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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   July 2019

Market the Right Way for Growth

You need a datacentric approach to boost commercial loan volume

c_2019-07_Roberts_spotMarketing in the lending world is tricky. Financial companies, including commercial mortgage brokerages, often spend lots of money on ads, leads and branding, with dubious returns on these investments.

Marketing campaigns have measurable results, but the costs and returns from marketing efforts are often overlooked by companies. A good rule of thumb is that for every dollar you spend on marketing, you should expect $2.40 or more in revenue, but how do you achieve that kind of return? It won’t happen automatically, and it won’t happen without an effective plan of action and a lot of work.

Marketing should be viewed as a data-dependent exercise in which the goal is to find and attract prospective borrowers. The branding aspect of marketing — blogs, business cards, logos, T-shirts and other ancillary items — is often overemphasized. Your brand is not your business.

Datacentric marketing

Today’s effective marketing campaigns are data-centric. The main objective for the first few months of any internal or external marketing campaign should be to take the pulse of the marketplace, your audience and what compels prospective borrowers to submit a loan application. Armed with knowledge about your potential clients, you can make critical decisions about how to market your products and services, with an unwavering understanding of your audience’s purchase propensity, preferred messaging and detailed targeting.

Effective campaigns should begin with a study of the demographics, interests and behaviors of your potential customers. You will want to target a specific audience and avoid spending money trying to appeal to people who aren’t likely to become your customers.

The market study should attempt to answer several questions, including how many times you need to reach out to the average person before they will contact you; how effective those messages are in turning potential leads into clients; and which channels — such as print advertising, online messaging, etc. — you will use to attract and retain a client long term.

Effective marketing takes time and patience. Real estate investments are big-ticket items with a long and extremely complicated purchase path. Mortgage brokers might not immediately see results from their efforts. Although this is not an easy pill to swallow, it could take six to eight months for your campaign to unlock seven or eight-figure revenues, and yield the desired twofold or threefold return for the dollars you spend on marketing.

External agencies are typically only going to perform well when they are highly specialized in a niche.

Hiring decisions

You will need to decide whether you are going to handle your marketing efforts internally or via a third-party agent. Small mortgage companies may have no choice but to do their own marketing. For external hires, however, you may need to make multiple staffing decisions. Your marketing hires will need to have a skill set that is well aligned with your technology. If you are running HubSpot for social media and web analytics, for example, hire a HubSpot wizard, and so on.

Another consideration is the type of employee you need, whether junior level or senior level. Junior-level marketing employees can command annual salaries in the $40,000 to $60,000 range, and experienced managers will cost more. The downside of hiring inexperienced staff is you may need to spend quite a bit of time on training. Entry-level employees are often capable, but need to overcome a learning curve. Experienced marketing professionals with years of experience command higher salaries, but they also can be expected to have a wider range of talents. If you are planning to hire for experience, it may make sense to employ a single marketing professional and also use a few outside venders.

The cost of your marketing efforts should amount to no more than roughly 8 percent of your top-line revenue, which includes the cost of staffing, technology and tools. External agencies typically cost big money and often yield poor results. There are endless funding scenarios out there. Doing any sort of marketing in the private commercial lending space, even with the so-called gurus of the industry, is a complex beast.

It is extremely difficult to find an outside company that can supply all the marketing needs for a mortgage lender or broker, will own the results and provide services at a reasonable cost based on the returns. In many cases, you end up as a line item on a list of clients. Hiring an external firm, however, can make sense for larger shops that want to manage their marketing under a single line item in their budgets and are confident the return on their spending makes sense. Furthermore, if a company is spending more than 8 percent of its top-line revenue on internal marketing efforts, then it may make sense to explore external partnerships.

When considering an outside marketing company, listen for specific details, such as, “We do this better than Company X because for 10 years we’ve driven X millions of dollars in results.” You also should verify every claim prior to choosing a partner and ask how many individuals in the agency have experience working with private commercial mortgage companies.

Niche experience

With all that said, it is clear that a marketing SWAT team consisting of three to five employees and some supporting vendors can be a sound investment. External agencies are typically only going to perform well when they are highly specialized in a niche. If they don’t already do private lending, they probably won’t be of help.

Don’t get sold by an external marketing company that talks up their experience in the residential qualified mortgage space. Private commercial loans are an entirely different ballgame than conventional financing for residential properties. The challenge of nailing your marketing efforts is not for the weak.

Commercial mortgage lenders and their broker partners are often good at closing loans, but misfire across the board on areas that impact the cost per acquisition, or close rates. Companies sometimes swing wildly for the fences in their zeal to solicit customers, but have failed to do the groundwork by compiling and analyzing the data necessary for an effective, targeted marketing campaign in which the returns justify the costs.

Your marketing efforts should be tracked internally from end to end. Do this better than your competitors and you will figure out how to block out the noise so your sales team can keep selling. 


 


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