If you've been reading our blog for long, you know that we've written much about how this "new" economy is impacting direct marketers. Obviously, the economy effects all of business -- and in times of economic downturn, we seem to discuss it's impact much more than when things are more rosy.
Today, there is more evidence that the slowing economy has really taken a toll on us -- particularly in the area of financial services, and more specifically, mortgage and student lending. The fact that there are increasing amounts of people that are losing their homes to foreclosure due to financing with subprime mortgage lenders has become the leading story in all of our newspapers. Plus, there is now further scrutiny by our political leaders on student loan providers (for more on this, please see our post from last week).
In today's DM News, author Eleanor Trickett reports that now "the Federal Trade Commission and a couple of Attorneys General have pointed the finger at fraudulent mortgage marketers." And further, due to this, "there’s no question that market forces have caused many direct marketers and their agency and supplier partners to reconsider how they are marketing products in such a volatile environment."
We all know of stories where people bought homes that they could not afford due to the creative financing that was available to them -- and as we watched the run-up on housing prices, we all knew from history that there would be an eventual . . . and certain . . . pullback.
At any rate, due to this focus on the mortgage industry, direct marketers have had to come up with new ways to more effectively serve the market today in order to help their companies sell more loans. As Trickett reports, "Many financial services marketers have told me that they have significantly retooled their mortgage marketing programs, from straightforward acquisition tactics to a strategy based more on education and informed decisions. What effect this will end up having on conversion rates has yet to be seen, but it will be interesting to learn how mortgage marketers are trying to maintain ROI for their DM efforts."
From our perspective, this is just another example of how we have to be continually prepared to rise to the challenges that the economy brings us. As direct marketers, we have to come up with better and more effective ways to increase response and conversion rates -- and positively impact ROI . . . even when the economy is not being particularly helpful.
We've all heard the saying "Hindsight is 20/20." We can all think of the conversations that we were having one and two years ago predicting this eventual outcome in the mortgage market. The problem was that we were all in the midst of riding the highs of that market, and striving to take advantage of those profitable times. Well, in hindsight, we did all see the downturn coming. As we continue to see the impact of the economy on mortgage lenders, we'll bet that those companies who planned for the downturn and began to plan their strategy accordingly are most likely the companies that will continue to prevail in this new economy. As we continue to track this, those companies will reveal themselves and establish (or maintain) their leadership position in the mortgage industry. We predict that the lessons learned from this difficult time will be the subject of business school case studies for years to come.
Yikes! Is it Monday or what? Have a good week! : )
4 comments:
I have a close friend and colleague who works for Countrywide. He knew that their marketing program was off balance. Loans were made that should have never happened.
But corporate greed took the lead in spite of what he proposed as a sound direct marketer.
When the customers' needs come first, the companies do well. When shareholders' needs come first, then the company should expect an Enronic outcome.
Ted
I hear ya, Ted. I've got some friends and clients that have become the carnage from some of the subprime lenders in Orange County -- many of whom no longer exist.
They tried to tell their leadership that the lending criteria was off base -- to no avail due to the exact reason that you cited.
The result: they lost their jobs, some of the "leaders" lost their companies, and the people who took the loans lost their homes.
Talk about a Lose-Lose Scenario!
I could not agree more that many of the residential subprime and stated income loans have been problematic. However, there is a commercial lending benefit to keeping this loan type alive. Financial institutions like Ocean Capital in Rhode Island maintain an up close and personal policy with the commercial lending that they do to folks trying to start a business and who may not have a portfolio substantial enough to make them attractive borrowers to the big box lenders. Sometimes, you have to purchase the gas station, auto repair shop or motel to generate revenue. Subprime commercial lending is oftentimes the only opportunity for certain new business developoment and should be retained.
Yes, you're right, Marianne. On the business side, it does often happen that small businesses can only get their start with more aggressive lending from some of the more creative B2B lenders.
There is definitely a place for "sub-prime." Even on the consumer side, it could help a person who, for whatever reason, is coming back credit-wise, from some type of personal hardship.
I guess the key is that this type of lending has to be done with some forethought so that you don't have millions of people who probably could never pay anyway receiving this financing -- and then failing. And failing enough to make a substantial impact on the economy.
Thanks for your comment!
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