REQUIRED READING: Historically, success in the mortgage servicing industry hasn't been defined by meeting or exceeding customer expectations, but by maximizing the value of the servicing asset – specifically, mortgage servicing rights (MSRs) – through complying with investor requirements at the lowest possible cost.
In fact, the investor who owned the MSR was often perceived as the primary customer because the investor paid the servicing fee, and because the repercussions of a negative investor experience were significantly greater than those of a negative customer experience.
Although there has been talk in the past about the benefits of enhancing the customer experience, the reality is that, when seen in isolation, it has been difficult to prove that enhancing the experience of mortgage customers will pay a dividend. Mortgage borrowers cannot elect the entity that will be servicing their mortgage and are not allowed to switch providers if they are dissatisfied with the service they are receiving. The only alternative is to try to refinance the mortgage, and there would still be a chance that the borrowers end up with the same servicer with which they were dissatisfied.
However, there are several reasons why mortgage servicers now need to have a renewed sense of urgency as it relates to enhancing the customer experience, including the following:
- As a result of the foreclosure crisis, there is a perception that the industry, in general, provides bad service. Therefore, it is important for servicers to ‘tell their story’ and be more disciplined about how they approach customer-service improvement efforts.
- A new regulator – the Consumer Financial Protection Bureau (CFPB) – has indicated that customer experience related to mortgages is one of its priorities and has recently launched a new mortgage complaints process.
- Customers no longer provide suggestions or make complaints just by calling the customer-service center or sending a letter. They share good – as well as bad – experiences with financial institutions through blogs, Facebook, Twitter, etc. Not only does this carry an increased reputational impact, but with so many avenues at the consumer's disposal, it also creates the potential for increased case loads, requiring additional resources.
- As a result of new regulations, as well as the reduction in the universe of customers that are eligible for a mortgage, it has become more expensive to attract new customers. Enhancing the customer experience can translate into retention-rate improvements (and additional servicing profitability as a result of a reduction in payoffs or higher in-house refinances) and greater receptiveness to additional product and service offerings through cross-selling.
This two-part article presents some initiatives that mortgage servicers can employ to enhance the customer experience. We begin by describing tools servicers can use to gain a deeper understanding of their customers. Once customer insight has been established, we present metrics servicers can use to measure how effectively they are delivering on those insights. We then comment on where servicers should take control of the customer experience through communications to the customer, as well as how servicers can manage and repair the customer experience when things go wrong.
Most of these initiatives can be implemented rather quickly and, in most cases, result not only in an enhanced customer experience, but also in opportunities to reduce cost (e.g., lower call volumes as a result of an increase in the use of self-service channels, or reduction in the number of complaints that need to be addressed.)
Voice of the customer
A solid understanding of what customers think about your organization and the service you provide is critical. A ‘voice of the customer’ (VOC) program has proven to be an effective means of capturing, interpreting, communicating and responding to customer feedback, illuminating customers' wants and needs, and helping to identify potential service gaps.
An effective VOC program can help servicers gain an accurate, real-time understanding of their customers, improve positioning and messaging to clients, enhance the level of engagement among customer-facing employees and more.
However, collecting customer feedback is not enough. An effective VOC program also incorporates the analysis of the information received and the process for reacting and responding to that feedback (root-cause analysis). The consolidated feedback should also be made available enterprise-wide, and it should be shared particularly with those who have direct customer contact.
Too often, customer feedback gets trapped in operating silos and does not make its way across the enterprise. A way to overcome this issue is to identify a single group that is responsible for collecting and disseminating direct (customer correspondence) and indirect (focus groups with customer-facing personnel) customer feedback.
The information should be considered among the inputs used by the process improvement and reengineering teams and in the strategic planning process. Externally, servicers should routinely acknowledge receipt of direct feedback and provide information to customers about the positive changes their input has inspired.
The first steps of a VOC program's implementation can be as simple as selectingÂ representatives from different servicing areas and asking them to meet on a regular basis with management to discuss various issues, such as the customer experience, improvement opportunities and assessment of how is the company doing.
Another tool servicers can use in identifying areas to improve the customer experience is a customer ‘journey map’ that identifies the ‘moments of truth’ for their crucial and customer-sensitive processes.
At every step along the way, servicers can use these journey maps to visually depict customer touch points and determine key areas of strength, as well as opportunities to capitalize on the customer interaction.
The most important element of journey maps is that they allow perspectives to be seen from the customers' point of view.
An example for servicers to consider is the customer journey involved in a servicing transfer. From the ‘goodbye letter’ to the first billing statement, a servicer can use journey maps to isolate each step from the customers' perspective, identify potential questions and concerns, and determine how the servicer can address those issues to improve the customer experience.Â
Completing this exercise will give servicers visibility into the various ways customers interact with the organization and allow for prioritization as it becomes clear where the customer's own focus will be. With this road map, servicers can then assign accountability for improving and monitoring those moments of truth – which may differ from how the servicer defines its internal organizational structure.
Measuring customer satisfaction
Mortgage servicers typically measure customer-service initiatives and performance using traditional customer surveys and call-center metrics, such as abandon rate, average speed of answer, and call quality.
Although these metrics provide information about the efficiency of customer interactions, they don't assess effectiveness. To gain a deeper understanding of customer perceptions, servicers should consider implementing more sophisticated customer satisfaction measures, including the following:
First-call resolution: a customer inquiry or transaction resolved or completed to the customer's satisfaction by the initial associate or another resource once the call has been escalated.
Reviewing first-call resolution can lead to measurable improvements in customer satisfaction. Today's customers don't want to spend time researching payment issues or waiting to be contacted by someone who can answer their questions; they want their question or issue handled correctly on the first call.
First-contact resolution: inquiries that were resolved by the initial associate without any need to transfer to, or involve, an additional resource.
Not only does this outcome create a positive customer experience, but first-contact resolution can be an empowering factor for customer service representatives. Empowered agents can be more effective and efficient because they believe they can have an impact on a situation. They have increased ownership of the issue and are vested in helping the customer.
Transfer rate: indicates the percentage of contacts that have to be transferred to another person or place for handling.
It is important for customers to feel like they are being listened to. High transfer rates can mean a customer explains an issue or complaint on many different occasions, each time amplifying his or her emotions and overall severity of the issue.
Channel switching: measures the percentage of customer calls that started in another channel (primarily the website).
This metric is critical because it usually represents customers who try to take advantage of self-service solutions but are forced to call for clarification or more information. Evaluating the reasons for channel switching can lead to significant improvements in customer self-service (e.g., website redesign to allow for automated-payment applications). Also, it can lead to positive reductions in talk time and abandoned calls, which are traditional effectiveness measures for customer service agents.
Net promoter score (NPS): measures on a 0-to-10 scale how likely customers are to ‘promote’ a servicer to their friends or relatives.
Based on their responses, customers fall into three categories: promoters, neutrals or detractors. Promoters give insight into the things the servicer is doing right and where it needs to do more. Neutrals raise the awareness about changes that can increase loyalty.Â And detractors help identify and take corrective action for service or other issues. NPS is the percentage of customers who are promoters minus the percentage who are detractors.
Customer effort score (CES): measured by asking ‘How much effort did you personally have to exert to handle your request?’
The CES is scored on a scale from 1 (very low effort) to 5 (very high effort). Servicers can use CES, along with operational measurements, to conduct an effort audit and improve areas where customers are expending undue energy.
For example, a CES measurement could be particularly effective when evaluating loan modification cycle times. Loan modifications require a significant amount of work by the loan holder to assemble, complete and return paperwork. Continually high CES scores for this process could lead a servicer to redesign associated activities to make it easier on the loan holder (e.g., online document upload versus postal mailings or simplified forms to collect only relevant information).
In addition, servicers should consider developing customer-experience dashboards that give customer service representatives a real-time view into their own performance metrics so they can proactively improve the customer experience on the front line and benchmark themselves against their peers. Customer-experience dashboards are also becoming a powerful management tool; as senior executives and board members are increasingly interested in making sure the servicer is addressing customer-experience issues and opportunities.
(Tomorrow, part two of this article will detail how servicers can further enhance their business relationships with customers.)
Roberto Hernandez (firstname.lastname@example.org) is senior manager and Alfred Kang (email@example.com) is senior associate in the consumer finance practice of PricewaterhouseCoopers.