Customer Loyalty Case Study in the Mortgage Industry

A large national mortgage company in a fragmented industry implemented a successful differential strategy.  After five years, the company was the market leader with above average performance in profitability and low turnover.  When the company’s value declined and the industry returned to normal, the Loyalty Research Center was hired to identify the problem and determine a strategy to improve and maintain value scores.

SITUATION

The company was the first in the industry to implement a differential strategy, and initial analysis revealed that this had created a large value gap advantage.  Over time, competitors began to imitate the company, causing the value gap advantage to narrow.  Based on this finding, it appeared that the key to regaining the value gap advantage was to prevent the competition from imitating the company’s strategies.  However, further statistical analysis revealed that competitors were hiring the company’s former employees and learning of its business strategies.  Realizing that the company could not prevent imitation, the new challenge was to determine how the company could regain and maintain its value gap advantage.  

IMPLEMENTATION

The Loyalty Research Center hypothesized that the company would have to focus on continual improvement in order to regain and maintain its value gap advantage.  The Loyalty Research Center performed benchmarking studies that revealed the strategies that were being successfully imitated and in which areas the respondents felt that the company could improve.  LRC recommended that the company regain its value gap advantage by implementing new strategies based on customer responses.  To test this hypothesis, tracking studies were performed in order to monitor the effects of implementing new differential strategies and to continually monitor areas in need of improvement.  LRC was able to identify neutral customers and more importantly those vulnerable and likely to leave if a better offer was offered by a competitor.  Assessing the reasons for vulnerability, the company was able to correct these areas and migrate a portion of this segment to loyal status.

KEY FINDINGS 

• Initial analysis shows a strong correlation between the advantages of being the first company in an industry to implement a differential strategy and the penalties of being the last to utilize the same strategy.
• Further analysis reveals improvements are necessary in order for a company to remain the industry leader even if its concept was at one time revolutionary. 
• Without the special analysis conducted by the Loyalty Research Center, this value gap advantage would not have been exposed and this large national mortgage company would have lost its position as the industry leader.  Vulnerable customers will exit even an industry leader without proactive adjustments made within an organization.