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Increasing the Lifetime Value of a Mortgage Customer

There’s nothing more rewarding than closing a loan for a client. You’ve worked hard, provided top-notch customer service, and now you’re done—right? Off they go without another thought.

If that’s how you’re doing things as a mortgage lender, it’s time to take a step back and think about the potential lifetime value of a mortgage customer. If you think about each closed client as a possible future client (in the form of a refinance, a new home purchase, or a referral to friends and family), you’ll likely want to change the way you’re doing things.

Increasing the Lifetime Value of a Mortgage Customer

That’s because there are two ways you can grow your mortgage business. One is to always be chasing down new customers. Of course, you can do that, but it shouldn’t be your only strategy because it’s time-consuming and expensive. The other way is to increase the value of the customers you already have, the ones you’ve worked so hard to earn their business. Hint: this second strategy is much more effective for producing a steady increase in revenue. We typically recommend at least 30% of your business should come from your past client base.

What’s the value of a customer to you? Mortgage customer lifetime value should be a key metric when it comes to deciding your marketing goals, budget, and processes. Done correctly, you’ll see almost unlimited growth in your business as you nurture and market to customers over a long period of time to make the relationships more profitable.

Calculating ROI on the Lifetime Value of a Mortgage Customer

The ROI of a customer can be measured effectively with a calculation on the lifetime value of a mortgage customer. Let’s dive in and look at some possible scenarios.

What if You Do No Follow-Up?

Here’s some math to show you how different scenarios can play out (calculated based on probability of a customer returning, average loan value, and average commission, as well as the homebuyer’s age).

If you have one customer, do a loan, and don’t do anything else to nurture or market to that client, you just earned whatever you got on that commission. We’ll use a scenario of a $387,000 loan amount—you just earned around $3,831, and that’s all that customer is worth.

What if You Add on a Basic Nurturing Campaign?

But what if you do a little more with that past customer? If you add a basic nurturing campaign for people who’ve worked with you, you’re going to start to see a return on your investment. If we go with the national average, which is a 25% probability of them returning to you and sending you one referral client, the lifetime value of a mortgage customer is more like $20,646.

A nurturing campaign might be a simple, automated email follow-up—nothing too crazy. Maybe you do a more personal email once or twice a year, but it doesn’t necessarily take much. Here’s a blog we wrote about nurturing clients. Here’s another blog about database marketing, if you’re interested in staying in touch with your book of business.

What if You Add on a More Robust Nurturing Campaign?

Let’s look at what happens when you put an even more robust nurturing campaign in place for your past customers. If they refer 3 people, their value goes up to $76,847, all because you did a better job of staying in touch with them.

A more robust nurturing campaign may include things like sending video emails, occasional texts, anniversary emails or cards, and more personalized emails that coincide with your customers’ interests. Adding value-packed content that will keep all your past customers engaged with you is key to keeping you top of mind. Show your customers why they should keep paying attention to you throughout their entire journey.

And what if you go just a little bit further? Let’s stay that adding in an occasional phone call moves the retention rate of a client to 50%. Now the value of that same past customer is more than $150,000.

What if You Add in Strategic Marketing?

Now, let’s say that you do everything we’ve talked about but add two more important things.

First, ask for referrals. Asking for referrals is a good way to remind people you’re still in business and that you’re there to offer the same great customer service to their friends and family. Sometimes asking really is all it takes.

Next, add in some strategic marketing based on customer behavior. This can include sending hyper-targeted email campaigns or doing targeted digital ads on social media and search engines. If you give people information that’s highly relevant to them, they’re much more likely to pay attention. This means truly understanding the lifecycle of a customer and reaching out to them with the right information when they indicate that they might be ready to refinance or buy another home (and there’s a lot of technology that can help identify those triggers). Here are some of the key components of a mortgage marketing plan.

When you add in asking for referrals and this kind of strategic marketing, you can bump the number of referrals to 5 people, and that increases the lifetime value of a mortgage customer to over $250,000!

Why You Should Invest in the Lifetime Value of a Customer

As you can see, these numbers speak for themselves! All of this investment in your past customers is the key to building your business faster and growing your business further than you ever thought possible.

What’s the takeaway? Nurturing your customers is good. More robust marketing is even better. And strategic marketing? That’s a game-changer. (To help you get started, here’s a recent blog on evaluating your mortgage marketing so you know where you’re starting from.)

For additional resources, read more about owning the entire customer experience with APM here or read about re-engaging past clients here. Take a few minutes to identify how you will increase your customer repeat and referral business and create sustainability for years to come.

Are you ready to get started? APM has all the tools you need to retain a customer for life. Go here to learn more about us and connect today.

 

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