Use e-Commerce Intelligence to Improve Online Lending Profitability
At TurnKey Lender we’re always looking for ways to apply outside intelligence to online lending. This week we focus on CRO (conversion rate optimization). It’s considered the holy grail of e-commerce marketing because it’s one of the fastest, most cost-efficient ways to increase profitability with minimal incremental marketing expense. In our digital age, it’s important for lenders to keep pace with online retailers. They have established a standard for digital UX (user experience) that our borrowers have come to expect, regardless of the type of business interaction they’re trying to complete.
CRO has been shown to deliver substantial rewards to online lenders. In a case study presented by The Financial Brand one bank improved their application conversion rate by 39% (from 36% to 50%) within five weeks after implementing an optimization program. And they increased their loan volume by 52% (from $1.74 million to $2.65 million). Think of the additional interest income your operation would earn with this kind of application conversion.
They say Cart Abandon, We say Application Abandon
e-Commerce marketers use cart abandon to trigger a strategic series of automated messages when a prospect puts a product in their cart, but then closes out their session without completing the transaction. The same principles apply to an online loan application. According to industry experts, the typical lending operation loses one-third of their prospects after they start to fill out the application form. A lender could substantially improve portfolio profitability by recovering just a percentage of these abandoned applications.
Start by Tracking Application Abandons
The first step in the CRO process is to measure your current performance in order to establish benchmarks and set realistic goals. The KPIs for desktop and mobile will likely be different for the same product and the same offer. About one-third of banks don’t measure abandon/completion rate at all. And banks that track these rates often give credit to the wrong origination source. They under-report on their digital channels and over-report on branch channels. This happens when the branch gets full credit for a completed application when their contribution was copying the ID and signature card. Lenders can minimize this type of manpower inefficiency and improper tracking by leveraging a cutting edge, fully managed LaaS platform.
Proper reporting can also have a positive impact on acquisition marketing. When you track the completion rate back to the original source of the application, you can use the data to fine-tune your targeting approach and maximize your marketing budget.
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Apply CRO Techniques
Start with the levers where you’ll see the biggest impact. Conduct a price elasticity test to optimize the offer, and then promote your most productive rate. This type of change will move the needle farther and faster than tweaking copy or playing with colors.
Reduce friction in the user path by providing your prospect with one-click access to an application form with minimal data fields that’s already pre-populated. It’s easy to see the consumer appeal compared to the typical online application where it takes 3-5 clicks to get to a form with an overwhelming number of blank fields. It’s critical to provide the prospect with a save option. This function allows them to start the application on one computer, and then complete it from another computer or mobile device.
There’s a marketing rule-of-thumb that says it can take anywhere from 8-13 customer touches to complete an online transaction. That’s why it’s important to nurture a relationship with your prospect over time to maximize conversion. Consider sending applicants to a landing page where you capture their email address before they start their application. Develop a communications strategy for these searchers and shoppers that will drive them closer to completion with each contact. Use an automated email marketing system to maximize efficiency as you stay in touch. Test a variety of funnel messages. You may need to try 10 variations to identify the conversion unicorn that resonates best with your prospect. Be sure to increase the number of customer touches with re-marketing ads that reinforce the brand benefits, and link back to their loan application.
Implement e-commerce cart abandon techniques when your prospect doesn’t complete the submission process. Use a pop-up to remind them to save their work, and let them know they can complete the application anytime, anywhere. Send a series of emails to move them towards application submission. The communications messages should offer helpful advice, offer a live conversation to answer any questions, offer a special promotion for a limited time, or create urgency with an expiration date.
Conclusion
Top performing e-commerce websites use CRO to generate twice the number of sales compared to an average e-commerce website. So it’s no surprise to see an online lender improve their application completion rate by 39%, and increase their loan volume by 52%, within 5 weeks after implementing a comprehensive CRO program. If conversion rate optimization isn’t on your radar for 2018, then it’s time to take a look at this highly effective and cost-efficient approach to improve your portfolio profitability.