profit, but it does give a better sense of the overall client value. For example: The average sales price in your area is $200,000 and your loan officers generally earn 100bps. If your loan officer closes a new transaction and that customer refers him just one new client per year, he will earn about $16,000 from that one customer over a five year period. That’s just one customer referring one new client per year. Use the same logic spread over 100 past clients; that’s $1.6 million in commission over the next five years.
given CAC strategy will no longer be beneficial, since the financial rate of return that generally accompanies new customers is surpassed by the cost of acquiring those customers in the first place. Consider how much time your loan officers spend looking to acquire new customers through relationships with real estate agents. They’ve probably spent hours chasing an agent who promised to send them referrals, only to be presented with two or three or more “leads” for potential clients who really are more in need of a bankruptcy lawyer or credit counselor. We’re not at all suggesting a loan officer doesn’t have to work through these scenarios to gain the trust of their referral partners. Referral partners, such as real estate agents and financial planners, are a tremendous source of business when you find the right ones. What we are suggesting is that, as a leader, you promote the idea that your loan officers treat their client databases as one great big referral partner. The logic is really so simple … Say you have one loan officer with a database of 300 past clients, friends and family. If just 10 percent of them refer him one client this year, that’s 30 additional loans. Does your loan officer have any real estate agent partners that will send him 30 referrals this year? If you do, we’re betting you spend a whole lot of
time and energy promoting your loan officer’s relationship with him. The leaders who have invested in a proven relationship marketing system and have committed to providing the infrastructure and tools necessary to execute, have a significant advantage. This advantage can be seen not only from a sales and marketing standpoint, but also from a recruiting perspective. The up and coming, motivated originators are more likely to make a move to your company if they can see that your vision includes a commitment to making them successful with clearly defined, accessible marketing systems. The mortgage industry is an everevolving challenge. The mercurial nature of the regulatory system and rapidly progressive technology demand creative and nimble leadership. These aspects of the current mortgage lending climate have greater impact on our marketing strategies than ever before. Leaders who face these challenges with the ability to quickly adapt and without losing sight of their ultimate goal are inspiring to all of us. We see these visionaries rising to the top and we salute them! Brent Emler is director of sales and marketing at Velma.com, a customizable marketing software provider exclusive to the mortgage industry. He may be reached by e-mail at brent@velma.com.
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If you think these numbers are extraordinary, you’re right. Not because database marketing results are mixed, but because too often originators don’t invest in their most valuable asset; the contacts in their database. A visionary leader not only understands the long term impact of these kinds of numbers on his business, he has the unique ability to inspire his entire team to adopt his vision. A visionary leader engenders a culture of success by personally practicing and preaching the principles of his marketing belief system. Furthermore, he facilitates his employee’s success by investing in adequate database management and relationship marketing systems. CLV has an intuitive application as
a marketing concept, because in theory it represents exactly how much each customer is worth in monetary terms, and therefore exactly how much a marketing department should be willing to spend to acquire or retain each customer when it comes to relationship marketing. You’ll likely treat customers with high CLV differently from those with low CLV. You’ll spend more to retain them because they’re obviously worth more. You might discover that some customers have a low or even negative CLV. So, why spend a lot of money trying to retain them? In addition to using the CLV formula, using the Customer Acquisition Cost (CAC) formula can be of tremendous value. CAC is the cost associated with convincing a new customer to buy a product or service. This cost is incurred by a business attempting to convince a potential customer. It includes all costs involved—research, marketing, etc. This is an important business metric as it plays a huge role in calculating the value of the customer to the company as well as the resulting return on the investment in a customer. CAC refers to the resources that your business must allocate (financial or otherwise) in order to acquire new customers. CAC will typically increase as business matures, but it is also typical to see a diminishing return on CAC as a business grows in size. At some point, a
n California Mortgage Professional Magazine n APRIL 2014