Before we plunge into this debate, I think it is appropriate to apply a clear definition to what we’re actually discussing, so let’s begin with the most contentious word: diversification.
To me, the simplest definition is “Don’t put all your eggs in one basket”. Everyone has heard this expression; it applies to life in general and, in this post-GFC world, it certainly applies to the broking industry. And yet there are many brokers out there who still seem reluctant to apply this basic principle to their customers.
Everyone understands that the more products that a customer holds with one organisation, the less likely they are to move to another organisation. So, as a broker, isn’t it a good business principle to offer a variety of products and services to your customers?
Think about it. You give greater value to your customers as you become their trusted adviser for multiple products and services, therefore increasing your customer retention. Your business gains greater value because you earn multiple income streams per customer. Your business has greater appeal to existing and potential referral sources and your marketing capabilities increase.
Making customers sticky
Let’s take a moment to review the practical application of these points. Instead of developing a relationship (and I use this word loosely) with your customer purely to arrange their mortgage, imagine the impact that you’d have if you also offered to arrange their motor finance, their children’s motor finance, their business finance, their home and car insurance (which are mandatory with the loans) as well as their loan protection? These are necessary expenses for any family unit.
By offering these services, you have grown your per customer income from just one product to potentially three or four. I understand that many brokers believe that there is not enough income to be earned from other products, or that they don’t have the time to attend to them, but the fact is that, collectively, your potential income stream is more than doubled. I say that you cannot afford to do without them.
Why? Because your customers will buy these products and services, and they’ll buy them from your competitors. The more products and services that you arrange for your customers, the less opportunity your competitors will have to market to them. Your customers will not need to seek alternate providers; they’ll revert to you for all their financial and domestic protection requirements.
Please, let’s not be under any misconception. There are more and more potential competitors coming into the residential mortgage space. And many of these new entrants have access to enormous databases, some of which will be your own customers. If you have multiple products and services in place, you may lose one product, but the others will continue to provide the connection and the income.
In other words, with a diversified business strategy as your operating platform, you incorporate the “hamburger with the lot” approach, and your appeal to referrers is greatly enhanced. Instead of just offering to assist your referrers’ clients with a mortgage, you offer a wider proposition. This gives your referrer the surety of corralling their customer, narrowing the need for them to have multiple referral sources. You also become a more valuable and trusted business partner.
Busier but better
And here is the icing on the cake! We’re all becoming busier. The majority of people admit that they are time poor. With this new business strategy in place, you can confidently go to the marketplace and promote yourself as the “one stop shop” - all your customers’ finance and protection requirements are met. Not only is this a strong consumer proposition, it also puts you in control of how you market yourself and your business. Be a broad-based solutions provider, and others will want to support your initiatives.
In summary, you no longer need to be a part of another company’s seminar, presentation or promotion. Put yourself in the driver’s seat. Don’t put all your eggs in one basket.