Despite another slip in mortgage interest rates at the start of July, homeowners and homebuyers alike are staying put. According to a recent CNBC article, refinancing has hit a 20-year low. Total mortgage application volume is 13.5 percent lower than the same week one year ago.
All of this comes as the housing market grapples with supply shortages and soaring prices. Housing inventory levels hovered at all-time lows in the first quarter of 2018 with 1.59 million homes on the market, down 8.4 percent from the same period one year ago. At the same time, the median U.S. home value rose 8.7 percent in April – its fastest rate in 12 years.
As it gets harder to cut through the noise on traditional and digital marketing platforms, the race is on for mortgage loan officers (MLOs) to secure borrowers.
The key to helping your MLOs’ books of business lies in turning first-time customers into customers for life. The cost to attract a new customer is high, making it critical to cultivate customers who come back to you again and again – for life.
The Cost of Attracting a New Customer
The average American consumer will purchase five homes in their lifetime, with the average loan sized at $313,300 as of March 2017 according to data from the Mortgage Bankers Association. And while consumers crave a return to the basics – face-to-face interaction and personalized touchpoints – data from J.D Power shows that 63 percent of customers would leave their mortgage servicer for better customer service.
Given the sheer transactional value of the average consumer not to mention the competitive lending landscape, you might think lenders would go to greater lengths to keep customers for life.
The same J.D. Power study shows that 27 percent of first-time buyers and 21 percent of all borrowers regret their choice of lender, making them more likely to look elsewhere on future home purchases.
One of the best ways for MLOs to ensure sustainable growth in today’s competitive environment is by tapping into their existing book of business. Doing so requires the right marketing and communication strategy.
Past customers must not only remember their MLO but actually want to work with them again. The only way to achieve that is by taking steps to engage with – and educate – prospects before they apply for a loan, during the loan approval process and long after they close.
Cultivating Customers for Life: What's in It for Me?
There are several advantages of placing greater emphasis on customer retention. Here are three of them:
- Higher Profits
The less it costs to find a borrower, the more profitable that transaction becomes. According to Bain & Company, increasing customer retention by even 5 percent can lead to an increase in profits of 25 percent to 95 percent.
- Less Competition
Happy, engaged customers are loyal customers. It stands to reason if people are spending money with your MLOs, they aren’t spending it elsewhere.
- More Referrals
People don’t purchase homes every day. Business cards get lost. Branded cups break or fade. It’s so much easier for an existing customer to remember the name of an MLO whose name and email are at the top of their inbox than rack their memory for the name of someone they did business with seven years ago to recommend to their friend who is now buying a home.
Make New Friends, But Keep the Old
Unfortunately, tighter profit margins and legacy technology can get in the way of customer retention efforts.
There is a better way.
Regular, relevant communication builds credibility and trust. And in an industry perceived as lacking customer service leadership, the ability to execute a solid marketing strategy makes it easier to surpass competitors and come out on top. The right mortgage marketing and sales tool can further optimize customer interactions, enabling MLOs to create personalized touchpoints, anticipate needs and provide ongoing education and value so that customers know where to turn when it comes time to buy their first home – and every home after that.