It Slices, It Dices, It Churns

Customer Churn has become common in Real Estate and Mortgage, but this HUGE problem is a HUGE opportunity for those who “act now”.

Fifteen years ago I was on a BBQ team that won awards in BBQ contests.  The world series of BBQ is The American Royal, where 500 teams compete for 5 meat categories every year.  It was always a pretty fun party… err… contest.  Several times we were sponsored by mortgage companies and a few of those years we won awards, including winning the open for pulled pork and brisket.
These days I don’t compete for ribbons and trophies, but I do cook for friends. I really enjoy cooking for people. 

My kitchen is pretty much a lot like yours but perhaps more on the simple side.  I prefer clean counters and despise small kitchen cluttering type electronics like the “ronco food dehydrator”.  I also stay away from too good to be true type tools like the Veg-O-Matic or single use products like the grilled cheese maker.  – You do not require a specifically designed tool for a fried egg, grilled cheese or quesadilla. What you do have is a small appliance addition, thanks to late night “As seen on TV”.

Too often we’ve been told that a product will “amaze” and “astonish” raising our expectations far beyond reality.  The “as seen on TV” hard goods only sell one product to one unsuspecting customer.  The sellers have no fear of future loss, no upside to gain. 

In my mind, the exception perhaps is the “as seen on YouTube” product videos from Blendtec.  Their marketing was awesome – but I can’t speak to the actual quality of the product.

 

Most of these products over promise and don’t work.  Today, the As Seen On TV products are either broken and were sent to the dump, or now sit unused in the garage.

Over / Under
So, how does a food processor relate to real estate and mortgage? Well, I’ve found in life, and in work – that under promise and over deliver is consistently a better method for good long term relationships.  But then again, we sell a subscription; people can quit a subscription if they don’t like what they get.  Thus we support our clients.

It wasn’t always that way.  When we were getting started, we at Revaluate had a similar quality issue and corresponding client related displeasure. It was two fold.  Our algorithms were not very accurate yet (they are now) and we didn’t even have a customer care department. (we do now) People were not happy and didn’t recommend us. Worse yet, they would cancel their subscription.  In the SAAS world, it’s called churn. Churn is determined by the number of clients that do not renew their subscription.

Real estate and mortgage companies experience churn as well, but on a different scale and timeline since people move less frequently.

Mortgage churn is when mortgage companies unnecessarily convince a homeowner to refi – since they are not a fiduciary, they don’t have to act in the homeowners best interest – IE it’s legal.  It’s also when a borrower does not return to their former lender for a legit refi, or for their next home. 

What’s the scope of this issue? It’s a HUGE problem – Housing wire reports that only 18% of people use the same lender for the next transaction.  “This is the first time customer retention has dropped below 20% since Black Knight began tracking the metric back in 2005” 

The Real Estate industry is only slightly better – with only 48% of home owners saying they would use the same agent again… however they frequently can’t recall who that was, and 88% of the time work with the first or second agent that contacts them in a time of need.

This lack of connection and poor timing represents an enormous problem.

Where a HUGE problem exists, so too exists a HUGE opportunity.

Mortgage companies ought to improve their relationship with and retention of customers – to the tune of 50-80%, growing bottom lines significantly annually.  New customer acquisition costs have to be significant in order to maintain a large client base… and while I have not found any data on this yet, I suspect it to be nearly 5-10% of operational budgets.

So why was the homeowner lured away, and why did they depart? Had they forgotten who they worked with? Did the lender not know they wanted a better rate? Or was it a vegomatic-like bad experience where they didn’t get value or delight from the transaction?

Revaluate has worked hard, investing in better customer service, enhancing our onboarding and referring to our client care offering as “white glove service”. 

As an example, despite covid, we lost less than 5% of our customers and since then have grown more than 150% y/y.  In the same time our y/y churn rate has dropped from 16% last year to 3% this year.  We know we still have room for improvement – but I’m proud of our client care team’s efforts.  I hope you have an opportunity to work with them.

I’m also excited to share that we’ve generated a huge number of referrals in the past six months.  This only happens when your service and product are exceptional. 

The take away – examine your recipe for client retention and don’t leave money on the table. Or more directly – don’t let your competition take money from your table.   Provide excellent customer service, find then reach out to those that might be interested in your service within your own database of leads, customers and past clients – invest in your customers in order to keep them, reduce churn and reduce customer acquisition and lead gen costs. 

No one knows what 2021 will bring – but preparing to keep what’s yours and grow forward will better prepare you for the unexpected and unknown.