Refinancing Offer Sticks to Basics

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Simplicity has been the driving force behind an ongoing direct mail campaign used by a Midwest mortgage bank to drive refinancing business.


Northern Lights Mortgage Co., Minneapolis, has targeted more than 350,000 homeowners since December 2002 within 45 miles of the company's six offices in the Twin Cities area of Minneapolis-St. Paul.


Elaborate photo spreads of smiling families in front of homes were not part of the mix, however. Instead, a basic 8.5-by-11-inch notice in a two-window envelope was used.


"For the last eight months, we've seen interest rates at historically low levels," said Tony Barranco, vice president of sales and marketing, whose company has 125 employees. "With that creative, unless they [had] just refinanced, we knew we could give everybody a lower rate. This meant we could spend less time matching the data sets with the creative. One piece of creative took into account all segments of our potential customer base. Sometimes elaborate pieces are no more effective than simple pieces.


"The key was targeting homeowners within drivability distance of one of our offices," he said. "There's probably 750,000 households within drivable range of one of our offices in the Twin Cities. We did as many as 80,000 pieces per month during the spring."


The envelope's top window revealed: "FORM 734-RR [in black]. INTEREST RATE REDUCTION NOTIFICATION [in red]. Department of Loan Reprocessing [in black]." It also contained an address in Robbinsdale, MN. The second window included the recipient's name and address along with "RE: Interest Rate Reduction Notice" in black, bold type.


"In the direct marketing business the creative is just a means to getting the contact in touch with the sales rep, and if that happens, I don't care what's on [the direct mail piece]," Barranco said. "It's just the means to the end. The data is the catalyst to sales success. The most important thing is the credit information and the recorded mortgage information.


"I'm convinced that if you over-explain in the creative, there's less reason to initiate the conversation," he said. "The creative is designed to get the phone to ring. If we answer all of their questions in the piece, that does a disservice to our sales team."


Northern Lights has found no benefit to segmenting by loan-to-value ratios or income levels -- what Barranco called "inconsistent and unproven types of data."


The piece asked them to call a toll-free number "to verify the information below so that we may begin processing your interest rate reduction." Current mortgage information in the letter contained the property owner's name and address. A deadline date was included.


"We used rolling deadlines based on the printing dates of the letters, and we tried to make that a short period of time," he said. "A longer period of time allows [the letters] to sit around. With bulk mailing you must be cautious regarding mail delays. The deadline to call was always between two and four weeks after mail reception."


The effort is generating "closer to a 0.9 than a 1" [percent response], a level Barranco described as acceptable. Just under 20 percent of homeowners who responded were converted to borrowers. The average first mortgage in the company's Twin Cities market areas is about $160,000.


Using only the letter with no business reply card held the per-piece cost -- including postage, printing, list acquisition and creative -- to 60 cents.


The mailing's run likely will end soon because of the rise in refinancing rates.


"The best time was during spring, the period before rock-bottom rates emerged," he said. "With the diminished return, we're starting to move away from it. I don't anticipate that we'll be using it for much longer because, with rates going up, we'll need to look at changing the creative to adjust to changes in the market. We're still getting a good response, but the data universe is shrinking."


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