Equity acquisition programs have always been challenging when targeting prospects. In fact, getting a response rate of .1% (yes, the decimal is correct) can be considered a success… especially in these competitive times of financial institutions being flush with cash and wanting to lend. To ensure being as efficient as possible with your marketing dollars, all initiatives to increase loan balances need to start with current customers.
Focusing on equity, the best place to start is with your mortgage customers. Assuming your financial institution keeps mortgages on the books, the amount of the loan balance remaining is known. Using this to calculate how much equity is available can help in selecting who is eligible and aid in the messaging (discussed more below). In today’s rate environment, it is possible that an equity offer may result in a refinance of the mortgage, but it is better that the customer refinance with you versus a competitor!
Many institutions have a separate system that houses mortgage data, so marketing may need to work with the mortgage department to obtain the data and make it useable. If your institution sells the mortgages, maintaining a database of sold customers to “stay in front of” for future equity offerings is beneficial. If the mortgage customer has other accounts with you, flagging the customer record can help compile a list of customers who held a mortgage with you.
Another area that is often overlooked for increasing loan balances is existing equity line customers with under-utilized lines. These customers already understand the need for an equity line and don’t need to be convinced to open the account. They may have forgotten they even have the account! A simple review of the equity lines already on the books and the utilization rates can provide insights into the opportunity and provide direction on who to target with a reminder message.
Existing mortgage and equity line households usually make up a small percentage of an institution’s total customer base but there is plenty of opportunity with the remaining households. If you had an unlimited budget, you could communicate to all customers without a loan. Since that isn’t a reality for most institutions, steps can be taken to further refine the audience for a lending message.
A great first step is appending external demographic data to your customers. This is important in determining if a person is a likely homeowner and most data companies also have information regarding the current mortgage for the household. Information like mortgage date, amount and current home value can help estimate the probable equity available in the home. Adding those variables to demographics that imply the life stage of the household (age, presence of children, etc.) can help identify the likelihood that the household will be in the market for an equity product.
Ideally, the appended data will then be used to build a model to quantitatively determine the likelihood of borrowing as opposed to guessing. The standard process is to build a profile model using the existing equity customers and then score the rest of the customer base on the likelihood of needing an equity loan. Then a communication campaign (mail, email and digital) will be executed and the responses are fed back into the model to develop a response model that continues to improve over time.