Time to think outside the box
The mortgage industry has faced up to some pretty demanding
challenges over the last few years and only now does it appear
to be settling down to something like normality.
So as the market moves onwards and upwards,I think there is a
lot the lending industry can gain by taking a look at marketing
techniques which have been adopted by other industries.
Take another financial market, credit cards, as an example. It
shares many similar characteristics with the mortgage market:
it's a financial service, highly competitive, and a saturated
market in which the challenge is to win market share from
competitors because there is little room for genuine growth.
Sound familiar?
The credit card market has employed some very sophisticated and
aggressive marketing tactics to win new business - you may well
have been on the receiving end of them. They have analysed and
segmented their customer base in great detail; they know
precisely the profile of people they would like to own their
credit cards. The marketing tactics being used by the card
companies are equally as sophisticated. Interest-free balance
transfers and 0 per cent interest for six months is an enticing
proposition, as are loyalty points for frequent users and
long-lasting customers.
Could these techniques be used in the mortgage industry - quite
possibly? Churning has been, and continues to be, a problem for
lenders and attracting and retaining customers is a key issue
the industry has to face up to. Perhaps rewarding loyalty is one
issue we need to address with more vigour than we have done
previously?
One market where customer loyalty is taken very seriously is the
grocery sector - supermarkets such as Tesco have pioneered many
of the marketing techniques which are now taken for granted. The
whole concept of customer loyalty cards and the payment of bonus
points was first introduced by Tesco and supermarkets are now
analysing customer transaction data to look at how they can
tailor marketing campaigns for the future.
It stands to reason that if a customer is buying nappies, Rice
Crispies and cherry-flavoured lemonade on a regular basis, they
are probably proud parents of a young family. Sending them
special offers on children's clothes and promoting computers for
schools is highly likely to reach a receptive audience. Lenders
know precisely what sort of houses their borrowers live in, how
much they earn and what their payment record is like, all of
which is valuable marketing information. But how effectively do
we use this data to help target future marketing campaigns? Have
we identified the first-time buyers of five years ago as the
potential family house buyers of tomorrow? I'm sure there are
isolated examples of this happening but most marketing is
reasonably unsophisticated product promotion on TV, in the press
and at point of sale.
Interestingly, the big supermarkets such as Tesco are now
entering the mortgage market. It will be interesting to keep a
watchful eye on them and to note the marketing techniques they
deploy in order to build market share. With the power of a brand
such as Tesco to play with, it must be good fun being the head
of mortgage marketing and plotting a few new campaigns.
Low excitement levels
One of the problems all mortgage marketers face is that, for the
average person, purchasing a mortgage is not as exciting as say
buying a new car. It's a necessity and an intangible one to
boot. How do you win over the hearts and minds of a target
market which would rather clean the car than go and talk to
someone about getting a mortgage?
Perhaps we should look to the world of politics for a few clues?
Historically, most people have displayed a similar lack of
interest in politics as they do in mortgages and politicians
know only too well that they need to engage their audience as
they enter an election period. Well, we've just seen the mother
of all elections in America, where Bush and Kerry managed to
generate the highest turnout of voters in American history. They
may have split the country down the middle, but they also
managed to make many millions of people sit up and contemplate
issues which were hitherto deemed to be boring and irrelevant.
I'm not suggesting that we all start holding glitzy showpiece
rallies but we do need to consider how we can get borrowers to
take financial matters more seriously and consider them as a
priority which should rank above playing the lottery. I don't
have the magic solution but I do think there are lessons to be
learnt by looking at the ways in which others have successfully
addressed 'dry' subjects.
There is a great danger in thinking that all the answers to the
marketing challenges facing the mortgage market will come from
within the market itself. I have no doubt that those who are
willing to study the successes of other market sectors will reap
rich rewards.