Thursday, April 5, 2007

Old Lessons For The New Economy



The new economy has revealed the potential for explosive growth in acquiring and processing online mortgage loans. Unfortunately many lenders have tried the new economy way to "buy" market share and ended up with an expensive learning experience.

There are many lessons from the "real world" that can be applied to the Internet, here are a few to keep in mind.

The Two Evils Of Business

Those who own a mortgage company can fully comprehended the two major evils of the real business world (labor intensive and capital intensive). They undoubtedly have been sucked into that whirling, endless, cyclic vat of meetings, layoffs, expansion, stock options, shareholders, employee relations, vendor outages, leases, politics, capital calls, legal documents, sour deals et al and probably do not like it... at all. "If only labor and capital expenses could be controlled, it would be a perfect world," they say.

The Net To The Rescue

Then they probably noticed this 'net' thing and noticed the potential to possibly reduce the 'employee aspect' (labor) and related needs for physical support items (capital) such as buildings and computers, but weren't sure exactly how to achieve this reduction.

"Labor Intensive" Savings

Then they have decided to actually build their own web site as they could clearly comprehend some of the "labor intensive" advantages of having a site: the reduction of sales forces as the traffic is inbound from people who actually want loans.

Where's The "Capital Intensive" Savings?

Once these mortgage companies decide to actually build a web site (and determining that they don't want it constructed with a wild array of tacky images) they discover that an online loan presence is more expensive to create than other types of web sites. A mortgage web site requires mortgage calculators, secure servers, frequent rate updates, etc. Thousands of dollars later, they finally have a web site.

Where's The Traffic?

Many loan companies (after their web site has been working for six months) find that simply 'being on the Net' doesn't insure business and they say, "We are player in our industry/region, we spent $10,000-$100,000 on our site and we don't get nearly the business we had planned on, in fact we don't get much at all." Many online mortgage companies began to advertise heavily in an attempt to find new customers. Shortly thereafter, fears of creating a new 'capital intensive' expense occur as a new economy marketing plan is discussed and formulated.

Top Line -- Bottom Line

In the old economy, there was more of a balance between expense control and revenue generation. In the new economy, start-up Internet mortgage companies, in an effort to demonstrate immediate viability to investors or shareholders, focused on the top line - sales. Advertising was heavy and incentive laden, with some companies even offering one free month of mortgage payments.

Flat Line

While sales are the bloodline for any organization, failure to control expenses, and the bottom line hemorrhaging blood faster than it comes in, results in losses. The end result… many online only mortgage companies went out of business using the new economy way of marketing.

Here are a few old economy lessons to help you with your existing web site.

Eliminate Minimal Revenue Creation Events

Banner ads continue to achieve lower and lower click-through rates, resulting in higher customer acquisition costs. Search engines continue to be the most cost effective lead generation alternative for most online loan companies.

Lead, Communicate, Take Action, Commit, Understand

We find the most successful loan web sites are those where the CEO or owner is web savvy. They 'get' the net, they understand the net and they use it as a tool. If you want your web site to become successful, take the time to become Internet proficient yourself: there are no short cuts here.

Don't Pollute

Stick to your expertise and focus on what you offer - loans. In the old economy you did one thing, and did it well. In the new economy many companies try and squeeze every penny from a web site by linking to non-related sites. Do not have links to Amazon.com, your web designer's home page, Microsoft or other links that in effect divert your customers' attention away from your site, and towards something else. That $20 Amazon affiliate commission check you receive is just not worth it to lose a $2,000 commission from a loan customer.

If You Must Make Mistakes, Then Learn

If your site is not working, then fix it. If you have traffic and you are not receive applications for loans, then something is wrong with your site, not with your visitors. Perform a review on your site appearance, the written content and the rates. As usually the problem for poor sales is one (or more) of these three items.

Feed On Feedback

Read the emails from your customers. Are they complaining about how hard it is to find information, that you require too much information on your forms or that your rates are just too high? Are you even getting email?

Talk To Your Customers Like, Umm, Customers.

The Net tends be more depersonalized than the real world. Many of our clients have us perform competitive intelligence on other sites. We are constantly amazed at how insensitive, uncaring, inept, non-question answering and incomplete the email responses are to our inquiries.

Don't use heavy corporate dictate type emails. Emails are a one-to-one experience, and while you should be professional, also be friendly, and, umm, a bit more human in your responses. If you provide old economy service to your new economy customers, they will be more likely to use your service.

New Rules + Old Ways = Cash

You will probably never totally control your labor and capital evils, but by using the new economy Internet and applying 'old economy' controls and customer service you can create a handsome offspring…profits.

For online mortgage leads please visit our mortgage leads page.

Originally published June 2001


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