. As far back as 2005 their Annual Report to stockholders was full of such boasts:

  • “Our primary strategy, consistent for 20 years, is to satisfy all our customers’ financial needs,…and through cross-selling earn 100 percent of their business.” (page 5)
  • “For the seventh consecutive year, our cross-sell reached record highs.” (page 5)
  • “We’ve proven this works: cross-sell among our mortgage customers has grown about 30 percent a year for the last several years.” (page 14)
  • “At year-end 2005, our average cross-sell set new records for the Company – our average retail banking household now has 4.8 products with us, up from 4.6 a year ago.  Our goal is eight products per customer, which is currently half of our estimate of potential demand.” (page 35)

Senior executives claim they did not know that their cross-selling metrics were being faked, which perhaps seems plausible given these boasts, but should they have been suspicious? After all they are extraordinarily well paid, and should be knowledgeable experts.


Back in 2006 a journal article was published by Ehrenberg-Bass Institute scientists that specifically demonstrated that cross-selling related loyalty metrics varied little between rival banks. Indeed, the article showed that the banks’ scores followed the law-like Double Jeopardy pattern that has been documented by marketing scientists in dozens of product categories, across countries and over decades.

In 2010 the Ehrenberg-Bass Institute and Mountainview Learning were asked by South African bank First Rand to review their strategy which was based on Wells Fargo – they were trying to use cross-selling to dramatically improve the average number of products each customer held. In 2014 a case study was published in Admap describing how First Rand reversed their strategy based on the scientific evidence and achieved high growth by focusing instead on customer acquisition.  The article said “based on our knowledge of loyalty metrics and the Double Jeopardy law, we all became sceptical about the Wells Fargo claims. We had specific data on banking loyalty metrics that could be trusted to be untainted by different ways of counting products.”

In “How Brands Grow part 2” we again explicitly stated that the Wells Fargo cross selling metrics must be being gamed.

This is a good example of the power of a knowledge of scientific patterns in marketing. The law-like patterns meant it was obvious that Wells Fargo’s loyalty metrics were being faked, yet many very senior and highly paid banking executives were unaware of this knowledge and so believed the fantasy that cross-selling was producing extraordinary loyalty scores.

Meanwhile, the debacle is likely to get worse. Facing angry lawmakers at the House Financial Services Committee and the Senate Finance Committee Wells Fargo CEO John Stumpf revealed that the bank’s investigation is now going back beyond 2011 to look at fraudulent accounts being opened from 2007 onwards. CEO John Stumpf has since resigned. In October Wells Fargo revealed that recent new account openings had dropped more than 20% and blamed negative publicity from the scandal. The bank faces a number of lawsuits from former staff who claim they were harassed or wrongly dismissed for failing to reach unrealistic sales targets.


UPDATE 8 September 2017

The Economist reports: A review by PwC into a scandal over sham accounts at Wells Fargo revealed that the American bank had opened 1.4m more unauthorised accounts, or around 70% more, than had initially been estimated last year.



“Can a brand outperform competitors on cross-category loyalty? An examination of cross-selling metrics in two financial services markets”, Journal of Consumer Marketing, 2006, 23:7, 465-69, by Kerry Mundt, John Dawes and Byron Sharp.

Bayne, T., Sammuels, B. & Sharp, B. 2014. ‘Target new, not loyal customers.’ Marketing Banks, Admap: 40-41. Warc.

Sharp, B. 2010. How Brands Grow. Oxford University Press.

Romaniuk, J. & Sharp, B. 2015. How brands grow: Part 2. Oxford University Press.


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