No More "Field of Dreams" for home equity marketersJeff Seymourshort-term interest rates, HELOCs, FICO, home equity marketers
We all like to remember the good old daysthe days of our recent
past when short-term interest rates were at record lows and
borrowers reacted by using second mortgages as no closing-cost
refinance loans. The only thing lenders had to do in this
environment was to post these rates and their response rates, and
application volumes made them look like home equity marketing
But that's all over. Thanks to Alan Greenspan and his swift and
rapid raising of Fed funds, home equity lines of credit (HELOCs)
are no longer as attractive as refinance loans. What was once the
"Field of Dreams" for marketers ("If you build it, they will come")
has turned into a real fieldone that has to be worked, planted,
harvested and worked again. In other words, we have to revisit
basic marketing principles and add some new tools. For those of you
who can't remember a time when consumers didn't wear a path to your
door (or even for those who can), here are some key marketing
principles that can help you cultivate additional home equity
borrowers in today's environment:
Be there when the need arises.
In the "Field of Dreams" days, you didn't have to worry about
timing. The low rates meant that any time was the right time to
reach the consumer. Today, the challenge is that you have to be
there when a consumer is contemplating the need, whether it's home
improvement, large purchases or college tuition. That means knowing
your audience, the products that you offer, and being in touch with
their "seasonality." For example, spring is when people think about
home improvement. Parents start worrying about having enough cash
for college in mid-summer. Right after the holiday season, you'll
also find increased demand for debt consolidation. Those are some
easy examples, but the real message is to make sure your marketing
efforts are timed to offer the right products to meet these needs
as they arise. Credit bureaus can help and have developed some very
effective trigger marketing products that can aid you in your quest
to be there.
Be there many times.
No matter how wonderful your marketing materials are, chances are
they won't drive the customer through your doors the first time
they hear from you. You have to deliver the message several times,
reinforcing it with direct mail, e-mail marketing, campaigns and
special offers. In the Field of Dreams days, you just talked about
rate and they came. Now, you have to be there when they need youin
their mailbox, in their newspaper, on their refrigerator with a
magnet, and at the home show when they are looking at replacement
windows. Be on that billboard they always pass on their way to work
and on the radio station they listen to at the office. Obviously,
you need to find the right mix. Then you have to balance that with
your budget and what makes business sense.
An effective way to increase your presence with prospects is by
conducting borrower education. Many people don't know anything
about home equity lending and need to be educated on its process,
benefits and implications. The borrower you educate is the borrower
you gain loyalty from. Develop that loyalty through seminars and
deliver regular short tips through e-mails or newsletters.
Educate your customers and prospects about their
potential borrowing power.
Many people are unaware of just how much borrowing potential they
have. By educating them about the amount of equity in their homes,
you open the door to home equity borrowing. We have a sister
company, ClickRSVP, that offers banks a product called
HomeValueBot. The product offers visitors to a lender's Web site
free online home value reports. Lenders are getting 27 percent
click-through rates that are resulting in increased activity in
home equity applications and conversion rates of between eight and
10 percent. That's because it engages a homeowner in a dialogue
about their home and their needs and puts the lender in a position
to meet them. There are many other sources that provide information
on FICO scores and other credit-related topics. FICO is something
that people may not understand but should, especially given all of
the uses of the score today.
Use personalized marketing efforts.
Direct mail continues to be the best way to prospect for home
equity loans because you are able to deliver a customized message
directly to the right prospect. You can choose the customers with
the best personal attributes, such as homeownership, geographic
areas and FICO scores, and then "talk" right to them. As a rule,
your current customer will respond much better than your true
prospect base, so use that to your advantage.
Put more emphasis on conversion rates.
What I'm suggesting with this point is that you change your
definition of success in your marketing efforts. Concentrate less
on response rate (which, by definition, will be down) and more on
converting the responses you do get. The conversion rate is the
percentage of those who responded and actually closed loans with
your institution. An 80 percent conversion rate on a two percent
response rate is better than a 20 percent conversion on a 10
percent response rate.
Because you have a smaller pool of people who will respond to
your marketing efforts today, concentrate on converting them as
quickly and efficiently as possible. Conversion is about processing
loans quickly and keeping communication open to the borrower. Look
for alternative and innovative ways to process loans faster, like
automated valuation loans and alternative title. These will get you
to those quicker closings.
Learn from what you do.
To improve your campaigns, seek to understand and learn why people
respond. You may come upon a case where you have a very strong
response rate to a campaign, yet a low conversion rate. Why? Are
you targeting the appropriate market? Is your segmentation flawed?
Test the accuracy and relevance of your message to those on your
list. Learn from those who responded. Then model your next campaign
to seek people like them. Consider the credit card industry 10
years ago. Look at the trends in their offers and response rates,
and study all of the marketing tools that they used to prospect
during their campaigns. The home equity market is looking quite
similar and many lessons can be learned and applied to your home
equity marketing (and portfolio management/marketing, for that
The "Field of Dreams" is definitely gone, but that doesn't mean
that home equity marketers need to hide in the corn stalks in the
new environment. It's really a matter of getting back to the basics
of old-fashioned marketing and learning from adjacent markets. Use
it and you will reap the rewards. Okay, I'm done with the
metaphors. Now it's time for you to go out and sell.
Jeff Seymour is marketing manager of Integrated Loan
Services. He may be reached at (800) 842-8423 ext. 1364 or e-mail