Banking on Digital Growth
Banking on Digital Growth

Episode · 7 months ago

141) #ClarityCalls: Why Cost of Acquisition Per Loan Is the Most Critical Metric

ABOUT THIS EPISODE

How does your financial brand measure cost per acquisition?

If it isn’t per funded loan…

Well, it’s not telling you what you need to know.

In this Clarity Calls episode, I discuss why with Carlo Cardilli, CEO at Alpharank, an organization helping financial brands remove the unnecessary friction driving their would-be customers away.

We cover:

- Why measuring per funded loan is the only true way to gain insights into your marketing costs

- The easily-avoidable friction driving customers away from financial brands

- Why compliance isn’t an excuse for poor customer experience

You can find this interview and many more by subscribing to Banking on Digital Growth on Apple Podcasts, on Spotify, or here.

Listening on a desktop & can’t see the links? Just search for Banking on Digital Growth in your favorite podcast player.

Carlo asked do financial brands measure the cost of acquisition per account or per loan funded, that cost of acquisition per click. That cost of acquisition per started or completed app. But cost of acquisition per funded loan. This is a fantastic question Carlo and one that I look forward to talking through together with you on today's episode of Banking on Digital growth. You're listening to banking on digital growth. With James Robert lay a podcast that empowers financial brand marketing, sales and leadership teams to maximize their digital growth potential by generating 10 times more loans and deposits. Today's episode is part of the clarity calls series where James Robert sits down for a conversation with someone in the digital growth community to provide clarity into the biggest digital marketing sales and leadership questions others have. If you'd like to join James robert for a future conversation, text your question right now, 283254957 and 92. And remember the only bad question is the question that goes unasked. Let's get into today's clarity calls, conversation greetings and hello, I am James robert. Ley and welcome to the 141st episode of the banking on digital growth podcast. Today's episode is part of the clarity call series and I'm excited to welcome Carlo Card ily to the show. Carlo is the Ceo of alpha rank on a mission to help banking credit and executives make decisions with confidence on products, marketing and growth. Welcome to the show Carlo. It is so good to have you on today man. I'm thrilled to be here. Thanks for having me before we get into your question and it's a really good one. I always want to start off on a positive note, what are you excited about right now personally, professionally? It is always your pick professionally. You know these banks and creating as we work with have pretty much an open...

...field. They, there's so much demand for their products alone, demand is exploding. So this is a time to really crank up the numbers. It really is. And that brings us to your question right here, which was in your frame this here. Do financial brands measure the cost of acquisition, per account or per loan funded And, and I want to provide some clarity because it really doubled down on this. You even said not measuring acquisition on a per click basis, not measuring acquisition on an application completed or started, but measuring acquisition on a funded account funded loan basis. And I greatly appreciate both the question and the additional clarity perspective because we're not seeing that's the case on our side and we'll get into that here in a moment. But I want, I'm curious why ask this question. It's an important one. Let's get into the why of your question for for some perspective, Why is this important to ask? Well, first of all, uh, it is the day true metric by which you want to measure growth at a financial institution. Absolutely. So if we think about how does the financial institution work, they take in deposits, they lend out these deposits on a longer duration they earn a difference in interest, which is net income. And but that is driven by the volume of loans that you're making, You're not making any loans, you're not earning any income and you're not making any money, you're not returning value to the shareholders. If you're a bank, you're not returning values the members if you're crediting. So uh those balances are the driver of the business. So, exactly. I mean, this is like bottom line all the way down. It is essentially kind of a do or die. And I think digitally that's where there's maybe some false confidence that comes into play because at this point our...

...focus is really around the qualitative side. I know the work that you're doing is on the quantitative side. So we're working with real human beings, guiding them through secret shopping studies. Um Let's say we take them from an ad or an email or a google search to the website specific product and following them through the process and really asking, how does it feel? What works? Well, where does it hurt? What could be even better? But then you're you're taking this even down to a deeper level. And it's not looking at a click on a c to or click on an application, but it really comes down to the funded side funded deposits, funded loans. And And that's where we see a couple of problems. There's number one, like if you're only measuring more of higher up in the funnel. Uh, one of the problems is around no instant approval. We got such an abandonment there because what is it? Less than 50% are actually funding accounts um, instantly. So that's creating friction and that's where things go and die on the vine and the number two, then you know, we got to get the consumer to get money into if it's a deposit account and get money into that account that creates more friction and a possibility to fall off and not fund and same thing we got to get them to use the loan on the flip side. So I want to flip this back over to you because we're seeing some problems here and we've talked with consumers about why there are problems in this through the testing that we're doing and some of the studies. But I want to flip this back over to you. You measure down to a very granular level specific product lines. So what are some of the challenges that you're seeing on your end here when it comes to measuring acquisition funded acquisition cost of acquisition down to the front of the account where some of those challenges there? Well from our perspective, I mean we've built this technology to solve that problem. So with the right feed from the website, from the account opening or loan origination system and the data from the system of record, we can put all together and give the institution, you...

...know, the complete X ray. So hey, you've originated 500 funded loans. Congratulations. Let's say it's vehicle loans. You know, that's maybe out of 800 completed applications and you know, out of all those people that came into the final, so we can put that together. If I were to wave my magic wand, we would have more origination systems that would be open to running a third party essentially tracking system. And there's some, some of them are closed. You could speculate about why they're closed. Maybe maybe don't feel very comfortable about the stability of their technology. Uh, maybe they don't like the fact that there's a third party auditing what's happening inside their system or maybe they have some other strategic reason, but there are a few that are closed. And what I would tell everyone whether it's my family, whether it's, uh, people that work at all frank or clients is, look, the person running the race cannot be the one holding the stopwatch. You need somebody else holding the stopwatch where the stopwatch holders and the measures of record. All right. So I'll take an add on that thought I'm a big believer in transparency, telling the truth because that's one of the three rules that we have when it comes to maximizing digital growth all growth begins by telling the truth about where you've been, where you're at where you can go next, getting the training education to provide a path forward. And then taking time to literally just think think about those, those next steps. And, and I want to dive deeper into some of the challenges that we're seeing around here, particularly when working with financial brands, banks and credit unions. They're doing some of this quantitatively if you will using google analytics in some measure clicks, some measure starts, some measure completed apps. But the gap always comes down to fund it. It comes down to what are we actually getting and what's the cost of acquisition? Not per start or per click completed, but per funded loan. And some are starting...

...to bridge that gap with marketing automation. And they're able to run some regression with that. But even then, 60 to 80% of financial brands don't have marketing automation. There's a, an easier quicker way I would say to do this and I want to come back to this point here with what you're doing it all for rank because you're, you're showing value sometimes 25% growth In 30 days upwards of 31% growth in 90 days growth being fully funded accounts simply by tracking and and measuring what they're already doing. Not adding new complexity, but literally saying, hey, you're doing this right now. Let's not centers parables all things being equal. Let's figure out what's working, Let's do more of that over here and let's stop doing what's not working over here, down to the bottom line. How are you doing this? Well, it's through data. So our mantra internally is we let the data speak. So the first thing we do is like Are there any hand brakes that you have inadvertently left on? So what is your abandonment at every step? And is it within the sort of reasonable benchmarks? So you might have, you know, 45% abandonment at a page where you're asking your prospect to select the product and 45% of batman at that page, I'll tell you right now that is uh two standard deviations away from the, from the, from the media. So you got a problem there and then you can examine the flow of the data and have that tell you exactly why people are giving up. So I'll give you give you a real example. I'll make it, I'll make you very real bank. We're working with, you know, we have this abandonment problem that we've identified on the product page. What is going on. What is actually going on? Is they have three checkboxes for disclosures. So you have to accept the privacy policies there, uh general statement on terms and conditions and then the specific disclosures around the product that you're about to get. So three...

...checkboxes seems very innocuous. Right? You know what's happened? Three checkboxes possibly go wrong jake. All right. Well this is how it goes wrong when you click on the checkbox is nothing happens. They remain unchecked. The only way you can get those check boxes to check themselves is by clicking on a hyperlink. Uh in this paragraph, it's not the whole paragraph. Just a specific point of the parent. You're gonna click on the hyperlink, reading the disclosure, I would assume. Yes. And what happens when you click on the hyperlink? Well on a on a on a wide screen device, like a Mac, which is probably how this thing was designed and tested on a white screen device. It just fires up a new tab in your browser and opens up this document, you look at it, you have to close the tab and when you go back to that product page, that bart is magically checked in. Okay, so on a widescreen device annoying because it's got another tab that fires up if you have a pop up blocker, good luck that tab will never fire. So you'll never be able to complete the check box on a mobile device though. And that's where two thirds of the action is all sorts of strange stuff house on a mobile device. So for example, uh on an iphone, you'll just get a warning. Do you want to download this file? So I don't know warning. I'm trying to get alone here. This sounds bad. A lot of people just say forget it. I'm done. You might open up that file in a pdf viewer. Fantastic. Now you're going to go back Through the browser to go complete your application now, you gotta do this two more times. So so you can see now where 67% abandonment comes from. Technology has transformed our world and digital has changed the way consumers shop for and buy financial services forever. Now consumers make purchase decisions long before they walk into a branch. If they walk into a...

...branch at all, but your financial brand still wants to grow loans and deposits, we get it. Digital growth can feel confusing, frustrating and overwhelming for any financial brand marketing and sales leader, but it doesn't have to because James robert wrote the book that guides you every step of the way along your digital growth journey, visit www dot digital growth dot com to get a preview of his best selling book banking on digital growth Or order a copy right now for you and your team from Amazon inside, you'll find a strategic marketing manifesto that was written to transform financial brands and it is packed full of practical and proven insights you can start using today to confidently generate 10 times more loans and deposits now back to the show. I feel the pain because you know, we've done the same thing qualitatively with real human beings and you get to these, these stop points there breaks in this that they seem logical, I guess when you go into production, but once you put it out into the real world, it's like, huh? Like for example, a credit union field of membership question creates a lot of confusion, particularly with one instance we saw how it was being deployed and they had some quantitative data. But for whatever reason, working with the lending department internally did not make any of the proper transformations fine. If the data doesn't speak loud enough, let's bring the people to the table and you get 10 people who are saying the exact same thing that are not internal. These are people in the local community. And you're just asking some very open ended questions of like this experience and it's like you can measure and marry the two different data points together and I think but but it can't just be a one and done process, right? This has to be something that is continuously absolutely discontinuous. And also...

...there's this interplay between changes in regulation which, you know, things do change and you have to um keep up your disclosures and your regulatory compliance with the regulatory climate and the fact that often the compliance team is not part of this conversation around how well the systems are proving they kind of like over there and I'm going to send you this design and then they're going to come back with red lines and I would literally have seen screenshots printed out that were No, no. Yeah, scrawled on pds. I mean, you know, designed by design by committee and that's part of the problem. So from a qualitative perspective, you have to have these teams part of the conversation. From a quantitative perspective, you have to have the conversations, look asking this set of questions in this order in this way is going to lead to, you know, maybe a few percentage points of abandonment and then some downstream effects on loan quality. I really want to talk about that in just a second. So we gotta, we gotta trade this off. And uh, you know, if you insist on asking somebody about a wire transfer when they really are just trying to get a car loan, well, this is what happens. This is the data tells you this is what happened now as an organization, we want, we want that or do we want a different outcome. You know, it's, it's, it's great. You, you bring compliance into this conversation and I can think of some financial brands who are in the banking on digital growth program right now and they're going through the university and compliance is a part of this discussion. Some have 30 or 40 people in the university. And when you hear someone over compliance getting excited about building a website that sells and their understanding how people make decisions and how like, you know, it's high level introductory, like UI UX, not getting too, but now they have a basic understanding, they are able to take some of that perspective when they're going in and making these decisions that's not going to hopefully make a negative impact like it would have before if they didn't have that.

Clearly they didn't have that awareness. You bring up another great point about loan quality here because you're right like like if we're just getting like it could have the perception if we're running digital ads and we're getting all of these conversions for our applications, but it's not the right type of loan and they're getting denied rejection. Right. Right. Well um a great example was one of our clients and large credit union and there were any of these campaigns and they were targeting better quality borrowers. So the average credit score going into the top of the funnel People that are marking do with 700 plus, They looked at the loans that we're getting approved and they were uniformly on average 650 and below these are averages of these populations. So where did all my good prospects? Because I'm sending this out to high quality and I'm getting a low quality borrowers back out. And what the data told us when we mixed in the credit ratings of the population in and the population out very simply the better borrowers had higher abandonment, which means they have low tolerance for bad process and they have choices, they will just go elsewhere. So you are left if you have bad process, you are left with the folks that don't have a whole lot of options. And you know, they have been turned down here. They've been turned down there. Maybe I can get a loan from this credit union. I will, you know, go through these complicated steps because I am hyper, hyper motivated. You know, and to, I'm going to share an experience. I think that might be interesting for the folks in compliance. The challenges not compliance. The challenge is compliance with a delightful process. And I just came back in from overseas to the country into the country. And uh, I signed up for a global entry. What a delightful experience I'm in full compliance of...

...border control laws. I show up at this terminal literally just take a selfie using this uh, this machine and everything happens automatically stamps out a receipt with my name with my passport number. I hand it to a border control post and I am in it was amazing. And I came back and I was like telling everybody because it was a delightful experience in full compliance of the rules. And that's the challenge for banking today. Let's give him a delightful experience in full compliance with the rules and what his experience experience is well defined systems and processes that have been number one strategically thought out. Number two applied. And then I think the key here is what you and I are talking about today, continuously optimize learning from what is working well. What could be even better and stopping or cutting and letting go of all of that friction and frustration that's creating chaos in the mind of the consumer global entry is a great example. You know, back in the day it was t S a pre check, but now pre check is kind of, you know, you've got a lot of people doing pre check. So the pre check lines are getting longer and longer and now. So here's my personal travel hack for anyone listening when you take your pre check and you double that up with clear it really then gets you to the front of the line, dump it. It's a catapult to get you to the front line of the front of the line and and it makes an otherwise cumbersome, complex, frustrating experience, as pleasant as positive as possible. Carlo. Great conversation, really great question. Um, always appreciate them. If you're listening, what's the best way to connect with you, Carlo? Just go to our website alfa rank dot ai. And uh there's a contact form right there, connect with Carlo. If you have a digital marketing sales or leadership question like Carlo. Text me that question 28325495792. And I look forward to talking it through together...

...with you on a future clarity calls episode. Carlo, thank you so much for joining me today. This has been a great conversation. It's been a pleasure Wonderful until next time and as always be well. Do good and make your bed. Thank you for listening to another episode of banking on digital growth With James robert. Ley. Like what you hear, tell a friend about the podcast and leave us a review on apple podcast, google podcasts or Spotify and subscribe while you're there to get even more practical improvement insights visit www dot digital growth dot com to grab a preview of James roberts, bestselling book banking on digital growth or order a copy right now for you and your team from amazon inside you'll find a strategic marketing and sales blueprint framed around 12 key areas of focus that empower you to confidently generate 10 times more loans and deposits until next time. Be well and do good. Mhm.

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