The Biggest Myth in Mortgage Direct Mail
Do you think sales is a numbers game? Many very smart loan officers think that the way to increase their loan pipelines and to increase their loan closings is to simply increase the amount of mail they send to prospects… they couldn’t be further from the truth.
Let’s expose one of the biggest myths about mortgage direct mail… response rates don’t matter! It’s not the Holy Grail of Success. You don’t get paid on response rate. People gravitate to response rates because it is the first element of the marketing cycle they can track (and some would say the easiest, too). However, I’ve seen response rates of .2-.4% consistently show a better ROI (return on investment) than those with 5 times more responses. Forget your Marketing 101 class that told you the average response rate for direct mail is 1-2%.
Maybe if you’re Pizza Hut sending me a coupon for a free pizza or the new dentist on the block offering a free teeth cleaning to new customers can you expect “the average” rate of return on your mortgage offer via direct mail. However, expecting a qualified return of 1-2% on the largest single purchase most of us ever make is not typically in the realm of reality. Does it happen ever? The answer is yes. By the same token, some guys just won $365,000,000 in the Powerball Lottery. It happens, just not very often…and usually not to you or me.
There are mortgage marketing and direct mail companies that will tell you they “usually get” this type of response. Heck, some even skate out on the ice a little further and throw out a much bigger number. Getting a big response rate can be easy, but getting to the ones that truly want your service is a whole different ball game. A case to illustrate my point…One very clever company proudly touts a 2.5% response rate on their mailers. How do they get that number you ask? They offer a free booklet on “the 10 Things YOU MUST KNOW before your get your next mortgage. Call our automated hotline to order your free information today.” I received one of these in the mail a couple of years ago and I had to find out if it really worked.
I’ve been in mortgage marketing for 15 years and I have to tell you, that headline makes me want to know what the really big secret is that I need to know…so I called to get my free booklet. The marketing company utilizes an automated call capture system with a toll free # and then reverse look up the name and address of the people that responded, which they then pass along to their client. Since the prospect called in the first place, calling back is no longer restricted by “do not call” rules. The mortgage company was in the clear, or so they thought.
The response rates looked tremendous. Surely, getting a chance to talk to this many “interested” homeowners seemed like it would work. The reality is that while many prospects may want to know the “inside scoop” in a free booklet, they weren’t interested in talking to the mortgage company about a mortgage when a loan officer called back.
I called the company that sent me this letter, told them who I was and that I was calling to see if this tactic really worked for them. I spoke to the branch manager and I’ll never forget what he said…” People freaked out when we called them. “How did you get my name,” they asked? “I’m on the ‘do not call’ list,” they said. This coupled with hundreds of “I’m not interested.” Despite his admission that they did close some loans from the campaign, he felt they had done more harm than good.
He had, in just one direct mail campaign:
- demoralized his sales force ( they had taken the brunt of the beatings from irate responders after expecting to close a lot of loans)
- been referred to the local BBB for false advertising
- lost credibility within his organization and with his sales team.
The moral of this story is there aren’t many shortcuts to success. It’s the QUALITY of the responses that matters most. Don’t buy the hype, especially when response rates are the metric first mentioned in the sales pitch by marketing companies. ROI, or return on investment, is ultimately the only metric that really matters.
Rex Rogers currently operates a website to connect mortgage brokers with mortgage lead providers and marketing companies. His site, LeadsBid.com, allows originators to submit their criteria for the purchase of mortgage leads and lets providers compete for the business.