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At the heart of innovation lies the customer. Understanding the customer – their needs, priorities, desires and behaviour – is essential if a business is going to concentrate its resources on innovations that will make a difference to customer acquisition. With the massive increase in the proportion of business originated by brokers, successful lenders understand that it is these brokers who are normally their direct customers. In this case, knowing thy customer, particularly in terms of service, means understanding the priorities of intermediaries in terms of service speed, consistency and ease of use. But in terms of designing products, lenders must consider borrowers’ priorities as these are at the forefront of brokers’ considerations. Increasingly, borrower profiling backed by market research is taking a leading role in this regard. Based on the characteristics of a borrower (salary, age, type and length of mortgage ), firms attempt to model behaviour to predict how they will react to changes in interest rate, different products, discounts and being contacted by phone or email. This is particularly relevant when it comes to customer retention. Once you know your customer – both intermediary and borrower – innovations can be targeted to meet their priorities. Innovation encompasses all areas of business. The most important for differentiating yourself in the market largely come at the front end of the business – in product types or customer service. But these front end innovations are supported by techniques further back in the business in underwriting, servicing or funding. So each department has to be constantly renewing itself through original ideas or techniques. To produce important innovations there must be cooperation between departments. For example, a product can only be launched if it is understood how this will affect underwriting and funding and those departments can deal with these factors. And it’s this joined up management that bigger firms in particular struggle with. Innovative ideas or techniques, whether originating from overseas markets, domestic competitors or within the company, must be backed by the right technological support. Companies have limited resources in this regard. Aiming them at areas that meet customer priorities is essential. Competitive pressures mean that over the next few years, those lenders unable to do this will fall behind.