Advertising credit products and loans. (Direct Mail Essentials).

While direct mail is effective for advertising many types of financial services, it pays off the most when selling loans.

Credit cards and home-equity credit are the most frequently promoted products in bank-sponsored direct mail. (Among regional banks using direct mail, 32 percent use it to promote credit cards; and, 88 percent, home-equity credit, according to the 2000 "Bank Marketing Survey Report" published by the ABA.) The reason is that these products have high profit margins and enjoy high response rates.

Credit Cards: These are the perfect products for selling by mail. The product is easily explained in a single mailing, and the response device--the application--fits easily into the mail package. A single mailing to the consumer can complete the sales cycle. When approved, the product itself--the card--can be delivered by mail.

To sell credit cards, banks target consumers with the appropriate income and desirable spending patterns. For example, solicit middle-income households with several children, as they are more likely than a higher-income single person to carry a card balance.

Home-Equity Credit: This product has a high profit margin and can be targeted precisely. You can easily find lists of homeowners (eliminating renters) and further refine these lists by making selections based on income or home value. Depending on the state and county you are mailing to, you may be able to purchase lists that identify further information based on public property-tax records, such as any existing home-equity credit loan on the home or perhaps the first-mortgage balance.

Home-equity credit can be sold with a variety of offers: a teaser fixed rate for a period of months before going to a variable rate; a rebate of interest expense (for example, first month's interest free up to a specified amount) or simply a competitive fixed or variable rate. You can handle the application process either by including one (check with your compliance officer for disclosure requirements) or by allowing the consumer to apply by telephone. Whichever offer and application method you choose, this product can produce very profitable mailings.

Mortgage Loans: Although the number of households that are potential targets for mortgage loans is typically smaller than that for home-equity credit, the lower mortgage rates in recent years offer a great opportunity for selling refinanced mortgages by mail.

You can target refinance prospects by selecting lists based on the homeowner's existing mortgage rate. Simply identify the prevailing rates for each month over recent years, then match the date when the homeowner moved to the assumed rate. Again, depending on the county and state you are mailing to, you may be able to purchase lists that identify information based on property tax records, such as the first-mortgage balance.

Because mortgage rates are competitive and mortgage profit margins are slim, you may not want to build your direct mail offer around the interest rate. Instead, you can use such inducements as a discount on the application fee or other closing costs. It may not be practical to put an entire mortgage application into your mailing package, but you can use a "condensed application" to establish preapproval or allow consumers to respond by telephone to prequalify.

Car Loans: Although banks' share of this market has declined with dealer financing, rebates and leasing, there still is potential for development by direct mail. Targets include your own customers and refinancing among noncustomers who have already secured higher rate loans through dealers or other sources.

The availability of information on car ownership varies widely by state and has been reduced somewhat with the expansion of privacy laws. However, you may be able to locate list sources to identify either the type of car owned or similar factors that will help to make your mailing more efficient.

The offers used for this type of mailing usually are rate-based, or perhaps you can offer a cash rebate toward the first month's payment. You probably can include an application with your mailing or at least a condensed version of what your loan department currently uses.

Jim Turner is President of Etra Corp., Naperville, ILL. The company provides advertising and research services. He can be reached at [phone] or at [e-mail].