What Your Cost Per Acquisition Could Be

Researching the topic of lead generation and acquisition costs in the mortgage business is a fascinating experience. It was sort of like attending my first thoroughbred horse racing event years ago.

  • Lots of options to consider
  • No lack of stats, data, and history
  • Everyone around me sharing their tips, tricks, and hacks

The Outcome? Long on stuff. Short on anything resembling success. Fortunately, I went to the racetrack knowing exactly how much I was willing to lose, and rather expecting to do just that. So, my cost was a known variable from the start.

Definition: Cost Per Acquisition (CPA) is the total cost of sales and marketing efforts incurred when acquiring customers. Your CPA is calculated by adding up all such expenditures and diving by the number of new clients in the same time period. For example, is you spent $100,000 in 2019 and added 95 clients, your CPA was $1,053.

In the mortgage industry, the CPAs are a bit more complicated than a horse race, encompassing a few key variables – how and where you source your leads, and how effective you manage them. It can be a very slippery slope. If you are not aggressive enough you may miss out on countless opportunities, pushing borrowers to your competitor doorstep. However, if you blow too much of your budget here, it can put you in financial dire straights without a robust pipeline to pin your hopes on.

Many executives within financial services regard their CPA metric as one of the most critical, repeatedly cited in researching this piece, from start-up to long time players in the space.

It all begins with the myriad of ways you obtain your leads, with costs ranging from bargain-basement prices to… ‘Uhm, I was just asking about per-lead pricing, not investing in the platform!’ We are firm believers in that you generally always get what you pay for, though always a strict eye on the checkbook.

But regardless of where you are sourcing from, CPAs are very heavily influenced by how efficient and effective you manage each contact in your database. Working hard is great, but working smart is greatest. With a Borrower Intelligence platform, you can just ‘set it and forget it.’ Literally, establish some key business rules and trigger items to launch when a desired consumer scenario plays out – alerting your loan officers into immediate action. By leveraging Big Data and Machine Learning technology, you are striking while the iron it red hot based upon consumer behavior or eligibility toll-gates just passed.

How does this impact your CPA? You change the focus away from administration duties of your contact database, redirecting time, and effort on data sources that monitor behavior. You will spot changing consumer scenarios that tell you they are either actively looking for a loan or just became eligible, or both. When you then present your contacts with timely needs-based offers, your closing success goes up at a lower cost of acquisition.

CPA Trends in Mortgage

While we found no definitive benchmarks on acquisition costs across the mortgage industry, we did see a few references to a CPA of $1,500 for a retail banking customer. Interestingly, big bank CPAs are reportedly much higher than start-ups. Big banks have a lot of clients but poor consumer insights. This is due to a lack of valid data primarily caused by business unit silos, aching technology, and other competing priorities. Whereby start-ups can tend to have a remarkably low CPA by comparison. Either way, data, and tech today make lower CPA costs a reality for all.

If you’re looking for ways to reduce the cost of doing deals, then take a look at Sales Boomerang, where clients see a CPA of $241 – $622.

Let’s face it. We now live in a world of content marketing, and everyone feels like they have to be a publisher to attract users and keep them sticky with their brand. The collateral damage here is that consumers (and all of us) get bombarded with an unmanageable amount of daily emails and social media posts. There is way too much noise to sift through, so far too often the good gets thrown out with the bad. Herein lies the beauty of a Borrower Intelligence platform:

  • Segment and manage your database contacts based upon their behavior and specific actions that are predictive indicators of needs
  • Receive alerts on this borrower intel so that you may present specific offers
  • Be at the right place, at the right time with the right messages
  • Just-in-time touchpoint methodology can increase engagement levels with your contacts, alleviating dormant and unengaged contacts usually blocked by CRMs

In summary, if you are going to pay for leads, why not do everything possible to manage them intelligently as consumers are, whether they know it or not, sending signals to the marketplace they have needs you can satisfy? Better yet, buy leads with such intel. Wouldn’t you be more committed to diligent follow-up with pre-selected opportunities, rather than the generic email campaigns that go out to all prospects? Maybe we should consider calling it a ‘Lender Intelligence’ platform!?!?!

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