Proptech Growth Strategy Brief Newsletter
Fraction Growth Strategy
Fraction helps homeowners access their home equity in a fairer way.
"Grain of Salt" Warning: I write this newsletter with an outsider's understanding of the business in question. I am likely to make mistakes, leaps of judgement, and assumptions - that's what makes it fun.
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The dream and promise of homeownership runs through the financial plans of most of Western world. After all, what symbol glorifies the life and will of the individual better than a castle to call your own?
While many have made their retirement off of their primary home investment, residential real estate is a risky financial vehicle. Even discounting market downturns and volatile local markets, the average American pays north of $1200 a month on their mortgage - multiples higher than their average savings and investment in other financial vehicles. This means the average American homeowner is in a precariously undiversified financial position, with the majority of their equity tied up in their primary residence.
Over the years, several products have aimed to help homeowners obtain a more flexible financial position. HELOCs (Home Equity Lines of Credit) and reverse mortgages aimed to get cash into homeowner's hands in exchange for equity in their homes, but both carried disadvantages. HELOCs require additional monthly payments and didn't cover market slumps, and reverse mortgages often have age restrictions and buyout penalties.
Fraction has recently appeared on the scene with an attempt to provide homeowners with more financial flexibility without the issues that accompanied the other options. They claim to be the "fairest way to access home equity", and they help unlock up to $1.5M of your home equity while allowing customers to continue living in their homes - all without monthly payments or unfair interest rates.
Here's how I think they could unlock new levels of growth.
There are two angles I'd aim for first on the acquisition front.
First, to pull in users who are already looking for a solution to access their equity by presenting them with the Fraction product. I'd create SEO-optimized content pages for keywords like "HELOC alternatives" and "HELOC vs. Reverse Mortgage". While working to get these pages to rank in search, I'd run a parallel Google Search Ads campaign for those same pages to drive traffic in the interim.
Secondly, I'd take aim at potential customers higher in the funnel. In a city-by-city fashion, I'd build out a social ad campaign (likely mostly on Facebook) targeting homeowners aged 50+. Test value propositions in ad copy and creative and move on to the next set of cities once the campaigns start to saturate each market, all while developing tight remarketing campaigns for all site visitors.
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There are several things Fraction should do to improve activation once users hit their site.
First, their web copy needs a complete overhaul. Fraction appears to have fallen in the common trap of writing customer facing copy that echoes how the team speaks of themselves internally. Listing benefits as "Fraction is Fair" and "Fraction is Flexible" means very little to a potential customer. Rewrites in the vein of "Better rates when the market moves" and "Financial flexibility for homeowners" would be better.
There is also a distinct lack of social proof on the site, a huge miss in a product that demands as much trust as Fraction. Building a database of case studies segmented by ages, home types, and locations, and let users filter as they wish will go a long way toward helping potential customers see themselves in Fraction's existing customer base.
There are several other areas that need attention as well. Better leveraging conversational marketing for lead generation, using a call center for phone calls rather than some random person's cell phone, and leveraging the post-signup experience to upsell or provide additional resources would all go a long way toward building customer confidence as they move through the funnel.
Fraction is in a business that requires immense amounts of trust to spur consumer action, and they're competing with institutions like banks and insurance companies. Their cost to acquire a customer will be considerable. To win, referral will be crucial.
Fraction can piggy-back on it's city-by-city rollout by offering generous double-sided referral bonuses. Fraction could empower their customers to refer their friends, and pay them both out at a rate around equal to their paid media CAC.
The generous payout will cause a lot of talk and buzz, but the long-term nature of Fraction's product ensure that only a small percentage of them will immediately take them up on it and claim their bonus, leading to a ton of "free" word of mouth that will pay out well into the future. This makes it an economical channel, and Fraction can gradually lower the referral bonus as they saturate the market.
That's it for today. Thanks for reading!
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