Think for a moment about how you are spending time today versus two years ago—how much time is spent closing a loan? Where does that extra time come from? If you are like most loan originators (LOs), you are spending less time focused on marketing. An automated, systematic approach would make a tangible difference in your results. Customer retention in the mortgage industry averages around 25 percent, which is too low to ensure long-term success.
Looking forward, it is likely that consumers will get a new mortgage every five years, implying a very purchase-oriented (not refinance) environment. By not keeping in contact with past customers, originators lose an average of 75 percent of the revenue each customer relationship represents. You don’t need an MBA in finance to see that originators need an easy way to build and maintain relationships with clients, prospects and referral partners.
Total originations in the market are forecast to fall for the fourth consecutive year. Combine this with increased competition from the top end of the market, and we may see originators’ income decline as well.
But not every originator will see their income plummet. In fact, during the past few years, some originators have seen their income skyrocket. What was the secret to their success? The top producers have continued to innovate in their marketing, taking advantage of new technology, sophisticated database management techniques and variable digital printing to execute new marketing strategies to their prospects, existing customers and referral partners.
When utilizing technology, even classic marketing tools like direct mail can be enhanced to achieve strong results. Although the benefits of marketing seem obvious, many originators either use generic marketing that isn’t effective or they don’t market to past clients at all. Top originators have always used marketing more effectively to produce greater loan volume and profit than their peers.
The most successful originators have three components to their direct mail campaigns.
Relationship marketing needs be regular and automated. Targeted marketing needs to be precise in list development and messaging. And, most importantly, reputational marketing should be relevant to the consumer. Incorporating all three of these elements will increase results and ensure long-term success.
Relationship-building marketing
Direct mail campaigns that are continuous remind customers, prospects and referral partners who their originator is, so they will return to you when it’s time to close another loan. An example is holiday cards. When used continuously, holiday cards make it easy to keep your name and picture in front of your target group. While the message is the same to all recipients, we know that frequent communication helps maintain a relationship.
Regular communication, even with a “mass” message, is the first step to a successful marketing campaign. It increases the chances that when a homeowner realizes it is time to conduct a transaction, they will think of you.
However, too many originators think that this is all their marketing needs to accomplish. Sending the same message to everyone, while important, has two key flaws. It doesn’t demonstrate that you are continuing to manage the consumer’s account—in fact, it takes your relationship from a detailed and important financial advisor at the time of the loan, and reduces it to an acquaintance who remembers birthdays. And, it isn’t targeted to the homeowners’ individual needs. Instead, it treats all of them the same. You provide a lot of personal service when finding the right loan product and tailoring a loan to meet individual needs—your marketing should demonstrate that this level of personal service still exists, long after the initial transaction.
Targeted marketing
The next critical upgrade is to make your direct marketing efforts opportunity-driven for a specific audience. Whether it is a new product launch, a refinance opportunity, or simply advice on how to help someone who cannot qualify for a loan today, targeted marketing requires that you to analyze your database to find those who would benefit from a specific opportunity. Then, tailor the message specifically to them.
How does this apply today—think about HARP 2.0 or HARP Phase II. This program will be available for homeowners based on loan date and other restrictions. You need to target the right group of borrowers with a message customized to them. Mass postcards to all homeowners will work, but why waste the money sending a notice to someone who is not eligible and not interested? In addition to wasting resources, it also demonstrates that you are not paying attention to them and their situation—which is not a desirable outcome from a marketing piece.
Reputation-building marketing
The third and most important component of direct mail marketing is to enhance your reputation by making the message both relevant and important to the consumer you are targeting. A study conducted by the direct mail industry revealed that when marketers used more personalized marketing messages, response rates from consumers increased tenfold. In short, the more relevant the marketing, the better the results will be.
Relevant marketing will maintain the trust and credibility built when you helped that consumer through the maze of regulations and red tape that is our current closing process. Marketing should have the goal of positioning you as a lifetime financial consultant, not just another salesperson looking to make a commission. To consumers, salespeople are pushy, self-serving and easily replaced. Consultants are trustworthy.
Think about your past customers … you know a lot about them. You know the details of the last loan, why they chose it, and what they are trying to do in the future. Sending out “Happy Fourth of July” cards is nice, but if you want them to truly remember the professional and detailed service you provided, you need to do better. Take this message for example:
“Andrew, your loan closed in September 2011 at a rate of 4.25 percent. Today’s rate is 4.5 percent, so my recommendation is to not do anything—you have a great rate! If your situation has changed, call me, and let’s talk about it.”
The next time rates do drop, or new products come out, and you call him, Andrew will return the call. He will remember you helped him through the loan process, and then kept track of his loan after the sale. When he has a friend ready to buy a house, he will recommend you.
If you have been a successful originator in the market for more than four years, you probably have 300 or more customers in your database. If homeowners do a transaction every five years (a purchase market), then 60 people you know are likely to do a transaction this year. How likely is it that they are coming back to you? What are you investing in that relationship to get them back?
You also know a lot about your prospects—you also know a lot. You know who is qualified, who is looking now, who is rate shopping and more. Shouldn’t your marketing demonstrate that you know these things? If it does, you will make it much more likely that the prospect will close their next loan with you.
Originators need a marketing engine that truly maximizes the value of existing relationships, rather than trying to survive with a series of one time transactions. You have a lot of information at your fingertips about your customers and prospects; make sure you use it to enhance your reputation. Don’t be satisfied with the simplest or cheapest marketing. Invest in marketing that delivers the best results.
The difference in results between good marketing and great marketing is easily measured. Are you satisfied with a loan or two from your past customers, or, do you want to truly capitalize on customer retention? Remember the three keys to marketing—build relationships, target effectively and build your reputation. Any marketing program that doesn’t include all three elements will lower your results. It would be like putting bicycle tires on a Ferrari—it may work, but you wouldn’t be satisfied with the result.
Jim Blatt is chief executive officer of St. Louis, Mo.-based Mortgage Returns. Jim co-founded Mortgage Returns in 2004, bringing consumer and database-driven marketing expertise to the company. He may be reached by phone at (314) 989-9100, ext. 102 or e-mail
[email protected].
