This week I continue my series of columns focused on maximizing conversion, but go way back to the beginning of the lead generating cycle and talk once again about marketing.
Last time, I talked about Underwriters, and now I am back to the beginning of the process? That is not moving to closing. That is moving backwards! Well, I want to take some time out to discuss the biggest opportunity that the mortgage industry has generated since that crazy period when every loan was a no doc and the investors bought them all anyhow.
I am not referring to the amazing technology solutions that I went to see at the MBA Tech show in Los Angeles last week. I am referring instead to what one of our industry's leading tech companies is doing to make one lucky person very wealthy. Of course, I mean Quicken Loans teaming up with Warren Buffett to offer $1 billion to someone for picking the entire NCAA championship bracket correctly. That truly is March Madness.
Of course, Buffett is no dummy, and surely neither is Dan Gilbert, the owner of Quicken Loans. Buffett surely knows that he is not underwriting a very high risk, with the chance of winning like 1 in a 9.2 quintillion if you guess on each game, and 1 in 128 billion if you actually are an expert in basketball prognostication. In fact, the numbers being thrown around are so crazy, I think we need Dr. Evil and his little pinky finger to properly enunciate the amounts. But everyone loves March Madness, and Quicken is generating a lot of attention for itself with this low risk gambit.
Now, full disclosure: I am a March Madness expert, having nearly won a pool several years ago that was being run by some friends of mine who work at a well-known government agency. These guys were hardcore geeks, but I nearly stole the pot by picking the winners for each game based on a very simple formula I used SAT scores as an inverse predictor of athletic success. You see, I picked the team with the lowest SAT scores in each matchup, and watched with excitement as certain subpar schools swept aside Duke, Georgetown, UVA and others. Heading into the Final Four weekend, I was leading all others in my non-government-sanctioned pool, just by betting on the dumb kids. Despite this secret formula, I still had no chance to get every game correct, with teams like Stanford and Michigan as bracket busters. And I don’t think that anyone is smart or lucky enough to get the Gilbert Bracket Buster challenge correct either.
Now, let me discuss Dan Gilbert's marketing plan for March Madness, which is certainly not a dumb move. In fact, it’s pretty smart, and it’s actually a good story about lead generation, marketing and conversion. Quicken is getting a lot out of their challenge to give away a billion dollars. First, they are getting huge brand recognition for their offer, getting huge publicity because the headline is so audacious and the topic is so top of mind. Everyone is talking about March Madness, and a subset of them are taking about Quicken too. That is great PR, and it's helped by the association with Warren Buffett and others. So, for branding reasons alone, Quicken is getting a lot out of this marketing campaign. In fact, this is such a big story that I was interviewed about it by NPR to offer my opinion about the marketing impact of this approach. When NPR is talking about the mortgage industry in a positive way, we know it’s big news. I am just upset that I was interviewed for 10 minutes about this and they never offered me a free tote bag. (If you don’t get that joke you have never sat through an NPR fund drive - lucky you.)
It’s hard to measure the benefits of branding campaigns, although Quicken sure seems invested in such approaches, as they also have a couple spokesmen touting their capabilities -- which apparently include playing a set of “bucket drums” and rescuing Ben Franklin from bad guys on speedy trains (watch the commercials if you don’t understand this reference). However, the March Madness challenge is more than branding; it’s also a direct response campaign that teaches us a lot about how mortgage marketing works.
Quicken has participants answer a series of questions as they opt in to participate in the Billion Dollar Challenge. These questions form two functions first, it creates an opt-in scenario for Quicken where they have an option to contact the consumer through the mobile number or email provided. Now, the consumer can choose not to opt in, but many will not, and the act of opting in is very valuable. Quicken is a direct lender, which does a lot of direct mail, outbound email campaigns and outbound phone calling on mortgage prospects. The challenge of trying to get consumers on the phone is that most potential mortgage borrowers either do not have easily identified phone numbers or have opted into Do Not Call lists.
My firm's research on this topic shows that over 80% of potential mortgage leads do not have phone numbers that can be contacted by the marketer unless the phone number is provided as part of an opt-in process. Quicken has good technology, and they likely have built a huge database of possible mortgage leads, perhaps by using advanced lead generation techniques including database, online and offline marketing. However, if they can get millions of March Madheads to suddenly opt in for contact, then perhaps some of those hard-to-contact leads will become easier to reach, driving up conversion (that word again).
The second dynamic of lead generation is that Quicken may be generating millions of new leads, but for the mortgage industry those leads are tough to monetize without a strong lead management strategy and a patient outlook. Mortgage marketing is not like marketing for a consumer product. If this were the $1 billion dollar Old Spice Challenge then you could expect every man who opted in to be a potential user of the product. And since Old Spice makes you smell like a man, then perhaps every woman would treat you like one. (This is my fourth commercial reference in one column, a National Mortgage News record).
The challenge for Quicken is that even if you get homeowners to opt in to your campaign, the typical qualified prospect only needs a mortgage product once every five to seven years (compared to the typical man who needs Old Spice every day). So, Quicken is going to have to take a long view of nurturing these leads, and also a very analytical approach to figure out when these prospects are most likely to need a mortgage. This involves using a lot of data, so you can figure out when a prospect might be moving from renter to buyer or when a homeowner might be looking to sell their current home. They could also use models that predict likely responders to various campaigns that can tell them which ones are the best prospects to contact and when that contact might generate returns.
It’s going to take a long time to figure out if this lead generation technique works, way past when the nets are cut down. Even the typical web generation campaign can take well over six months to figure out if the campaign is generating a return. With proper nurturing, prospects can respond months later, and make the campaign a success even when early results may be far less promising. This points to a problem many lenders have they get used to quick hits during the refinance booms (call, quote, and close), and then have to pay up for loan originators who can generate Realtor-screened buyer leads during the purchase cycle. The good companies and Quicken is one of them take the long view and work the leads forever, continually adding data for each prospect to give them the best chance to convert the leads as the customer’s situation changes.
I wrote this from the MBA Tech show in Los Angeles in the shadow of the Staples center where two NBA teams play their home games. So, before I leave town and head home to South Florida (home of the World Champion Miami Heat), I have a final basketball related message for Dan Gilbert. And that is no matter how many billions he offers to pay out for basketball winners, he is not going to get Lebron back from Miami. That's one player who doesn't need someone else’s money to make him a winner.