Marketing home-equity products: a review of the decisions and actions needed for optimum campaign results.

• Author: Monteleone, Jim
• Position: Direct Mail

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The success of a home-equity mailing is judged by how well it meets its return on investment (ROI) goal--and in a larger sense--how well all such programs help the bank meet its annual home-equity revenue targets.

With this in mind. estimating response and conversion for each mail flight can (and should) be done as the first step in planning an annual home-equity solicitation program. Questions that need to be asked range from the obvious (How much money do you need to make?) to the complex (How often should we go out to customers and prospects, with what messages, what offers, etc.?)

The answer is a function of "What's there?"--that is, the size of your potential universe. This is a combination of the response potential of your customers and likely prospects within your bank's footprint.

Once the universe of candidates is defined, separate estimates of response potential should be done for each mailing to customers (cross-selling and activation)--and to prospect for new account acquisition. Only when such estimates are completed is it possible to take a "reality check" to see if your allocated annual mail budget has a chance of reaching the often-aggressive ROI goals set by senior management.

And as ongoing mail solicitation programs drop throughout the year, there is huge benefit to be gained from detailed (and frequent) tracking of response, conversion and take-downs. Not only will you know how your mail is performing, you'll also be able to fine-tune your booking channels as well.

The frequency of measurement is important--the more often you measure response and conversion, the more quickly you can spot "leakage" in the process that may be jeopardizing total program results. For example, a large number of responses--but a lower than normal conversion rate--can indicate serious list problems, training issues or application processing problems that can cobble even the best direct marketing effort.

Time spent estimating "what is doable"--then being able to track results through every step of the response/conversion process--can pay huge dividends and help you reach your ROI goals. Ignoring any of these planning issues can be a recipe for failure.

Making the right offer

Home-equity credit offers have a lot going for them compared to other types of credit. Under certain circumstances, the interest paid on home-equity borrowing may be tax-deductible. Interest rates are usually far lower than other kinds of revolving debt (such as credit card borrowing). Loans can be structured for long periods, making monthly payments affordable.

In general, most borrowers seem to understand that home-equity credit is their most substantial (and attractive) credit alternative. And given the great number of offers in the marketplace today, potential borrowers are becoming highly selective in terms of rate, offer, terms and other reasons why they should choose one particular offer over another.

Aside from the obvious need for additional funds, an attractive interest rate seems to be the single largest response driver. This, plus a teaser introductory rate, has become...