Is your customer-acquisition strategy product-centric, education-centric — or both? For commercial mortgage brokers looking to boost their business, a plan known as “Marketing + Market Fit” can make your development efforts more efficient and effective.
Within the U.S. commercial real estate market, there are some unique inflection points where marketing efforts can help to boost investor interest and loan amounts, even if closed-loan rates remain consistent. For mortgage brokers, this can ultimately equate to lower deal-lead volumes, but higher loan amounts and revenues. So, the strategy is simple: Direct your efforts to markets where loan values are high and you can earn more across a smaller number of originated loans.
When comparing states such as California, Florida and Texas, there may be a vast difference of hundreds of thousands of dollars when comparing specific loan types based on their average value at closing. A market with lower average loan values, however, may have higher conversion rates of leads to closed loans. Some markets may be less competitive and thus are easier to pursue.
Mortgage brokers should anchor their client-acquisition and marketing expenses to specific zip codes where the return on investment is the strongest. If you originate fix-and-flip loans, for example, Attom Data Solutions publishes two quality sources of data in its quarterly home-flipping report that are worth taking a look at.
One of those data sources is a heat map that shows average gross home-flip profits by zip code, while the other shows the number of home flips by zip code. Solving for the remainder of the equation is as simple as interpreting what is already present and implementing it.
The bottom-up approach
Within what is known as a “Marketing + Market Fit” plan, the goal should be to look at every single loan funded from the bottom up, with an ability to define the origin of your marketing investment on that closed loan. This dollar-for-dollar relationship sounds trivial to establish, but quantifying the entire process is incredibly difficult.
Many commercial real estate finance professionals have a low degree of lead-funnel visibility in relation to closed loans. Simply put, this means being able to ingest a lead, understand its true source of origination and then anchor its origin to a closed loan. This mentality is par for the course within the e-commerce world, for example, but it is seemingly nonexistent in the mortgage industry. There are many reasons for this lack of visibility, but there are a few details to look for.
Google Analytics should not be not your lead funnel. Many times, this tool only provides upper-funnel visibility and may track up to lead conversions. It’s good for identifying some optimization opportunities, but it’s rarely set up correctly and is not the right place to focus. If you can track true loan conversions as conversion metrics in Google Analytics, then you’ve got it set up correctly. This means, as the status of a loan switches to “closed,” it triggers a data point that allows you to see where the converted traffic is coming from.
Similarly, AdWords also should not be your conversion funnel. It is a means of turning strangers into leads and prospects. The same goes for Facebook ads, or any other retargeting ad campaigns you are running. They are just the tip of the iceberg.
Search-engine optimization (SEO) and natural searches, which may be more trusted than paid searches, go hand in hand with your advertising expenses. Google’s search console can help you understand where inbound traffic is coming from and the keywords that are driving it. These natural keywords are indicators about where to further invest, especially if they are yielding loan conversions.
The list of upper-funnel focus areas is endless, and it’s easy to get lost in the data. These things are actually deterrents in your customer-acquisition strategy. In many cases, what works up top can have a very limited impact on what happens downstream. Simply put, you should stay away from upper-funnel optimization if it’s not impacting bottom-of-funnel loan conversions. You cannot make educated business decisions on marketing expenses if you don’t understand the origin of closed loans.
Pull the right levers
There are endless marketing gurus who each have a definitive method for being smarter than the next person. Choosing a partner to run your marketing campaigns is difficult, and it’s easy to go astray. What’s a true indicator you are working with an expert? It’s finding someone who can demonstrate sustained growth with the same marketing budget.
How you spend, where you spend and even the time of day in which you spend are valuable insights that influence your customer-acquisition methods. There are endless levers to pull, but if you aren’t pulling them all in the right direction, you’ll never truly yield optimal or expected results. Every interruption in a potential client’s day should offer value, and this speaks to the education opportunity at hand for borrowers.
To this end, you should fully understand lead-abandonment and recovery opportunities. You may be starting great conversations or getting website traffic, but if potential customers are leaving without converting to a lead, you need to objectively understand the reasons why. This is a good opportunity to leverage your retargeting efforts to the places your customers spend their time. For borrowers, that is searching for commercial properties or housing inventories.
Audience modeling, or building larger audiences from smaller segments, should focus on conversions and value-added interruptions, not clicks. The concept of geofencing — engaging your audience within specific locations — is a way to leverage data or high-performing ad campaigns and scale them for growth. An example that works within the “Marketing + Market Fit” mentality is to avoid statewide ads in Nebraska and geofence in Lincoln, Nebraska, because it had 24 fix-and-flips in second-quarter 2018.
Note the days of the week or the times of day when loan inquiries are occurring, a process known as timeboxing. Align your ad spending with your business’ peak-performance times. If marketing efforts are generating qualified leads from 6 a.m. to 6 p.m. on weekdays but your data shows Saturday and Sunday as “off days,” for example, spend only on days where your marketing performs.
Narrow your focus
Calculate your ratio of leads versus closed loans and scale your marketing efforts by refining them based on the aforementioned levers, not by scaling your budget. As you close in on what’s working, you can then scale your budget for the right volume. Throwing money at a problem early on isn’t the solution.
The data generally speaks for itself. If you earn $3,500 per loan after expenses, for example, and you’re spending $10,000 a month on ads that generated 295 leads and five closed loans, it becomes easier to scale a cash flow-positive marketing effort, provided you have granularity in lead-to-closed-loan data.
Draw a tight boundary around your initial expenses — such as the regions, dates and times you focus on — learn from them, and make forward-thinking decisions. The mortgage brokers in each market who breed lasting and healthy competition will survive because they truly understand the inner workings of that market at a granular level.
You and your marketing team can stop doing some things today, such as chasing small victories in lieu of first addressing the most difficult issues. Stop investing in your “brand,” which is conflated with your logo and other “in market” collateral. A brand is your gut instinct about a product or service. Invest in borrower trust and education, not your visible identity and how it’s perceived. Simplify everything. If you can’t measure it, you probably don’t need it.
Marketing task list
It’s strange to say, but very few people in the commercial mortgage brokerage industry do marketing using these “Marketing + Market Fit” steps. And few companies have hired internal or external staff to correctly address core marketing functions.
If you choose to hire a marketing manager, their typical task list might look something like this: Optimize the company’s pay-per-click campaigns, drive more website traffic, improve SEO rankings, make the company blog more effective, find sales staff more and better-qualified leads, increase conversion rates, and increase the number of e-mail subscribers opting in. Many marketing professionals abandoned this mentality years ago. Data science and calculated decisionmaking is the future.
Mortgage brokers within the private-lending sphere often fail at creating this degree of marketing visibility. The great news is, if you can do it, you’ll have a serious competitive advantage. Given that you have products designed to fit your market, improving your “Marketing + Market Fit” approach should result in a higher return on investment while reducing customer-acquisition costs. You’ll then have a conduit for distributing value-added interruptions across your potential client base and for starting meaningful conversations with borrowers and lenders.
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In conclusion, marketing efforts have a direct correlation with loan values, lead volumes and conversion rates. It’s a seemingly undervalued or misunderstood aspect of the commercial mortgage industry, and the tech industry may not yet have a grasp on the quantitative side of this business.
The inability to objectively identify borrowers and true sources of revenue within specific markets is costing many lenders and brokers. There is a data-backed argument that investing in customer-acquisition efforts with objectivity and specificity drastically impacts your company’s bottom line.