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.
Anthony Harrison owns http://www.capitalmortgagesolutions.co.uk, a specialist mortgage broker which provides mortgages and mortgage advice to clients suffering from credit problems.