Loan Demand Is There – But How Do I Find It?
From 2009 through 2015, anticipated loan demand was on the decline, bottoming out at 19 percent. Since then, the demand has increased sharply. In 2017, 28 percent of consumers reported they anticipated opening a new loan in the next 12 months. Although demand for loans was down slightly in 2018 to 24 percent, it will remain high in the next 12 months. Financial institutions just need to know where to look for it.
Use Target Marketing
How do you effectively use your marketing budget to target potential borrowers? Marketing dollars are not endless; using target marketing based on demand, needs and anticipation to purchase can make your spending more effective.
That approach proves to be easier when your organization actively mines your data in a way that helps create segmentation strategies to increase the accuracy in identifying customers most likely to be in the market for that next loan product. No matter how sophisticated your organization is in data mining, you have to start somewhere!
In my role at Raddon, I build marketing campaigns for financial institutions by starting with Raddon research to determine their opportunities for loans. Using Raddon Accelerator Bundle, my colleagues and I dig deep into an organization’s wallet share metrics for each of the Raddon Consumer Segments. We thereby determine the best segments to target and the first one to grow loans organically. This method can also signal if the current loan demand may prohibit additional organic growth and require a search for new customers to grow loans.
Increase Your Effectiveness
Before you define your targets, consider three main ways to increase your effectiveness:
- Use your organization’s strengths
- Identify the demographic profiles and the needs of those individuals
- Determine which product correlations will boost your success
Be reflective about your organization’s strengths by answering some critical questions. Do we have core lending strengths in certain product lines? Do we need to grow balances in a specific type of loan product based on asset/liability considerations, or are opportunities available because of changes in local markets?
In identifying demographic profiles and needs, consider generational preferences as one aspect. For example, Raddon Research Insights reports that 50 percent of the older millennials, those born in the 1980s, anticipate adding loans in the next 12 months. This is a key loan segment, especially if you have identified either first-time mortgages or credit cards as product targets for growth. These are the top two products in demand for this segment. But don’t overlook other demographics. Demand to open a new loan product over the past year was strong in all segments, with one exception – traditionalists, born between 1922 and 1945.
Remember to consider product correlations as well. Customers who have used certain loan products with you in the past are more likely to use another one of your products. Some products are more highly correlated than others are. Depending on the life stage, many mortgage owners need an equity product. Although that need may seem obvious, data will help drive you into the less obvious correlations between loan products and even deposit products to improve your targeting success.
Put Your Data to Work
All organizations are at different levels of sophistication in data mining, and targeting is not necessarily a new concept. However, deep, rich targeting is becoming a requirement. Putting your data to work is the key. Segmentation, product correlations and even relationship management are all important considerations as you build your campaigns to capture the demand that consumers are indicating they have.