When the phone stops ringing: A broker's guide to an effective direct marketing campaignRichard Scoliodirect marketing, refinance boom, delivery media, telemarketing, direct mail Silence. To many, silence comes as a welcome sound, a sign of a few moments of peace in an otherwise hectic day, a time of reflection, rest and relaxation. To a mortgage loan officer, however, silence is deadly. Silence is the sound of no prospects calling, no loans closing, and no increase to your bottom line. To a mortgage loan officer, silence is the sound the phone makes when it is not ringing. Interest rates are rising. The refinance boom is over. The sub-prime sector continues to face more and more scrutiny from consumer advocacy groups and regulators. The mortgage industry is on the verge of exiting one of the most profitable eras of its existence. As a new era in mortgage lending begins to define itself, one thing can be certain: only those who are willing to adapt, with pro-activity and innovation, will survive. In tough times, it is important to maximize time and be as effective as possible. Direct marketing can be a great medium for this because it focuses on a targeted audience that has a need for a particular product. By combining the right data with the right offer, efficient execution, and measuring success, anyone can complete a successful direct marketing campaign. Where to start: Finding the right data and the right offer Executing an effective direct marketing campaign is not easy. The best place to start is by understanding what makes a campaign successful. Many people are caught up trying to develop a highly creative campaign and lose sight of what is going to make it successful. In a traditional campaign, success is driven by two main factors: the data and the offer. Data is a significant determinant of success because it is used to target the audience to which an offer will be extended. The more targeted the data, the more likely you will reach qualified responders. For example, if a mortgage broker mails a letter to a list of homeowners in a particular zip code for sub-prime refinance, chances are he or she will have people who are both sub-prime and prime responding to the offer. This not only wastes valuable marketing dollars, but it also hurts the broker's efficiency by having to handle calls from homeowners who do not fit the loan product target. However, if that broker sends the letter to homeowners in a particular zip code who have a credit score of 600 to 650, have a loan-to-value ratio of 50 percent to 75 percent, and have not refinanced within the past year, it will dramatically increase the likelihood of response as well as improve efficiency on the back end. This happens because the responders have a need for a sub-prime mortgage product, since they most likely do not qualify for a conventional loan. Data will always be a key contributor to the success of your direct marketing campaign. An equally important contributor is the offer. The offer you make to a consumer or homeowner has to represent a tangible benefit to the consumer that will drive him or her to respond. When creating an offer, you should always try to envision what will make a consumer or homeowner respond to your marketing. This will help to determine what type of offer would entice them. In addition, you need to have a full grasp of the benefits of your product and service when creating an offer. The benefits that your recent customers derive from your products are a great place to start. Some examples of benefits are a lower interest rate loan, lower monthly mortgage payment, the ability to take cash out to consolidate high interest rate credit cards or other debts at a lower total payment, eliminating private mortgage insurance fees, owning your own home, reducing your monthly housing expenditure, and the ability to make home improvements to an existing home. These benefits need to be clearly communicated to the target audience to compel them to respond to the direct marketing campaign. Lastly, giving the recipient something for free is always an excellent way to get people to respond to the offer. This can come in the form of free services or as an incentive. Some examples of this are a free consumer credit report, waiving appraisal or application fees, and offering promotional items if they follow through with the loan, such as free airline tickets, a computer or an iPod. Executing the campaign Once you determine the best data to fit the best offer, the process of marketing the product can begin. First, you must choose the most appropriate medium for carrying out the campaign. Ideally, a good campaign will consist of using a variety of methods. The preferred method, however, will vary depending on the campaign budget, the size of the prospect pool, etc. The two most common marketing channels are direct mail and telemarketing. •Direct mail: Mail is a tested form of direct marketing. With direct mail, a lender is able to lay out a visual case for the features, advantages, and benefits of a loan product. Additionally, more information about a loan product can be presented than in other channels. •Telemarketing: The growing Do-Not-Call list and increasing animosity toward telemarketers has steered many businesses away from what remains an effective medium. The ability to offer further information based on questions presented by the prospect combined with the ability to draw an immediate response make telemarketing a worthy investment for many lenders. Once your delivery media has been chosen, the creative process begins. Artwork and marketing pitches must be carefully tailored to the specific audience being sold to, as well as the product being sold. For example, a photo of an elderly couple standing on their front porch would not be fitting for a direct mail piece marketing a loan to a young married couple with young children. Perhaps that same marketing piece would be better with a photo of a young couple, holding a baby. Whatever delivery channel is chosen, it is imperative to remember that the combination of targeted data, a solid offer, and creativity will represent the best possible chance for a successful direct marketing campaign. Next, you will need to determine the response channel, or the different ways a consumer can reply to your offer. The most common response channels are toll-free phone numbers, call centers, and the company's Web site. Less common response channels include fax, mail-back cards, and a brick and mortar branch or office, which are more commonly utilized by banks and credit unions. •Toll-free phone number: You will need to set up a main toll-free number or dedicated toll-free numbers for each individual campaign to help you track your responses. Always provide a toll-free number when marketing to an area outside of a consumer's local area. •Inbound call center: For larger operations or campaigns, you may consider either creating an internal call center or outsourcing a call center operation in which customer service representatives qualify responders and then forward only qualified prospects to a loan officer. •Company Web site: Drive your clients to your company's Web site to fill out a pre-qualification form or have consumers register in exchange for a small incentive, such as a newsletter, a free consumer credit report, or educational materials. Measuring success For many lenders, the most difficult aspect of a direct marketing campaign is the ability to capture the information necessary to measure the success of the campaign. Whether it is system limitations or a lack of follow-through, the inability to measure results can render your work fruitless. Having access to this data allows successes to be repeated and failures to be avoided on future campaigns. For example, a lender executing a direct mail campaign could compare the number of closed loans to the data set used for the campaign. He or she could see which data points generated the most closed loans (i.e., 75 percent of all closed loans had revolving debt of $5,000 or greater). Conversely, you could determine what did not work (i.e., the campaign generated no closed loans from those consumers with revolving debt of less than $1,500). From this example, it is easy to see that not only can a lender use campaign analysis to eliminate a non-responsive population, they can also focus their efforts on a population that generates results. The lending environment in America is more challenging every day. Borrowers are no longer lining up outside the door to apply for loans. The phones inside those offices are not ringing like they used to. However, all hope is not lost. By efficiently targeting loan prospects, communicating the value of loan products and measuring both success and failure, lenders can not only survive, but also grow and prosper. It will not be easy. It will take creativity, pro-activeness and patience. It will, however, keep the phones ringing and make your business more profitable. Richard Scolio is president of MarketerNET LLC. He may be reached at (312) 229-5800 or e-mail [email protected].