Arend de Jong: Got RODA? Turn Your Customers into an Income-Generating Asset
Arend de Jong is Chief Financial Officer with Sales Boomerang, Owings Mills, Md. He is a strategy and financial expert, with 20 years strategy consulting experience, focusing on new business lines, startups and fast growth. Pricing and XaaS based revenue models are his speciality. He has been involved with Sales Boomerang since its inception in 2017, and joined as CFO in 2018. Arend has an MBA from NYU-Stern School of Business, London School of Economics and HEC School of Management in Paris. He holds a BA(Hons) in European Business Administration, passed the exams of the Chartered Institute of Management Accountants in London and was a Certified Management Consultant.
For years, you took great care to build your list. Clients, and also prospects that didn’t quite become clients yet, but whom you fully intend to make into a client one day. You actually spent quite a bit of money getting the list together. To keep your prized possession whole, you spend quite a bit of time maintaining it. But… have you cracked the code on how to make this pay off for you? Sure: you love returning clients, but are you capitalizing on your list structurally?
Each of you has that list. When asked, each will say that ‘our clients are our most valuable asset’. Famous last words. But an asset should bring a return – otherwise it is just a liability, no?
Is a client list workable?
What can you do to start generating that return on your asset? You can hardly call those clients and prospects every month to check if they are ready for a loan yet. So, you send them birthday cards. Perhaps a quarterly newsletter. Some affinity offerings even. All nice to have – yet these are only small gestures. A true relationship depends on constant interaction. And for that, there is no reason – your clients will not likely interact with you until they need you: when they are moving, or when there is a change in their life affecting finances. That is the moment you need to be front of mind with your clients. And a birthday card will likely not quite do that.
Create that Income Generating Asset
To crack the code, lenders must avoid building a relationship with uncertain outcomes, and find a solution that alerts them when their clients need their next loan. Lenders have to be right there to help them get that loan at the moment they need it. The solution is to get a heads-up notification when your client is making moves indicating they’ll be buying another house, that they have a child going to college and they are likely to need some funds, or that they have enquired about a mortgage!
Alerts give you the opportunity to react – and anticipate – your clients’ need for a new loan. Such an alert is far more valuable than a call from a direct mail campaign; or a call from an advertisement. And thus, your conversion should be far superior than from a new lead! Which is the exact opportunity to truly generate a return on that old asset of yours: your client list.
Return on Data Assets (RODA)
We call it Return on Data Assets: the subtraction of the gain from data, minus the cost of data, returns the profit of the investment. This profit is then divided by the cost of acquiring the asset. In simple terms: the revenue you earn from loans generated by alerts, minus the cost of your alerts, divided by the money you invested building up your client list.
RODA vs. ROI explained
While RODA calculates the return generated on your asset, we can obviously calculate ROI on your alerts as well. Using the example here, your generating $45,000 of revenue from a $3,000 investment makes for a Return-on-Investment of 15x. Not bad!
RODA opens up a new way of looking at your business: not just as a lead processing machine to generate revenue, but as a business which cares about its clients, which nurtures its clients, and which is able to anticipate your clients’ needs to help them with their second, or third, or next loan. And, a business that is starting to generate a second revenue stream: RODA.
Show me the money
On your asset – let’s say you have a list of 10,000 clients and good prospects. You likely invested somewhere around $50 per entry on that list over the time it took you to build that list: lead-generation marketing, advertising. Sure – quite a few came to you as a referral from another happy customer. For others, you had to make a bigger effort, so $50 on average is pretty reasonable. That means you spent $ 500,000 building that list! And that is where it gets clearer: would you have a $ 500,000 house sit empty and not provide you with a return?…. Right!
On your cost – We know that your 10,000 records will generate alerts. In fact, we would expect to – on the conservative side! – generate about 200 alerts a month. You would pay about $ 3,000 a month in Data Asset Management costs. Maintenance on your asset, really.
On your revenue – We have data on how many of the alerts we provide convert into a loan. These are not assumed numbers: actual, traceable data. Your 200 alerts will lead to an average of 6-7 loans per month. Let’s go low: 6 loans. About $1.5M in loans per month. At an average commission of 3%, these loans would generate revenue for your business of $45,000 per month. That’s new income. From your asset.
On RODA – the rest is easy: (revenue – cost)/data asset = ($45K-$3K)/$500K = 8.4%.
About what an S&P 500 index tracker delivers if you leave your money tied up. But: then your money is tied up! This asset, you already have – you just have not found a way to capitalize on it. Your normal business continues as before. RODA is an extra income stream, from an asset that is otherwise unused in business terms. $42K net revenue each month. Extra. Per month!
We predict that RODA is growing to be the future for customer-centric mortgage companies. It helps transform clients from single, cost-driven transactions into long-term relationships.
What are you waiting for? Get your RODA!
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at msorohan@mba.org; or Michael Tucker, editorial manager, at mtucker@mba.org.)
