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Compounding Mortgage and Protection Clients: Leveraging Your Referral Rate

Every mortgage and protection advisor knows that personal referrals from existing clients are one of the best sources of new business. These enquiries often have a high conversion to successful transactions, as those referred know somebody who can vouch for your service.
In this article we discuss how a seemingly small increase in your referral rate (the rate at which your existing clients refer new clients to you) can have major impacts on your business over time.
referral
Why do Clients Ask for Recommendations for Mortgage and Protection Advice?
Personal referrals are a common source of growth for a wide range of businesses. However, they are particularly important where customers interact with a market infrequently and transactions are relatively important in the context of everyday life.
This explains why personal referrals are so important in the mortgage and protection market. Mortgage and protection advice is both an infrequent and important transaction, meaning that customers rely more heavily on trusted personal recommendations.
This can be particularly important for first time buyers who have never interacted with mortgage and protection advisors in the past.
Which of Clients Recommend You?
The Net Promoter Score (NPS) is widely regarded as the benchmark for measuring client experience. In this, customers are asked a single question:
“On a scale of 0 to 10, how likely are you to recommend our business to a friend or colleague?”
Only those who answer 9 or 10 are classified as “promoters”. Those who answer 7 or 8 are “passives” (e.g. they will neither promote nor detract), while those that score 0 to 6 are “detractors”.
A striking insight from NPS is that even those who respond with 8 out of 10 satisfaction typically don’t recommend you to a friend or family member. They have to love your service enough to score you a 9 or a 10. For strategies on how improve your customer experience to such levels, refer to our comprehensive guide on enhancing your client process.
The big impact of a small change in your referral rate
But how does a change in your referral rate impact your business? The short answer is: a lot!
Think of your referral rate as an interest rate that compounds over time. If customers refer more customers, and in turn those customers refer more customers then a seemingly small change in the referral rate can translate into a big difference over time in your customer base over time.
In the below table, we show the difference between a referral rate of 0.2 (for every 5 transactions you get a referral), 0.5 (for every 2 transactions you get a referral), 1 (every transaction refers another customer) and 2 (every transaction refers 2 new customers), over 6 “rounds” of referrals. We introduce this to show the multiplier impact of the various referral rates.
referral table
  • With a referral rate of 0.2, the multiplier impact dies out quickly and you only have 1.2 clients after all the referrals
  • With a referral rate of 0.5, you end up with 2.0 clients after the various rounds of referrals
  • With a referral rate of 1, you add a new client each period, so end up with 6 clients at the end of the cycle
  • With 2 referrals per client (or indeed any referral rate > 1) your client base really starts accelerating. You end up with 63 clients from the original client.
referral chart
3 Steps to Increase Your Referral Rate
1. Measure it
How actively do you measure your referral rate currently? You may note customers coming through via referrals, but do you record this in a systemic way? This is important to track over time, particularly if you are looking to improve your referral rate – you need to have an idea of what it is today.
2. Convert 7s and 8s into 9s and 10s
We discussed above that only those who answer 9 or 10 to the NPS question are likely to refer your services to others. Think about how you can improve your client process further to improve those 7s and 8s to 9s and 10s. What’s the weakest part of your client process? What do clients complain most about? Fix that part first!
3. Ask for feedback and referrals!
At the end of each transaction ask for feedback on your service – you may even want to directly use the NPS question. Where customers answer below a 9 or a 10 you can also ask what you could do in future to improve – this will help you with the above step (converting 7s and 8s into 9s and 10s)
And for those customers that do give you great feedback – ask for referrals. You can mention how referrals really help your business grow and how grateful you’d be for any referrals to friends or family. As the saying goes – closed mouths don’t get fed!
About Keychain
Keychain is an all-encompassing client portal tailored for mortgage and protection advisers. It enhances client and adviser interactions by offering digital fact-finding, secure document sharing, e-signatures, and automated reminders. Book a demo of the platform here.
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