As with any service industry, developing and retaining good customer relationships is crucial, and this is never more evident than in the financial sector, and particularly in the relationship between mortgage provider and intermediary (mortgage brokers and independent financial advisers – IFAs). The beleagured Northern Rock is a case in point because although it has come in for heavy criticism by the press, it still enjoys good industry buzz among intermediaries.
Banks, building societies and specialist lenders spend millions of pounds on their marketing activities each year trying to persuade new customers to take up one of their offerings. Some of this activity is directed towards mortgage seekers, but much of it is aimed at the mortgage intermediaries.
The intermediary market is extremely fast moving; within a month or two, a concerted service and marketing effort by a mortgage lender can improve its brand’s prestige substantially. Within a year or two, a complete brand franchise can be built or lost.
Earlier this year, BDRC implemented Project Mercury, a major research project designed to track mortgage lenders’ marketing effectiveness and brand standing among active mortgage intermediaries. The research looks at how mortgage providers are marketing their products and services and how effectively.
Each month BDRC interviews 150 mortgage intermediaries authorised by the Financial Services Authority (FSA) and chosen at random.
The two principal components of the analysis include descriptive evaluation – brand standing, brand marketing, brand experience, brand editorial; and diagnostic evaluation of trade press advertising, including the relationship between advertising awareness and the willingness of intermediaries to recommend.
The best measure of brand standing is the unprompted willingness of intermediaries to recommend a lender, as this encapsulates both brand salience and brand performance.
Interestingly, Northern Rock is one of the top three brands for any mortgage, although Alliance & Leicester showed the greatest improvement (10% from the previous quarter). Abbey and Halifax made up the top three. Northern Rock topped the list for recommendations to first-time buyers as well as being the most recommended for 100% mortgages and for those looking for equity release.
Building a willingness to recommend should be the central aim of lenders’ intermediary marketing which, based on our analysis, must include advertising, direct marketing, PR/editorial coverage, and business development manager contacts.
While past business is key to future business, it does not completely define it because there are several other variables to take into account. These include competitively priced products, clear and consistent underwriting, speedy and efficient processing from application to offer and then from offer to completion, knowledgeable and pleasant staff, and good relationships with business development managers.
The mortgage providers that make up the top five from our research findings are strong in virtually all areas and this performance has been fairly consistent throughout the year. Some notable institutions that are strong in some areas but not in others (for example, strong in underwriting but slow in processing applications) have a lower score in brand standing and this, in turn, influences the behaviour of mortgage brokers. This is a crucial area for lenders and one that they need to stay on top of.
Another area that influences lenders’ brand standing among mortgage intermediaries is unprompted brand salience. This is a combination of unprompted recall of any marketing activity and any wider “industry buzz” (comments among friends or colleagues and mentions in the media). Halifax, Northern Rock and Abbey all have a high brand salience rating (more than 50%) among mortgage intermediaries. In the majority of cases, recall of marketing activity is at least twice as high as that of industry buzz.
Trade press advertising does have an impact on the selection of a lender. Although there has been a relatively low unprompted recall of any lender advertising (which, in itself, is worth noting), the picture changes when the intermediaries are shown specific campaigns. Our results suggest two areas have a major impact on intermediaries; “useful news” and a strong “feel-good” – or reassurance – factor.
Intermediaries’ colleagues tend to drive favourable and unfavourable “buzz” to a greater degree than the media. So even though a mortgage provider may receive unfavourable media attention, it may not have a deleterious impact on the intermediaries. In turn, bad press may not necessarily lead to a downturn in business since we can clearly show a close correlation between intermediaries’ attitudes towards a brand and consumer uptake of mortgages.
Nevertheless, mortgage provider brand image is extremely important to mortgage intermediaries, so lenders must pay particular attention to how their brand is perceived by their intermediaries.
Low inflation, low unemployment, low interest rates and consistent growth have helped the mortgage industry to flourish, with more than 20 lenders entering the market since the last quarter of 2004. But now the market looks more uncertain, those that understand their market best and communicate effectively with their target audiences should be the ones that survive over the next three years.
Mark Long, client services director of BDRC, contributed to this week’s Trends Insight