Mortgage Marketing With Today’s Media

Does this mean mortgage lenders should halt their direct marketing campaigns and redirect those budgets? Of course not — the solution is not to stop trying to reach the customer but to reach the “right” customer, with the “right” message, in the “right” way. Successful firms are asking themselves: Do we really know our customers? Do we understand what they need? Are we communicating with them properly? Do we understand the value they add to our organization?

To reach customers and put direct marketing dollars to more effective use, mortgage lenders are going to have to “get intimate” with their customer base. Marketing budgets should be defined by those initiatives that enhance customer relationships rather than mailing volume or the development of new creative concepts. Only when a firm truly understands its customers and can find ways to establish mutually beneficial relationships do marketing communications become relevant and welcome.

Mortgage lenders must learn to create interactions that are on the customers’ terms. By designing communications that meet the customer’s expectations in terms of both channel and message, loyal (and profitable) customer relationships can be formed and maintained.

Creating Customer Intimacy Becoming a customer intimate organization requires a commitment beyond simply sending out a customer satisfaction survey once a quarter or orchestrating occasional executive fly-bys. Customer intimate, or customer-centric, firms spend the time and budget to develop Customer Insight by investing in initiatives such as customer segmentation, customer value analysis and competitive assessments. Their objective is to get to know their customers better than their competitors and to use this information to drive their Customer Strategy. By creating well-defined value propositions and strategies for their customers, successful firms are able to design Customer Interactions that, not only meet customer expectations, but yield further insights to drive a virtuous cycle of continuous improvement (see Figure 1).Appointing the customer as the focal point and the driver of all interactions allows companies to create a truly customer-centric marketing approach that will produce results and increase effectiveness. Do We Really Know Our Customers? The first step in gaining customer insight — getting to know your customers — sounds simple. In reality, determining who your customers really are and what they need can be complex. Many firms make the mistake of trying to categorize or segment their customers based on “what.” Customers are defined based on the types of products and services they purchase. The assumption is made that customers purchasing similar products have similar needs. Although two consumers looking for a 30-year fixed loan may have the same basic need (i.e., to finance the purchase of a home), the factors that drive their final decision in selecting a lender may be very different.

Figure 1: Creating Customer Intimacy

Likewise, many firms mistakenly focus on the “who,” defining and grouping customers solely on demographics. Although demographic information often correlates with customers’ needs and can be a good starting point for analysis, it is not the end goal. Ultimately, why customers buy is much more important than what they buy or who they are.

True customer insight is driven by focusing on the “why.” Why do customers buy? Why do they stay? Why do they leave? By focusing on the underlying needs that drive customer decisions — Which lender should I use? Which loan is best for me? — “needs-based” segmentation provides a firm with the insight necessary to develop customer interactions that meet or exceed customer expectations.

Working “Outside-In”
Creating a customer-intimate, customer-centric firm means placing the customer at the heart of all decisions. Before embarking on a segmentation exercise, it is important that a lender breaks away from the traditional “inside-out” way of thinking. Internally, firms are broken into functional silos — sales, marketing, service, operations. To really get to know its customers a lender must define the stages through which a typical customer flows in his “every day” interactions with the firm — from his point of view. Customers don’t care if someone from marketing or sales or the janitorial staff answers the phone, as long as that person can solve his problem. To effectively identify customer needs, a lender must first identify the critical touchpoints of the customer experience. An example interaction cycle may include:

• Engage: Enticing customers to do business by identifying their needs

• Transact: Assisting customers in selecting products and terms that best meet their needs

• Fulfill: Ensuring products and services are successfully delivered

• Service: Supporting customers and resolving questions or problems that arise

The “outside-in” perspective allows a firm to understand its processes from the customer’s point of view as well as the needs that subsequently arise.

The next step in discovering customer needs is to identify the factors that drive differences in customers as they move through their interactions with the firm. These factors, or influencers, can be grouped into three primary categories: Attributes, Behaviors and Values.

• Attributes are characteristics that describe a customer from a demographic perspective. Single or married? Small “ma & pa” shop or multi-office, multi-state brokerage firm?

• Behaviors define what a customer does; how she acts. Comparison shops for the best rates online or expects a third-party to do this for her? Uses sophisticated marketing techniques to reach consumers or relies strictly on referrals?

• Values depict a customer’s preferences, priorities and principles. They can be likes and dislikes; beliefs and aspirations. Looking for an investment or a starter home? Leaving the business to his son or looking for a buyer?

Once identified, these factors allow the firm to create interactions that are tailored to the customer’s unique needs. For example, a wholesale mortgage lender may find that one segment of its brokers are very “needy” for support and services (Segment A). They want to work with a lender to explore new ways of doing business and think of their relationship as a partnership. Another segment (Segment B) may be much more “self-sufficient” and view too much lender involvement as a threat. They see themselves as the owner of the customer relationship and the lender as simply a provider of capital.

Each segment has separate needs that should be fulfilled and marketed to separately. Strategies that focus on product training and on helping customers learn how to better market themselves to their own consumers should be pursued for customers in Segment A. Customers in Segment B, on the other hand, are looking for a much more streamlined experience. They want to know that interactions with the lender will be efficient, allowing them to get back to business. They also expect a lender to clearly recognize the contribution they make to the lender’s own business.

On the retail side, a lender may find very similar consumer segments. One segment may be needy of product information, “live” support and financial coaching while a second segment desires a more self-sufficient experience. The second segment is most likely looking for the ability to quickly conduct transactions, with little to no personal interaction.

In all cases, each interaction point the customer has with the firm should be tailored to meet that customer’s needs, starting with the way in which marketing and sales communicate with, or engage, the customer. If products, services and capabilities are marketed to the customer in such a way as to speak directly to his needs, marketing will begin to cut through the clutter — increasing effectiveness.

Do We Understand the Value of Our Customers?
Unfortunately, it’s not enough just to understand customer needs. Lenders must also understand the value each customer brings to the organization. Although it is theoretically possible to satisfy the needs of any customer, doing so for most firms is economically unfeasible. By creating a “matrixed” view of its customers (see Figure 2) to represent both needs and value, the firm is able to balance its short-term needs (profit) with its longer-term goals (customer satisfaction and retention).

Figure 2: Segmentation Matrix

Value analysis can take many different forms and result in a host of different algorithms or calculations. However, the heart of any value analysis measures the value a customer brings into the organization against the value it “drains” or takes away from the organization. Value contribution factors can be qualitative in nature (e.g., community influence, strategic importance, brand cache, etc.) or quantitative (e.g., submissions, fundings, loan size, etc.). Likewise, value reduction factors can take many different forms but should, at a minimum, include those items that affect the organization’s resources, including operational capacity, supplies, marketing materials, and time & attention spent by sales and service professionals.

With both needs-based and value-based segmentation as the building blocks, a firm can design communications and interactions that both satisfy the customer and contribute to profitability. Continuing the previous example, the wholesale lender that had identified two needs-based segments (Segment A & B) has also identified four distinct broker value groups: Recognize, Recover, Develop and Sustain. Brokers that fall into the Recognize category are the most valuable to the lender. They may have, for example, the highest “pull-through” ratio and can be thought of as the most loyal. Brokers in the Recover category are showing signs of a “decelerating” relationship — their value is declining. Conversely, brokers within the Develop category are accelerating their relationship and continuously increasing their value. Finally, the lowest value brokers fall into Sustain.

By creating a matrix of the organization’s needs-based and value-based segmentations, marketing can increase the relevance of its communications by tailoring the strategies and interactions that are developed for each group. It also can increase its effectiveness by focusing the majority of its resources on the most valuable segments. A matrixed view of its customer base, allows marketing to create micro-strategies that touch upon the customer’s needs, value or a combination of each (see Figure 3).

Figure 3: Example — “Micro-Strategies”

On the retail side, lenders can use the needs/value matrix to identify and target the most attractive segments. By creating profiles of the consumers that constitute the firm’s most valuable consumers (i.e., those with the lowest default rate, the highest loan values and/or the lowest servicing needs) lenders can then focus their efforts on customers matching that profile and target them with messaging and products that fit their needs.

Marketing as an Integrated Discipline
Although the marketing organization may be responsible for the development and maintenance of the firm’s segmentation models and resulting strategies, truly effective interaction strategies involve the entire organization. To make customer communications relevant and welcome, each and every customer touch point must have a thorough understanding of the customer’s needs, and must know how to apply that information throughout the customer interaction cycle.

In today’s organization, the traditional functions of marketing span multiple departments. Cultivating customer relationships is now the responsibility of all employees. Customer retention programs, for example, should not be focused on a single silo of the organization, such as the call center, but be designed in such a way that retention opportunities are exploited at each interaction point. Becoming customer-intimate, however, takes time and effort: it is much more than simply declaring yourself a customer-centric organization. It is the result of conscious, firm and clear-headed commitment to make the necessary incremental investments in time, effort and money. If well orchestrated these commitments will lead to the progressive accumulation of capabilities and mastering of customer-centricity skills across the whole enterprise.

Getting the “right” message through the “right” channel to the “right” customer, although critical, is just the beginning. Today’s customer is more sophisticated and demands more from its lender than ever before. Those firms that learn to understand their customers’ preferences and deliver a tailored customer experience will be rewarded with loyal, lasting and profitable customer relationships.