Increasing Lifetime Value of a Customer

Nothing is more rewarding than closing a loan for a client. You’ve worked hard, provided top-notch customer service, and now you’re done—right?

If that’s how you’ve been doing things as a mortgage loan officer, then it’s time to take a step back and think about the potential lifetime value of a mortgage client. If you think about each customer success story as a source of possible future income (whether that client comes back in a few years for a refinance or a new home purchase, or refers friends and family to you), then you’ll want to make your customer retention strategy a top priority.

That’s because there are two ways you can go about growing your business. One is to focus on new customer acquisition. Of course you can and should be doing that, but it should not be your only mortgage marketing strategy. That’s because it can be time-consuming and is not always cost-effective.

The other way is to increase the loyal customers you already have—the ones whose business you’ve already earned and whom you’ve already built up valuable relationships with. Remember this: Retaining a customer will cost you significantly less than trying to acquire a new one. As a mortgage loan officer, repeat customers are your best bet to improve your bottom line. We typically recommend that at least 30% of your business come from your past client base.

So what’s the value of a customer to your mortgage business? Customer lifetime value (CLV) should be a key metric that you consider when deciding your marketing goals, budget, and processes. If done correctly, you’ll see almost unlimited growth in your business as you nurture and market to prior clients over a long period of time, which can make those customer relationships more profitable.

Customer lifetime value is a metric that estimates the total revenue a business can expect from a single customer throughout the business relationship. It helps companies understand the long-term value of their customer base, allowing them to focus on customer acquisition, customer retention, and overall customer relationship management.

The formula for calculating customer lifetime value is:

• CLV = Customer Value × Average Customer Life Span

For a mortgage loan officer, customer value refers to the average value of a transaction multiplied by the average number of transactions. Average customer life span is the average length of time a customer continues doing transactions with you.

Many businesses use CLV data to help optimize their marketing spend and reduce customer churn, with the goal of increasing customer loyalty.

The ROI of a customer can be measured effectively by calculating the lifetime value of a mortgage client. Let’s look at a few possible scenarios.

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

If you have an existing customer, close their loan, and don’t do anything else to nurture or market to that client, you will probably earn only what you received on commission from that one transaction. 

We’ll use a scenario of a $500,000 loan amount. In this case you just earned somewhere around $5,000, and that’s all that customer is worth to your business.

Let’s say you decide to do more with that prior customer. If you add a basic nurturing campaign, you’ll see a return on your investment. If we go with the national average, which is a 25% probability of them returning to you for a future home purchase or refinance and sending you one referral client, the lifetime value of that mortgage customer could be $19,000+, which is significantly higher than your commission from their first single transaction.

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. Here’s a blog we wrote about nurturing clients and database marketing to gain more inspiration on how you can stay in touch with your book of business.

Let’s look at what happens when you put an even more robust nurturing campaign in place for your past customers. If a customer refers three people to you, their value goes up to $29,000, all because you exceeded customer expectations by simply shooting them an occasional email or text to stay in touch over time.

A more robust nurturing campaign may include things like sending video emails, anniversary emails or cards, and more personalized emails that coincide with your customers’ interests and milestones. Adding value-packed content that will keep 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.

Let’s say you follow our above recommendations but add two more important elements to your mortgage marketing strategy.

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

Next, you can add in some strategic marketing based on customer behavior. This can include sending hyper-targeted email campaigns or running targeted digital ads on social media and in search engines. If you give people highly relevant information, they’re much more likely to pay attention.

This means truly understanding a mortgage customer’s life cycle and reaching out to them with the right information when they indicate that they might be ready to refinance or buy another home.

When you add in asking for referrals and this kind of strategic marketing, you can bump the number of referrals to five people, which increases the lifetime value of a mortgage customer even higher!

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

Remember, nurturing your customers is good. Doing more robust marketing is even better. And strategic marketing? That’s a game-changer.

If you’re ready to get started, DG Pinnacle TPO has all the tools you need to retain a customer for life.

We can help you put your strategies into action. Contact us to guide you along the way and take advantage of the many opportunities in the Real Estate Market. Call or text us at 📱 305-851-5225

This article was originally published in www.apmortgage.com