The purpose of this article is to address the most neglected component of most Mortgage Broker businesses growth plan (although the same strategies apply in any business). This is, of course, their referral programs. This article comes as a precursor to another that introduces our automated EDGE platform module and other automated referrer tools.
Before any of our high converting online advertising programs make their way online it's important to ensure you have a program in place to retain existing business and convert your current database into either referrers and/or passionate advocates. Using the techniques discussed on this page, and by way of our EDGE platform, we've seen almost every inbound mortgage customer convert into at least another 10 others during the first 12 months. Compounded over just a couple of years our program (used in conjunction with our other tools) has seen brokers attain that elusive "top performer" badge from their aggregator very quickly. So, if you've ever heard that traditional strategies don't work anymore, and you're silly enough to act upon that advice, you're literally costing yourself the most lucrative channel for business growth.
It's important to keep in mind that we're massive advocates for online marketing and other digital strategies (there's no other agency in the country that comes close to delivering our returns), however, since we take a holistic approach to marketing we don't ignore the plethora or other channels that'll drive business growth (we refer to this multi-faceted approach as the "Mortgage Matrix" and it's the subject of another article).
Once a loan is written and the banks effectively take control of your client, there's an expectation that a Mortgage Broker will continue to provide support to that client and act as an intermediary for the banks. Despite banks inheriting certain responsibilities, there are a number of banks that are essentially using brokers as a "human shield" against their own incompetence and consumer-facing trust issues. While it's the responsible lending practices (and "liar loans") that are tending to attract most of the scrutiny, the banks have also identified the lack of client care as a major contributor to its compromised reputation... and it's the one claim they make that may actually be justified. It's this post settlement timeline where many mortgage brokers don't provide the attention it requires... effectively compromising on your ability to illicit a written testimonial, generate referrals, or ensure a repeat customer. Mortgage professionals are in the service and education industry... and that service doesn't end when a home loan has been facilitated. It's generally this lack of customer care that banks often use as a means to nullify any "non-compete" agreement that may apply.
No other Australian mortgage broker marketing agency (and only a few globally) have a highly structured referral and client care strategy that is powered in part by clever automation. In fact, the techniques we're seeing others use are the same that have been used without significant success for as long as the mortgage broker profession has existed. The old question on bank application forms asking for "your nearest relative" was a premature means for some to ask for a referral during the early interview stage. Since the banks generally removed that question we've seen some brokers include it on their fact-finding questionnaire so they could sneak their way into asking the question at the end of an early interview. Others might write down the numbers 1, 2, and 3 on a piece of paper thinking it'll "spike interest". While there's dozens of other techniques that various brokers use, none are particularly effective... and some are downright offensive. Building a relationship takes time, and building trust takes longer (see our "Magic Lantern Approach" article on establishing trust and referrer incentives).
Examining why referrals are so valuable is outside the scope of this quick article (although their value should be evident). However, in brief, you can often liaise with your existing relationships to pre-qualify any leads, and they come willingly to you without you having to invest as much time and energy into establishing trust.
The old (and somewhat redundant) sales model of AIDA (Attention, Interest, Desire, Action) is a fairly logical (and often costly) means of filtering clients through a targeted digital advertising campaign (our variation of AIDA is discussed here) but it doesn't (by design) consider the most profitable component of any client relationship: repeat business. It's this repeat business, client retention, custom care, and the associated referral strategy (supplemented with automation) that we'll briefly discuss below.
The Customer Acquisition Cost (CAC) is one of the many questions we ask our brokers in an early questionnaire and very few have a response (if you market your business you absolutely have to know this figure). The CAC can be calculated by simply dividing all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the period the money was spent. While the CAC itself might be considered a fixed value, the ROI derived from the acquisition cost can vary significantly (we've seen a single loan introduced via a Facebook campaign convert to 16 loans in 4 months... although this is the exception rather than the rule). While many businesses work hard at optimizing Facebook and other campaigns to improve upon their CAC, very few look at how to improve upon the return from their existing database... and it's the mortgage industry - by virtue of the ubiquity of potential clients and the fluid nature of the money market - that have the ability to leverage their existing contact list more effectively than virtually any other industry. Given the high returns, by simply leveraging your existing relationship database (notice I didn't call them contacts?) you're uniquely positioned to triple your profits in just a few months before you even consider implementing Facebook, Google, and other advertising.
As a digital marketing agency we're bound ethically to improve upon your bottom line using all available technologies and techniques without relying exclusively on our high converting online advertising strategies. Without a post-settlement and referrer strategy firmly in place you're seriously compromising on your Customer Lifetime Value (CLV, or LTV). While the CAC should normally be predicated upon your lifetime relationship with a client, the mortgage industry will always see a significant return on every dollar spent (well above what might be considered average). The LTV of a client is a function of 'Unit Economics' and is a large part of our long-term marketing strategies.
Historically, the LTV:CAC ratio was considered "satisfactory" if performing at a ratio of 3:1 - meaning that the lifetime value of a customer (LTV) should be three times more than the cost of acquiring them (CAC). However, with highly efficient digital marketing, advertising, social, and other strategies, you can easily slash that ratio... so anything you read in a text book prior to 2005 is almost entirely redundant. It's virtually impossible for our structured advertising campaigns to return anything other than a significant and immediate ROI. Given that everybody needs to save money on their home loan, and since mortgage commissions are generally quite high, we believe that there's no industry that's more capable of achieving a high LTV:CAC ratio.
With history as a reference, we've traditionally heard that acquiring a new customer will cost seven times more than retaining a new one. Since digital marketing has literally opened the floodgates to those businesses clever enough to use an agency such as ours, the gap between the cost of acquiring and retaining a customer has narrowed. In fact, generating new business is easy. Retaining customers, and converting them into referrers has become the new challenge.
When is the last time you contacted a client only to find out that they've gone directly to a bank for refinancing or, even worse, sought guidance from another broker? The lifetime value of a client can only be considered if we build upon a relationship strong enough that our clients will come back to us. It's the "churn rate" (or those clients that seek mortgage comfort elsewhere - usually as a result of insufficient post sales care) that we must avoid if we're to optimise our ROI. This is done by applying a laser-like focus to our daily routines and SOPs to ensure necessary contact and/or follow-up is made with those that 'qualify' for contact at various stages in your relationship timeline.
Depending on what survey you choose to believe, between 70% and 85% of people don't remember who their mortgage broker was that wrote their loan; you don't want your own clients to be so neglected that they'll forget who you are. A whitepaper sanctioned by Mortgage Choice revealed that 38% of mortgage holders couldn't remember or didn't know the interest rate on their mortgage. We advocate communication in such a way that your client will never forget who you are, they remain willing referrers, and they're always aware of their home loan vitals.
The frequency at which you should contact your client varies. Generally, you'll contact them after settlement, before their first and second payment, and before their third payment (to talk about your referral process). Additionally, you'll schedule a call after 6 months, 12 months, and depending upon their term commitment or exit fees, at various other points leading up to the inevitable refinancing. Every call has a precise (and often scripted) purpose and will aid in cementing your ongoing relationship. It's this structured communication strategy that is the focus of EDGE.
There are numerous types of incentives that'll ultimately (and optionally) draw referrals your way. These incentives are generally categorised as compensation incentives, recognition incentives, rewards (or value-based) incentives, and appreciation incentives. While each is discussed in more detail in our article on the Magic Lantern methods, our EDGE module is designed to establish you as a broker an individual would refer without your intervention. That said, there's an option in the contact schedule to offer a value-based incentive for providing referrals.
An introducer, or referral partner, is a person or business that is partnered with you so you might extend your services to their clients. In the finance field these groups typically include real-estate agents, accountants, financial planners, tax agents, and others. If managed correctly they'll be a significant portion of your inbound business.
Most brokers we work with will talk about how these relationships are difficult to establish... and this subjective reality is far from truth. Far too often we'll see people approach these potential sources with the mutual financial benefit as the priority... and this isn't want the other party is most likely interested in. They want to know that their clients will be looked after, and their referral won't be treated with the contempt we commonly see in the financial space. Many will be concerned about how their service to the client might be diluted. Others will (justifiably) be worried about simply handing business to another on the basis of empty promises. The broad answer that mitigates these concerns is providing reason for investing trust in your proposal, and by providing a long-term proposition that adds objective value to their business (not just their bottom line).
While there are any number of methods that might be use to extend your partner's presence in their own clients' lives, they will usually be far more receptive to any proposal you make if you show them the systems you have in place that'll ensure their people are well looked after. If you approach each introducer with a genuine plan (rather than the typical back-scratching arrangements that normally take place) you'll invariably establish relationships even if they already have something in place.
If you're serious about building a serious partner program with a particular business, consider how their branding might be used everywhere - from a custom 1300 or other phone number that is answered to their liking to newsletters and other communication. While you're obligated to act within the guides of your credit licence (including divulging exactly who they're dealing with), branding does ensure that the business providing the introduction remains well represented during the entire process. This might also include such actions as cc'ing the introducer into all early emails, or forwarding common bank/aggregator receipts as an application is progressed.
It's important to be mindful of the potential to integrate high-quality referring agents into a franchise model if and when that business opportunity presents itself. The franchise model (business format, product franchise, representative etc.) is one that introduces other business challenges we'll talk about soon.
Bottom line: the introducer needs to know that the relationship is a business opportunity rather than just a financial one.
The BeliefMedia back end (Facebook, Google, and other advertising) paired with Edge, a structured referral routine, and our proprietary social/marketing platform are the staples for business growth. Our systems have seen the highest growth rate of any mortgage broker marketing systems in the country. If you're interested in learning more, please contact our team on 1300 235 433 (1300 BELIEF).