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5 Pillars of Mortgage Industry Customer Retention

I’m depressed. I just figured out I’m in debt for nearly a million dollars – $867,790, to be exact – and there’s no way out. No, I’m not an ex-Enron exec or an IRS scofflaw, I’m a homeowner. According to the stats, I’ll own as many as five homes in the next 40 years, and that’s where my crushing debt comes from.

Since the mortgage payment is usually the consumer’s largest housing-related expense, you might expect that the mortgage industry is as eager to please and keep their customers as Sears is when it sells an appliance, whether it’s a high-priced washing machine or a lowly toaster. Oddly, the reverse is true: The mortgage business has one of the worst customer retention rates of any business. Mortgage companies fail to retain 93 percent of their customers when those customers get a new mortgage.

There is $6.2 trillion in outstanding mortgage debt, and you’d think with so much money at stake over such a long time, mortgage companies would fight to keep most of their customers for life and be the alpha dogs of consumer marketing.

Can and should the mortgage industry keep customers for life? The transactional value alone should motivate any lender to a resounding “yes.” If that isn’t enough, encroaching competition from nontraditional channels (credit cards, AAA, affinity programs) should scare them into doing it.

Here then are five pillars of marketing that can help the industry meet the challenge:

1. Offer your customers value. Consumers today have one question: “What’s in it for me?” Mortgage banks have consistently failed to answer this question. If I have my mortgage and my credit card with the same national mortgage bank, plus a brokerage account with the same group, what do I get? Right now, nothing. How about throwing me some free checks for submitting my payment on time for the past 36 months? How about giving me an e-mail coupon good for four free trades when I close on a jumbo loan? Providing value breeds loyalty.

2. Offer more personalized features and benefits. Paying my mortgage online is a great feature, but in today’s quickly evolving industry, this benefit is as revolutionary as the remote control.

It is time to roll out new features. Let me pick my payment date. Whoever decided the first of the month should be the standard mortgage due date was probably born before cars were the preferred method of transport. That arbitrary first-of-the-month date doesn’t promote loyalty; it just promotes needless anxiety from homeowners. What about more flexible payment options like interest-only payments for a month or two, or a pre-pay option?

3. Get personal. Though your customer is bombarded with special offers, today’s financially savvy and service-hungry consumer can still be wooed – and won. Leverage your knowledge on these existing customers and make your best offer. If I bought a $200,000 to $300,000 product from you, shouldn’t you at least call me once a year and tell me if I can save $200 a month by refinancing, or ask whether I plan to move soon and whether you can help with my next mortgage? Think about the loyalty you would generate with that call, not to mention that it would give your bored inbound reps something to do, now that the refinancing calls are waning.

4. Stop romancing the one who doesn’t love you. Get out of bed with private mortgage insurance companies and have an affair with your customers instead. PMI payments are one of the most-hated consumer burdens out there. Of course the bank needs protection from default, but if I have my checking account, credit card and brokerage account with my mortgage holder, don’t you think they could waive PMI for me?

Think about the loyalty and cross-selling potential that would come from the following offer: "Open a Mortgage Bank Gold Card (or gold circle checking account or online brokerage account) today, and we’ll waive your PMI."

5. Rewards, rewards, rewards. Learn from loyalty and affinity-based industries, the experts in customer retention. Credit card companies let you skip payments (with interest), which is a break I’d be grateful for when the first college tuition bill comes due. Affinity programs offer you discounts related to products or services you’ll need.

If AAA can give me a discount when I rent a car, why can’t the company that owns my house arrange for me to get a 10 percent discount at the Ramada or Hilton? Or, just send me a coupon from Home Depot. You can afford it, and I’ll be grateful.

My advice to the mortgage industry, no matter what strategy is used, is to figure it out fast – your competition is coming from nontraditional channels lurking at the gates. Remember when you could get a car loan only from your bank? Not only has the auto industry poached that business, but credit card companies like Capital One have joined the party. Soon the top-notch database marketers will figure out how to steal mortgages from the current, lumbering category owners – the banks.

Great database marketing is about figuring out whom your most valuable customers are and how to keep them. If the top mortgage banks begin the initiatives to build loyalty and add value, they not only are uniquely positioned to dominate the No. 1 financial marketplace, but they also might lift my depression. I can start being happy about the $867,790 I’m going to pay in the next 40 years, especially if I’m going to get some coupons.

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