This article featuring Rocky Foroutan, CEO of Loanzify/LenderHomePage was originally published on MBA.org.
Retention is the new acquisition and likely the most important KPI in the digital age. While the focus has historically been on acquiring new leads for revenue generation, the mortgage industry is now shifting its emphasis to retaining customers by enhancing the overall borrower experience.
A recent 2021 study published by Gartner looked at customer satisfaction in the financial service industry. It found that nearly 100 percent of satisfied customers spread the word about their positive experiences. You don’t have to be a professional marketer to be impressed by this type of organic marketing, especially when considering an earlier Gartner study that revealed that up to 80% of future profits could be attributed to 20% of existing customers.
But improving customer satisfaction to gain customer loyalty and increase revenue isn’t a new idea in business. Expressing empathy or creating an appealing environment are two examples of in-person actions that improve customer satisfaction immensely. But recreating them in a digital environment proves challenging. Furthermore, attempting to have a similar interaction online doesn’t guarantee you’ll produce the same results.
Adding to the challenge of digital customer satisfaction is another factor –removing negative experiences. The same 2021 Gartner study revealed that reducing negative experiences is more impactful than increasing positive ones. For example, the study found that when a customer needed help resolving an issue, each subsequent interaction resulted in customer satisfaction decreasing by about 20%.
Considering that both technology and obtaining a mortgage are notoriously frustrating for most consumers, we can better understand what the mortgage industry is up against and why lenders must get this part right if they hope to retain customers and the profits that follow them.
Lenders undertaking the mission to enhance their borrower’s experience must also realize that the bar is set extraordinarily high. Consumers’ expectations aren’t based on a previous engagement with a single provider or even a previous experience with a single industry. Instead, their standard is based on the collective experiences –both positive and negative –of all online interactions across various industries.
For this reason, it’s ill-advised for a lender to analyze only what their competitors are doing. One must also take note of exceptional digital experiences across other industries and leverage that knowledge to create an extraordinary borrower experience that retains their customer base.
The Borrower’s Journey and The Omnichannel Connection
Planning for optimized online interactions requires a deep understanding of the basics, starting with the Borrower’s Journey. The Borrower’s Journey encompasses the entire digital consumer lifecycle, from awareness to acquisition to long-term retention. Lenders can optimize, make course corrections, and maximize retention by zooming out and seeing the culmination of every touchpoint instead of viewing it as a string of singular interactions.
It should be emphasized that consumers also view each touchpoint with little differentiation, meaning that no matter where the consumer digitally engages, be it the lender’s mobile app or website, consumers expect a consistency that enables them to continue their borrower’s journey seamlessly. This idea is the essence of omnichannel, and its influence on digital mortgage customer retention may surprise you.
A study by Harvard Business Review found that companies with the most robust omnichannel strategies had a customer retention rate of 89% instead of only 33% if the plan was weak. It’s also worth mentioning that an omnichannel borrower experience produces higher-value customers. Regarding big-ticket items, the same study showed that a positive omnichannel experience raised the consumer’s maximum online spending threshold –a deceptively minor revelation with extraordinary profit implications for lenders.
Now that we’ve established that customer retention is vital for business success in the immediate and future, and the key to retention is the borrower experience (i.e., digital engagement with your business), we need to dissect the best practices for developing positive and profitable borrower experience.
The Borrower Experience: Technology-Led Retention
It goes without saying that the digital borrower experience is driven by technology, which, fortunately, simplifies the most complicated and demanding aspects of this strategy. By utilizing the right mortgage technology, lenders can simultaneously elevate the experience while standardizing it, thereby delivering that superior omnichannel borrower experience that equates to increased customer satisfaction and loyalty.
With over 2 decades of experience in the mortgage technology space, I’ve found that a solid basis by which to measure the effectiveness of mortgage software as it relates to improving the borrower experience, we can use a modernized version of the Four P’s of marketing.
Predictive. Helps to predict a borrower’s next step in the journey and illuminates the lender as to how best to engage the borrower. Mortgage technology simplifies the process with AI and automation. The lender can take advantage of the preset parameters provided by the software and refine it for their specific requirements.
Examples of Application –
• On-board analytics like CRM lead scoring
• Automated re-engagement marketing
Proactive. One of the most effective ways to eliminate negative experiences is to anticipate what the borrower will need at each step of the journey and understand the best way to deliver the helpful resource. This is best accomplished by gaining a deep understanding of the borrower’s past and future behavior and by providing an abundance of resources in various forms and making them easily accessible.
Examples of Application –
• Automated actions including alerts, responses, and self-guided task completion
• Real-time reporting in both macro and micro levels, anticipating possible intervention
• Interactive applications and content.
• Deep integration throughout the borrower journey, including websites, social media, CRM, LOS, credit verification processors, POS systems, and more.
Private. Mortgage software must be compliant and protective with data while also conveying the company’s transparency. Part of developing customer satisfaction is gaining their trust through consistency and assuring customers that their sensitive information is encrypted and secure.
Examples of Application –
• Blockchain information transmission to decrease data corruption
• Encrypted borrower portals and customizable permissions
Personalized. Use the insight you gained from collecting customer data to personalize and improve the experience. Remember, each interaction is equally vital in the borrower’s journey, and a single touchpoint that fails to address their needs can drop their satisfaction level dramatically.
Examples of Application –
• Multi-channel access to live assistance such as instant messaging, video calls, and group chat.
• Self-serve functionality and automated task reminders
Final Thoughts
While customer retention relies heavily on satisfaction in the borrower experience and the technology that drives it, there is one other X-factor that customers weigh: company authenticity. In an age where face-to-face lending is considered obsolete, the industry must comprehend that lending is still very much a human-to-human transaction. As such, consumers will always prefer dynamic, authentic engagement from their digital lender. Thus, whatever mortgage technology chooses to implement must also support this requirement.