Improving direct response rates when loan rates are high.

Several years ago, direct mail response rates on the key consumer loan products--home equity credit and mortgage refi's--were relatively high. But now, after at least 17 rate increases by file Fed, consumers are not taking on new debt so eagerly.

As a result, while direct mail marketing has consistently been one of the best tools for selling loans, response rates today are generally lower than they were several years ago.

Are there still opportunities for your bank to build loan market share?

In short, "yes." Here are some suggestions for using direct mail.

Developing your offer

Draft your direct mail offer to reflect the times. Consumers worried about rising rates are more likely now to respond to rate guarantees, such as "50% below prime rate." And, teaser rates for a few months or a year may persuade them to switch lenders with their current balance. Or, they might respond to an offer of a fixed-rate loan to replace a variable-rate line of credit. Because maw homeowners are using refinanced, cash-out just mortgages to pay down debt--including their higher rate home equity loans--you might effectively build your offer around an appealing rate or term for a first mortgage.

You also can compile a list of your bank's customers approved for home-equity credit who have accessed little or none of their line commitment. Use direct mail to remind them periodically that any potential credit they have available can be used to pay down other higher rate loans or credit cards on a tax-deductible basis. You can also point out that while rates am higher, they still are among the lowest available for consumer financing.

If your response rates are lower now in prospect mailings, consider reducing the size of your list to lower expenses and improve profitability. With testing, you may find that households with more debt in the middle-income ranges may be more likely to respond than higher-income households. If so, try appealing to those segments by showing the benefits of a home-equity line's lower rate for debt consolidation, its flexible nature and potential tax savings.

Selecting your strategy

Direct mail is the perfect medium for showing tables and comparisons of how home-equity credit or refinancing can stack tip against consumers' other debts. You can demonstrate how payments with different interest rates compare or how tax deductibility can lower their effective rate. Give examples of refinancing a first mortgage and perhaps offer them a free quote for their own situation. Offer them the opportunity to convert their rising variable rate to a fixed rate.

Also consider using testimonials. Show how other customers have benefited by paying off their higher rate loans or by refinancing their first mortgage. These examples turn the theoretical differences into meaningful advantages.

Higher interest rates may be with us for some time. But consumers will continue to need bank financing and to find ways to exchange higher rate loans for more economical products. If you take advantage of direct mail's ability to target prospects and to show comparisons and selling points, you may capture a bigger share of this important market.

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]