Conversion Ratios Part 2

Contrarian Example
In the CPFL analysis in one of my previous post I shared a business case that demonstrated the leverage of conversion ratios. Conversion ratios do indeed provide the greatest amount of leverage for your ROI. In the example that I shared how a mere 1% increase in conversion ratios would have netted my client a 245% increase in their ROI. But I also want to share a contrarian example of why conversion ratios can’t be your sole focus either.

This is a real example. It did take place back in the height of the refi boom and it also deals with the home equity product, so numbers in this example are not indicative of what is typical in the more popular refinance product, but it is a compelling story nonetheless.

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Conversion Ratios Part 1

We have arrived at Part 4 now, and hopefully this has proven to be helpful to some of you. If you haven’t noticed, one of the key things that I am trying to accomplish is shatter the myth that costs equal ROI. Costs are a component of ROI but if that is all you are tracking then your efforts are extremely short-sighted. My focus for this piece will be the coveted conversion ratio, the second component of my three key pieces to ROI: Costs, Conversion Ratios and Income.

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I have already gotten quite a few inquiries about the spreadsheets that I mentioned in my most recent post. I thought that because of this, I would follow up with some screen shots using the business case I described in the post. After all, the picture is worth a 1000 words.

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Cost Per Funded Loan

We are now on part 3 of my conversation about evaluating ROI. I have introduced what I feel are the key components and subcomponents of ROI (see below).

1. Costs

1. 1. Cost per Lead

1. 1. Cost per funded loan (CPFL)

2. Conversion Ratios

3. Income

Firstly we discussed Costs, specifically the Cost per lead. This post will be about the Cost per Funded Loan (CPFL).

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It’s definitely that time of year again. The NFL is drawing close to an end and my baseball stats sheets and forecasters are arriving in the mail–that’s right Fantasy Baseball is in the air!

This time of year gets me all excited about stats and predicative indicators. So, this weeks best practices post and whitepaper is in tribute to Michael Lewis’ ode to Fantasy Baseball–”Moneyball.” I am about to show you what ROI, %contact, %app, AttAR, AttCR, and many more quintessential key metrics and indicators can do to optimize your loan production. Read the full story

Are you feeling the market constricting around your neck? Is it harder and harder to find borrowers you can actually help? Have you shaken down every real estate agent in the tri-county area and found their pockets empty too?

Welcome to the crowd, but don’t panic.

The first step is to admit you have a problem. Stop saying, “I get all my business from referrals” and believing it. Take control of your success. Build a marketing plan to get fresh referrals, Internet referrals, and create a business that is bigger than you!

That’s right we are building a bigger vision here.

STOP! Before you run out and slap down a couple grand on a random lead provider, a recipe for 0% conversion and some pissed off loan officers or worse owner/manager, get a plan.

Here is the 10 step plan I used back in my lead buying days.

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There are many mysteries in life for which we may never really see an answer. What came first, the chicken or the egg? Is their life on other planets or solar systems? Why is Dr. Phil even on TV? I won’t claim to know the answers but one pervasive mystery that eludes most people in this industry is the concept of “Return On Investment,” or ROI.

What I actually find more often is that companies think that they know their ROI, but actually aren’t looking at the whole picture. I do feel like I have the answer to this and will be writing a three part series on the three key components to ROI. I won’t tell you how to measure it, I’ll let the great lead management programs on the market provide that solution for you. But I will demonstrate the importance of looking at all three components and some of the pitfalls incurred if you don’t look at the whole picture.

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Over the weekend it was announced that Matt Coffin former LowerMyBills founder and President, and David Dowhan former VP of Marketing for Adveractive have joined the eBureau team.

Matt Coffin who has been an active member in the investing arena backing the likes of search engine Mahalo, document  sharing platform DocStock, and now joining the board of directors at eBureau. This is from the Adotas article:

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From time to time I spend the evening playing with Google Trends and Microsoft’s AdLabs. There are a few keywords that I always check in Google Trends. The first is Mortgage Leads and the second is Mortgage Refinance.

Here is what I found: According to Google Trends there is a decrease in searches for mortgage leads. Not really all that surprising, I guess. Especially with so many brokers and LO’s shifting out of the mortgage industry.

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The first annual leads2007 un-conference has come to an end and the overwhelming response was that it was a great success.

I want to briefly recap day 2’s discussions for those of you who could not attend.

The first session was moderated by Noel Collins and discussed the lead buying process. Here are few points and key topics that were discussed.
How many leads should you purchase to determine the failure or success of a lead provider? Many people agreed that 50-100 leads over a one month period seemed to be ample time to gather enough data to judge a lead provider. Many added that it depends on the number of LO’s with the company, but all added that a 30-60 time frame is needed to gather the correct data to analyze and base judgement.
Are affiliates bad? The consensus was that yes they could be bad and typically are if they are mismanaged. Providers must be active and hands on with their affiliates to have success and minimize fraud and the overselling of leads.
What are the key questions that a buyer should ask all potential lead-gen companies? Does the company or their affiliates participate in coregistration? What methods do they use to generate their leads? Ask for references. Especially ones from company that similar in size to you. Is the Lead Provider licensed in the states that you are buying in?
The session evolved into talks about the formation of a third party organization that would evaluate and vet lead providers in the space. Basically giving lead providers stamps of approvals.

The big take away from this session was the discussion about the need for a third party organization that could facilitate the grading of lead sellers and buyers as well. Yes, lead buyers too. A number of the providers expressed the need for the vetting of lead buyers so that they too can make optimal decisions when building their client base. They would like to have an open source to file complaints about lead buyers that do not pay their bills. At first glance I was concerned that this would encourage or foster a “you complain about me I am going to complain about mentality”, but maybe this is a good thing. I think  it is only fair that the lead sellers have a place to judge or complain about dishonest buyers just like many of the buyers want a place to judge or complain about the sellers.

It has been really great to see many of the top tier sellers and buyers agreeing on such standards and initiatives. I really feel the desire to clean up the industry and rebuild its reputation from all the parties involved.

Day 2, Session 2

The topic of this discussion was titled the “Interaction between Publisher, Advertiser and the Consumer.

The general discussion revolved around ideas for improving the customers experience.
A few of the questions that were asked included:
Is the level of questioning sufficient?
Would the increase of more specific questions really improve the customers experience?
What is the optimal number of times a lead should be sold?
Should all companies be required to show which companies the lead has been matched with?

From there the discussion broke out into new opportunities to improve the customers experience. The idea of flipping the scenario was discussed heavily. For example: Based on the consumer profile banks would compete for the consumers interest. Once a bank was chosen by the consumer, based on product offerings or rates only then would the contact data be given to the bank/s. The idea of giving the consumer more control over the process was a hot topic.

Out of that discussion came the questions does the lead generation game or processes need to change to really make a difference in the consumers overall experience?

Really great discussion took place during this session again and the future of lead-gen space will surely be effected one way or another by what was discussed here.

Day 2, session 3

Thinking About a Telemarketing Front end.

Another great session that reviewed the positives of implementing a telemarketing front end to your sales process. The room discussed and reviewed the pitfalls and challenges that may arise when implementing this strategy.

Day 2, Session 4

Briefly discussed the ability to capitalize on web 2.0 marketing and lead generation techniques. Blogs, social networks, notification networks (Twitter) were all discussed during this session. The room also discussed the different experiences people had with these types of platforms and services and how they can beneficial and cost effective.

Please look forward to Leads2007 podcast which should be available in the next few days.

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Leads2007 is currently under way! Discussions between lead sellers and buyers are plentiful and meaningful. Being that this is the first conference or “unconference” of its kind No one knew what to expect. We all only hoped that there would be something to take back to our own businesses and capitalize on and from the first day alone, this has far exceeded any expectation. Those of you who were on the fence and chose to stay home are unfortunately missing out on an industry and business changing event. I do, however want to recap today’s events and discussions for you.

The first discussion involved improving the consumer experience. Bill Rice spurred discussion by first presenting a large yellow square sheet of paper with a black dot in the middle and asked the audience to tell him what they saw. The exercise encourage the people to be more observant to the whole, complete process and not just the obvious. So many times lead buyers/brokers and lead-gen companies tend to focus strictly on what directly influences profits and do not review the complete picture. Have we been throwing the consumer experience to the way side and strictly focusing on what will make us a dollar today rather than executing practices that will not only generate a sale today but also tomorrow. I think we all have to admit that we all fall victim to this on one level or another. Currently there are buyers that will distribute a single lead to multiple LO’s within an organization in hopes have increasing the odds of a conversion. On the same token there are a number of lead sellers that are strictly focused on generating the highest volume of leads and sacrifice the consumers overall experience for an extra lead sale.

Discussions included standardizing the lead-gen process, matching the consumers with the appropriate buyers and at the same time informing the consumer who to expect phone calls from, a standardize lead grading scale based on analytics and feedback and lastly, lead providers gather consumer feedback regarding their experience. Proper loan officer training was also a popular discussion.

An interesting statistic from Forrester research, via Colleen of LowLender, stated that 70% of the people that went online did not intend to complete the process online. This bring up a number of questions and concerns as well and I would love to here your thoughts on the statistic.

The second session included discussions which detailed what technology’s currently in the market place help improve processes?

Loan Management Software was the voted the most influential. Unfortunately, many LMS users are not effectively using the software or know how to implement the software properly into the business. This was expressed by a number of different lead-gen companies. The crowd voiced a small wish list that would help improve many of the current LMS solutions in the marketplace. This included a wider array of analytical reports and closed looped sales reports from lead to funded. A few of the lead-gen companies requested standardized reports.

The 3rd session discussed different approaches to maximize relationships.

This included ideas about placing more ownership on the LO’s by mandating that they pay a portion of the lead cost or even rent seats within the sales organization. Most were agreed that this was a difficult model to incorporate and expressed that this may do more harm then good. Discussions included email marketing, remarketing, the request for referrals and customer service follow up teams.

Session 4 asked the question “does technology increase conversions?”

This included talks about automated pricing engines and the appropriate ways to implement the tool. The question was also asked, “are we simply implementing technology for our own ease or is it actually to improve the overall customer experience?”

A huge discussion broke off from this topic which include the industry wide standardization of date returns and feedback delivery from each of the LMS’s to each of the Lead-gen companies. Every one was in agreement that this could benefit all parties involved and many lead-gen companies pledged their allegiance to the idea. The question still remains who will actually follow through with the coordination of the integration.

Lastly, session 4 discussed the different points of views with the lead ecosystem and brought forth the need to be aware of the different views. It was interesting to see the polar opposite views of the lead-gen companies and the lead buyers. Each demanded the other party need to improve and in my opinion both are correct. The session encouraged partnerships between the two groups rather than working against each other.

Over all the first day was excellent and informative and I look forward to tomorrow.

We will be posting podcast of a the session recaps tomorrow so look out for those. I am exhausted from today and am about ready to fall over so please pardon any grammatical errors in the post. I think by now many of you have excepted the fact that I am a horrible writer anyway so you probably have not noticed any difference anyway.

It’s official, the Morinsight Forum is live today.

I am really excited to bring this new feature to you today. My hope is that it will be a place of open discussions about lead providers, lead management, Internet marketing, real estate and much more, without all the spam.

There are currently a number of mortgage and real estate forums on the Internet, but the problem with many of them is that they are not monitored for spam comments. My opinion is that the creditabilty of the forum is lost when the spam comments enter. So for this forum to be useful each registration will be reviewed and all comments on the forum will be monitored for spam. When signing up for the blog please use your company email address and also list your company website.

I encourage everyone to register. I think it will be beneficial to all.

 Register Now.