We are now all trading in a very competitive market, with both lenders and brokers in hot competition for whatever business there is to be had out there in the marketplace. Standing still as a business is no longer an option, as there are likely to be competitors waiting in the wings with some smart ideas about capturing your traditional business.
Diversification is often seen as a good way of trying to expand a business and can be a successful strategy for intermediaries looking to increase earnings or replace lost income. Cross-selling suitable products that are complementary to the core business is probably the first and easiest step to take. We have seen the success of insurance products alocOther bodies representing other parts of the PPI market have not been so proactive and indeed they seem to be reluctant to introduce baseline standards and transparency to a product area that is crying out for such improvements. Alongside mortgages, secured loans alongside mortgages and now commercial mortgage finance offers another significant opportunity for intermediary growth. To make this transition and successfully add a commercial mortgage desk to your business, you will need to adjust your marketing activities and educate your customers and business introducers.
The fundamentals of good marketing activity are simple and based on common sense. Crucially you need to test and learn, after first researching your market and devising a well thought-out plan of action. You need to implement your plan, monitor closely the results and draw the learning from that activity before reaching suitable conclusions that can be built into the next stage of the plan. At the simplest level, each different activity should be analysed to identify the cost of that distribution (for example, buying advertising space in a national daily paper), the number of enquiries and the subsequent number of confirmed sales. This will provide a cost per enquiry and cost per sale figure that either works financially or not. Hopefully identifying a number of successful routes to market, these activities can then be scaled and further investment made with some confidence.
Marketing variations
Mortgage and loan intermediary activity is normally split between those firms who go direct to the consumer (business to consumer) and those that target other introducers to provide referrals (business to business). Whatever your business strategy there are a number of simple and inexpensive ways to vary existing marketing activity in an attempt to attract or educate your customers about your ability to help with commercial mortgage finance. By doing so, you will add incremental fee income from the product sale and crucially add a new client relationship for future selling activity. In addition, being proactive will serve as an effective client retention strategy, mitigating the risk that another intermediary will provide a solution on the client’s commercial property, and then obtain the residential, insurance, or pension business.
All commercial business was traditionally generated by referrals from accountants, and solicitors. Historically, commercial brokers tended to be ex-banking employees with existing referral relationships with the professional practices that were the first line of enquiry for business owners seeking commercial finance. This is in contrast to residential mortgages where direct marketing is undertaken on a far larger scale, and there is a far broader range of routes to market.
Lateral thinking
Networking for referrals is still a highly effective way of producing new business and, as always, applying some lateral thinking is bound to pay dividends. If, for example, you own and run a small broking business you may get asked to networking events (such as local business breakfasts) run by Business Link or other networking groups. As everyone at the event is likely to be a local business owner, this could be the ideal place to spread the word about commercial mortgages. Another method is to attend commercial property auctions – possibly placing an advertisement in the catalogue.
A related technique for spreading your commercial marketing message in a cost-effective way is to buy (or simply agree) a small slot in marketing channels created by suppliers of goods and services targeting the same market as you – just with a different product. These could be stationery or equipment suppliers targeting local businesses via websites, e-mails, advertising and mailings.
Other suppliers make person-to-person contact – for example, vending machine suppliers in pubs – and can generate referrals through being on the ‘grapevine’ of which premises are changing hands, or looking to raise capital for their business. The reward for carrying your marketing message could be simply a fee paid on each completion – which is a variable cost only paid when your incremental income has been earned through the proc fee from the lender.
It’s a simple task to apply the successful techniques of marketing residential mortgages to creating sales opportunities for commercial mortgages. If you make the most of existing activity – and importantly your marketing spend – to add the commercial mortgage message onto your current marketing, then any sales generated will go straight to your bottom line or help pay for the marketing itself.
Existing database
For example, whether you are mortgage/loan broker or IFA, you can look at your existing client database to identify self-employed and corporate clients and devise a marketing letter detailing latest commercial property trends, typical LTVs that can be achieved and how you can help with funding a purchase or raising some capital from commercial property. This will only cost you your time and the price of a stamp for each client contacted. At the very least you will have achieved some brand building, and no doubt it will act as a reminder about your firm and its activities.
Think about adding a line in the detailed factfinds you undertake with each client, asking about commercial property assets. The information obtained may suggest a commercial mortgage need, even if the client does not directly mention it. Self-employed residential mortgage clients who opted for self-cert mortgages may well be in the market to buy their business premises instead of renting. Why not find out by sending them a letter?
One of the best ways to arouse interest from potential new commercial mortgage clients is to simply lay before them the idea that owning their own business premises could be cheaper than renting, could offer good return on investment (currently around 6 per cent per annum), and could give them the independence and huge feel-good factor of owning their own premises. A little research into what is happening in the commercial property market could provide a topical hook on which to hang your powerful sales message.
Toolbox
We have built a marketing toolbox containing a wide variety of marketing templates that can be tailored to the requirements of our intermediary partners. Feedback from the users tells us that often the simplest methods create the best results. Too much product information can be confusing at the first point of contact and it is often better to first sow the seed into the minds of potential commercial mortgage customers. I believe there are three broad categories of selling messages:
Product benefits – for example, 85 per cent LTV and the ability to utilise a self-certification of income rather than traditional accounting information.
Service benefits – a broker will provide professional service and ownership of the task. The client can relax in the knowledge that somebody is taking responsibility for raising the necessary finance, and leave them to the important business of running their own company.
Opportunity benefits – what will the finance achieve? Financial freedom from expensive and removable short-term overdrafts or facilities? The ability to expand the business with a capital investment or the chance to own your own commercial property asset rather than relying on a landlord.
One of the most important elements in designing marketing literature is deciding upon your ‘hook’ – the key overriding selling point. Fundamentally you have to decide upon the overriding message. All experience would tell you that this is either driven by need or greed.
No matter what marketing you undertake, it is unforgivable if you do not monitor and track your lead-generation activity – even if you have only used the simple methods outlined above. If you don’t track which leads come from which marketing activities then you will always be working in the dark.
The benefits of adding a commercial mortgage facility to your business are significant and it offers a wonderful opportunity for revenue growth. By investing some time and effort there a number of simple steps that could very quickly expand the service you offer and help grow your business. Arguably there has never been a better time to make this investment, both as a means to replace lost income and as a way of mitigating the increased threat of competition.
Stephen Johnson is sales and marketing director at Commercial First Ltd
