Managing the customer experience means something quite different today, in the age of Dodd-Frank, than it did even a few years ago. For some lenders, the customer experience was a by-product of their normal banking business. It never appeared on a balance sheet or a profit and loss statement and so it wasn’t something many financial institutions tried very hard to manage. The results, in hindsight, were predictable.
Mortgage lenders today are among the professionals who consistently score at the very bottom of the customer satisfaction scale, at least as measured by J.D. Power & Associates. Of course, that’s going to change.
Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), has, on numerous occasions, pointed out that his agency will be concerned with more than just the safety and soundness of the institutions it oversees. Now, mortgage lenders will be held accountable for the experiences consumers walk away with after interacting with them, regardless of whether they received their loans or not.
In a post Dodd-Frank world, the customer experience has become a compliance issue, and that’s exactly how most mortgage lenders will treat it. In the process, they’ll miss an incredible opportunity. By doing only what they must to remain in compliance, the standard modus operandi of the compliant financial institution, lenders will lose out on the opportunity to turn the customer experience into a powerful new marketing advantage.
Chasing the new referral
In the mortgage industry, referrals have traditionally been associated with business that comes in from a partner, such as a real estate agent or financial advisor. Consumer referrals have never accounted for a large percentage of the typical lender’s business. The reason most commonly heard for this is there simply is no customer loyalty in this business. It is closer to the truth to say consumers traditionally have not understood the mortgage industry well enough to know who to be loyal to.
What is clear is that lenders have not earned the trust that brings repeat business or referral business from consumers. Who do consumers trust? Each other.
Ron Schott, an SEO expert for Search Engine Watch, pointed to a recent Social Impact Consumer Study from Sociable Labs that found that 57 percent of shoppers are more likely to buy after receiving opinions from friends. The same study pointed to Facebook as an increasingly trusted source of consumer information, with 62 percent of online shoppers reading product-related comments from and 75 percent of these shoppers continuing on to click through the retailer’s site.
New York public relations firm Edelman found that, in the online world, 76 percent of consumers will recommend companies they trust to a friend or colleague. For the first time in history, the business world has a network of nationwide social channels that allow consumers to come together and recommend companies they trust to their network connections. And their connections are actually taking their advice.
Just as consumers look to online outlets for recommendations on what TV to buy or which cell phone has the best rating, home loan borrowers shop online for rates before setting foot in the physical branch. All lenders have to do now is get someone to trust them.
Building consumer trust: The process
A professional psychologist will likely say that consumers do not really recommend brands to each other, but rather experiences. It is akin to the truism that consumers are not actually swayed by the facts at issue, but rather the story that brings those facts to light. By improving the process so that it enhances the borrower’s experience, lenders can provide customers with a higher level of service they will be eager to share with others. This truly makes customer experience a marketing issue, as well as a compliance concern.
This is great news because federal regulators are already pushing the industry in the direction of improving the borrower’s experience. Unfortunately, most lenders will make one or more of these critical errors when they attempt to get this done.
►Mistake No. 1: Failing to see the end-to-end experience for your customers.
Most organizations tend to create silos, which force executives to view processes without the benefit of information relating to how those actions are interrelated across lines of business. That means their view of the customer is fragmented.
It is important to take a holistic view, evaluating the customer experience across all channels and touchpoints to ensure a true understanding of how customers view your business. Because there are so many parties involved in the production of a mortgage asset, the mortgage industry is notorious for having a fragmented view of the customer’s overall experience. A mistake made by one party can sour the entire process for the borrower.
Having someone involved in the transaction that focuses on the borrower as the transaction moves toward the closing table is a great way to keep control of the overall experience and build trust. With a designated person available to call, a mistake or misstep won’t be the cataclysmic event it could be if the borrower had no one to reach out to for help.
►Mistake No. 2: Treating all customers as equals.
Many large organizations undertake customer research and collect mountains of data, but relatively few know who their most profitable (not largest) customers are. When this data is used, it is often used to segment consumers into fairly homogenous groups, which are then targeted for marketing messages.
Like most things in life, the smaller portion of the lender’s customers will be responsible for the more significant proportion of its profit, which means these are the individuals the originator should target first when focusing on improvements. In the past, most lenders have segmented their pipelines by product type, leading to organizations that are heavy in refinance expertise and under-developed for purchase money lending. This could be a significant problem for lenders in the future.
As lenders shift to take advantage of the trend toward purchase money lending, it will be important to know which borrowers are likely to be the most profitable. Lenders already have access to this information and it will provide a handy starting point for their customer experience improvements.
Lenders should take care not to make the mistake that the larger loan amount leads to the more profitable customer. Even a first time homebuyer can make a significant impact on the company’s bottom line if they begin to refer the company to other borrowers through social media channels. By monitoring social media, lenders can engage dissatisfied customers to help transform negative sentiment into a positive customer experience.
►Mistake No. 3: Failing to invest enough in employee training.
In building a customer-centric company culture, employee training brings to life the values of the brand and the tactical customer experience that reflects the brand. As opposed to differentiating solely on price or features, forward-thinking companies help employees—call center staff, sales and marketing teams, and senior executives—internalize corporate initiatives to improve the customer experience.
To increase the likelihood of success through a merger or simply launching a new product, employee training is vital to ensuring that everyone is on board with a consistent vision for the customer experience.
The bottom line … improving customer experience is good for business. In today’s mortgage industry, customer experience is a compliance imperative, but it can also be the key to a much stronger brand and a powerful marketing tool.
Steven J. Ramirez is CEO of Beyond the Arc Inc., a customer experience and advanced analytics firm helps financial services clients identify opportunities to differentiate themselves in the marketplace. The company's social media data mining helps clients improve their customer experience across products, channels, and touch points. He may be reached by e-mail at firstname.lastname@example.org.