Creating ‘Mortgage Customers for life’ — Using the ‘Hook Framework’
So here we have John Doe, who has taken a housing loan from us. We have on boarded and are servicing his loan for the last 8 years. Unfortunately John had an immediate financial need. His son needs to start college, he doesn’t have a college fund and instead of coming to us, he found another lender to meet his immediate need.
It is an all too familiar story. Most customers eventually leave. Like John.
By now we are all familiar with the average customer life cycle. It goes through the 5 phases — Awareness, Acquisition, Engagement, Activation, Retention. And the last part retention is one of the more challenging ones.
The mortgage industry is no different. The mortgage industry is getting more competitive and the cost of originating a new loan has been continuously increasing. It has risen from about $5000 in 2012 to about $8000 now (Mortgage Bankers Association)
It is therefore imperative that Mortgage providers retain their existing customers and turn them into customers for life. The opportunity to refinancing existing customers and cross selling other products would be too good to pass.
But is there a way we can retain customers for life? Or better still can we sell them more of our products throughout the life-cycle? I am going to look at this problem by using the ‘Hook Framework’.
We can create customers of life only if we engaged with the customers often, understood their pain and proactively offered solutions. Having a mortgage professional engage with customers and ask their issues regularly is a costly affair. But with the advent of Digital platforms we can engage with our users regularly.
Let us say we on-boarded John into our Mobile/Web-Platforms. How could we have engaged with him more meaningfully?
Enter the Hook Framework
Here is where the ‘Hook Framework by Nir Eyal could help us give a structure to our thoughts. I would highly recommend going through this article for an in depth discussion on the ‘Hook Framework’ please refer: Link
Using the ‘Hook Framework’ we can create ‘Habit’ for our customers. So much so that they habitually come to us whenever there is a financial need or pain.
In short the Hook Framework can be explained by the below diagram.
Let us look at each of these steps for our use case and hopefully you should be able to figure out the usefulness of the ‘Hook Framework’.
Trigger: Triggers can be ‘Internal’ or ‘External’. The need to pay my monthly mortgage payment for example is an internal trigger. And a notification from the ‘app’ towards that reminding the user is the ‘External’ trigger. The reward being timely mortgage payment, debt reduction, improved credit score. The investment being the act of installing the app.
But making a mortgage payment, tracking loan progress, booking an appointment with a loan officer etc are stated needs of the user. These are common features that almost every mortgage provider has addressed. How we stand out of the crowd would be determined by how well we identify and address the ‘Unstated needs’ of the user.
Unstated needs are those that the user does not explicitly state or sometimes even know. This provides us a challenge and also an incredible opportunity.
But to identify these unstated needs, we need ‘Investment’ from the customer in the form of data which can be financial, behavioral or emotional.
Once we understand the customers better, we can provide more meaningful triggers that would lead them to act on them. When this act is beneficial to them they get the reward — which can be financial (better rates, more money, increased savings) or emotional (meeting a financial need on time).
Creating such joys from ‘Unstated needs’ is what is truly going to delight the customer and get him ‘Hooked’ to us for life.
Applying the framework — Example
Google Photos employs this well. Most android users have Google photos in our phones. We also have another Gallery to view photos in our phone. I use Google Photos to back up my existing photos in the cloud to free up space. There isn’t much of ‘Internal Triggers’ for me to check Google Photos often.
Unless, Google prompted me to engage often I might lose interest, uninstall or even look for alternatives.
To overcome this, what Google did is learned from the photos I have uploaded and tried to create external triggers. For example, it collated all the pics of my daughter over an year and sent a notification ‘They Grow up fast’. I clicked the notification to find a beautifully auto created video. Now, I am more engaged. I am willing to invest additional time, photos with Google Photos. Checking Google photos for these clever experience now becomes kind of a — once a month habit.
With this insight let us quickly see if we can come up with a valid hypothesis for broad feature sets by applying the above model. Let us go back to ‘John’.
John has stayed with us for a fairly long time. Around 8 years. In these 8 years, John is not the same customer we initially interacted with when on-boarding him. He has had 3 more kids. He has recently had to take additional loans for his medical expenses. His debt to income ratio has increased. His eldest kid is planning to start college. He doesn’t have a college fund for his kid yet.
So when his need for additional money came about, there was no way we could have known about it until he reached out to us stating his need. If we are lucky we would have been the first lender he approached. But given the competition, catching them early in the discovery cycle is difficult but it is one of the keys to engagement and retention.
There is no way we can know more about the customer unless he had invested in us with that data. If we had engaged with John in these 8 years, we could have learnt about him and there was a chance we could have anticipated this need.
The key to engagement are the ‘External Triggers’. How often can we prod the customer into using our app/website. External triggers help build habit. To see a good example of how external triggers are used by ‘Google Pay’ refer this article of mine: Link
I cannot emphasis enough other tools like persona based user research, empathy mapping, customer journey mapping etc for building an effective product. But those are too broad a topic for this article. For the purpose of this article, let us assume they are all done. With those insights we need to identify and build external triggers through out the customer journey.
Some of the ways to engage through ‘External Triggers’ would be — providing contextual financial advice. A couple of quick examples:
- If I have a new kid, how wonderful it would be if the app pushed out a notification that enabled the me to discover the benefits of opening the college fund, estimate the impact on my finances due to this new addition to my family. The more the customer engages with us the more we become the first stop for the customer for any financial need.
- If there was debt consolidation opportunity proactively presenting the user with the option.
- If we know the customer has never done a renovation and is interested can we notify the user of ideas/tips/financials.
The Challenge
But to create those useful external triggers we need to continuously learn about the customer. The customer who joined us today would be very different 5 years from now. And a Mortgage relationship has a long lifespan. And each customer is different.
The Answer
And this is where I believe we can apply the framework to good effect.
Investment: How can we make him invest in us, his life events, needs throughout the life cycle. (So we need features around these) It could be through an educational section where we can learn his current interests based on recent search behavior or Rewarding customers for sharing data voluntarily is another way. Reward could be emotional (Gamification) or material (Points/Discounts), need (Financial Educational).
Triggers: With the data how can we come up with contextual ‘External triggers’. Example: Given he had invested the data that he had 4 kids and we know his eldest kids age and If we knew he did not have any college fund from the financial data he had shared with us earlier — can we let him know our debt consolidation options early or additional loan options. All this even before he started looking for options? (So we need functionality around predictive analytics, pattern recognition)
Action: Once triggered we need an easy way to act — making our refinancing option/ speaking to loan officer easy. (This hopefully we already have, given this is a stated need)
Reward: What are the ways in which we can reward the customer for performing the action. Rewards can be in terms of time saved, financial, emotional etc. What are the ways in which we can make these rewards obvious to the customer?
In conclusion here is what I think are the keys to creating customers for life.
- Engage meaningfully with customers often through the life cycle. And use digital platforms for engagement. Use data for timely and meaningful engagement. Refer point 4
- Identify stated needs → Identify ‘Internal’ triggers. Create relevant ‘External triggers’
- Build ways in which customers can act on the triggers to meet the needs.
- Get the customers to invest in us — data, feedback. Reward customers for engaging with us and sharing data.
- Use data to identify ‘Unstated needs’. Perform steps 2 and 3.
By identifying and enabling action on triggers early we would be engage with the customers often in their need based journey. And would certainly pave the way for creating customers for life.
