Noyes and Funsten offered their observations during a February 8, 2007 Webcast entitled, “Strategies to Optimize Deposit and Loan Acquisition, Retention & Profitability,” hosted by OnsiteConference, Inc. a privately held research marketing firm located in Tampa, Florida

What they see as having a major marketing thrust, however, is first mortgage refinancing.  The number of adjustable rate mortgages that are resetting this year should peaking in 2007 and continue a little into 2008. 

“Where consumers once tapped into their equity with a home equity loan or line, they’re now tending to refi there first mortgage and use that equity,” commented Noyes.  “The problem arises from promoting these aggressive products to consumers looking to refi adjustable rates is that eventually their monthly payment gets a little bit too high,” Noyes added.

The net result is utilization rates are dropping on home equity lines.  Noyes said that Harte Hanks clients are experiencing HELOC utilization going from 49% in 2006 down from 52% a year earlier. 

“The other problem that’s being created in this wash of refi is folks that traditionally weren’t sub-prime are now turning into sub-primes.  The sub-prime market is actually increasing because FICO scores are starting to drop,” commented Noyes. 

Funsten and Noyes see three major trends developing in the marketing of loan products. 

First, marketers are considering alternatives to an ‘invitation to apply’ (ITA) as a solicitation both first mortgage and home equity loans.  Noyes and Funsten see gravitation back to pre-approval offers. 

Second, the number-of-contacts is increasing.  “The days of soliciting during April and then back to school are gone,” said Noyes.  He added, “We’re seeing continual solicitations throughout the year as being a much more productive method.”

The third trend is the leveraging of ecommerce.

According to Noyes, ITA produces a 75% better response rate than a pre-approval offer for home equity loans.  But with the ITA offer, the turn down ratio and associated expense is quite high.  If the turn down expense, the cost for turning down every single one of those accounts that respond to your ITA offer, then pre-approval becomes a more cost-efficient alternative.

To target customer and prospect homeowners who have the maximum propensity, and capacity for Equity credit, Harte Hanks employs a three step process to optimize response as well as conversion. 

First, establish your exclusion criteria then establish tracking segments for current and former customers.  Next, pull a credit prospect list from your established zip code trade area and reject household record for customers and prospects using your prescreen and direct extract criteria.

Finally, refine the selection at the third party processor by selecting pre-approved households using response and conversion models.  Noyes recommends using both response and conversion models because the variables that are indicative for response are very different than the ones that are indicative of conversion.

“So by combining those two models and selecting the top four deciles from each of the models you will end up selecting the best 16% of your list.  That becomes a very productive list that you could essentially mail and produce very good results, says Noyes.  He added, “What we find in doing this process several times during the year, you end up basically maximizing your acquisition goals.”

Multiple touches (direct mail contact) actually produce higher response rates.  Noyes explained that, “If the prospect qualifies through your modeling each time you generate the prospect list, then absolutely the sixth touch actually has as much as a 136% increase in response than the first touch.” 

Regarding ecommerce, marketers vary greatly in how they approach the use of technology.  What is driving the use of ecommerce tools, noted Noyes, is research that shows that two in five of your responders will checkout the offer online before responding.  And that one of those five will actually apply online.

So the guidelines recommended by Noyes and Funsten include:

• Make the landing page simple and straight to the point.  You’ve only got a few seconds to communicate your message. 
• Remove any type of navigation that might take them away from the landing page for more information or to gather information.
• Require only those fields that are only needed.  A productive idea is the use of a reservation number that once entered can pre-populate certain types of fields.  The registration also gives you a list of responders that you could re-solicit.