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CRM R.I.P.? Compliance-centric, enterprise-level marketing automation delivers where traditional CRM can't.

CUSTOMER RELATIONSHIP MANAGEMENT (CRM) software might not be dead--but it's certainly undergoing a major transformation. That's because in its traditional form, CRM will not produce the results you need. [paragraph] These days there are two new litmus tests that CRM-type systems must pass. They must: enhance management control and regulatory compliance; and boost sales performance through marketing automation. [paragraph] The fact is all products--however useful and popular they once were--will fade away unless they are able to mutate into something more relevant to a new set of circumstances. This is the classic product life cycle we're all taught in business school. [paragraph] Specifically in the mortgage industry, the new set of circumstances is being driven by seismic shifts in the technological, competitive and regulatory environment.

So, when it comes to choosing services to support how lenders take their loan products to market, solutions we've come to rely on might no longer fill the bill.

Customer relationship management is a case in point.

Brief history of CRM

Siebel CRM Systems Inc., acquired by Oracle Corporation in 2005, came out with the original CRM software in the early 1990s to support the operation of telemarketing call centers. Siebel's solution pulled together data from disconnected product-centric silos so as to provide a unified view of each customer. This enabled customer service representatives to communicate with customers holistically, in full knowledge of their transaction history and purchase patterns (recency-frequency monetary value [RPM]).

In the late 1990s, Inc., San Francisco, led the way for the transformation of CRM into what might be described as online sales toolkits.

Since 2000 many other software providers, mortgage-specific and otherwise, have jumped on the CRM bandwagon. But these simple contact management solutions are inadequate in today's complex lending environment.

So the next transformation is now under way, to solutions that are designed and built to support all the players in the marketing process across the enterprise--especially where the demands of production and compliance intersect.

Automation is the key and originator-based CRM-type offerings won't cut it, even if they come with an added veneer of "corporate-ness."

Compliance and control

Mortgage lenders are being inundated with new rules and regulations even while, simultaneously, they are having to deal with unpredictable origination volumes. This combination has put intense pressure on lenders not only to boost their marketing efforts but also to implement measures that ensure regulatory compliance.

It's this ever-tightening regulatory environment that's the first factor driving the transformation of CRM to something much bigger.

The Federal Trade Commission's (FTC's) Mortgage Acts and Practices (MAP) Advertising Final Rule was instrumental in pushing marketing compliance to the top of every lender's agenda, although this is only one component in an expanding array of mortgage-specific regulations that now seriously constrain marketing activity.

My sense is that the Consumer Financial Protection Bureau (CFPB) is taking all pre-existing laws and regulations and creating its definitive set of rules, which it will use when auditing mortgage companies.

The MAP Rule was issued as a final rule by the FTC on July 22, 2011, and given the compliance effective date of Aug. 19, 2011. On July 21, 2011, the FTC's rulemaking authority for the MAP Rule transferred to the CFPB--but the FTC, the CFPB and the states all have authority to enforce the MAP Rule, according to the CFPB Forum, an online website.

The MAP Rule prohibits material misrepresentations in advertising or any other commercial communication regarding consumer mortgages. The FTC and the CFPB share enforcement authority over non-bank mortgage advertisers such as mortgage lenders, brokers, servicers and advertising agencies.

On the back of these regulations, the CFPB and other agencies at both the federal and state level are now engaged in ensuring that mortgage marketing receives greater scrutiny than ever before.

"Our plan," says CFPB Director Richard Cordray, "is to work with the mortgage industry to ensure that the CFPB's new rules are implemented accurately and expeditiously. Both consumers and industry will win when the new rules are understood, applied and carried out evenly and effectively."

The CFPB's plan to regulate the mortgage industry (including taking the pre-existing MAP Rule and wrapping it into a more comprehensive set of CFPB rules) is to be implemented during 2013 such that the new consumer protections go into effect in January 2014.

Both the CFPB and the FTC have warned mortgage marketers about misleading claims that might constitute deceptive acts or practices under federal laws. For example, some of the ways in which originators have historically presented mortgage prospects with a loan offer might well be impacted--remembering also that a Fair Offer of Credit letter has to be pre-approved by the respective credit bureau(s).

Another requirement under the MAP Final Rule is that a 24-month record must be maintained of all communications following the most recent date an offer was made. This is likely to be interpreted as an auditable history of the actual personalized communications, not generic samples.

So the days are gone when a lender's marketing efforts can be left solely to loan originators. In the new world, this is both inappropriate and dangerous.

"Many mortgage lenders are centralizing their review process and prohibiting loan officers from producing marketing content in order to limit the possibility of violations of law and regulation", explains Lisa M. Ledbetter, partner in the Washington, D.C., office of Dentons US LLP law firm.

On Nov. 19, 2012, we got evidence of just how serious the FTC and the CFPB are about pursuing potential violations on this front. In the first joint FTC/CFPB effort, the two agencies announced they had sent out a total of 33 warning letters to companies notifying them that their advertisements may have violated the MAP Rule, according to a Reed Smith LLP law firm-written blog called Adlaw[R] by Request[TM].

The blog post noted that the agencies indicated that 20 of the 33 warning letters had been sent out by the FTC, while 13 came from the CFPB. The warning letters were sent to lenders, mortgage brokers, real estate agents, home builders and lead generators. The law firm's blog post added that 19 other companies are under active investigation for violations of the MAP Rule and possible deceptive marketing practices. The FTC is conducting 13 of the investigations and the other six are being run by the CFPB, according to comments made by the regulators at a press conference.

The blog, written by Keri Bruce and Douglas Wood, noted that agency representatives at the press conference said companies receiving warning letters "are believed to be companies that should be doing a better job, while those that are under investigation may be guilty of far more serious violations."

So, as we can see, enforcement actions are not theoretical, and it's the company that will be held liable. In addition to imposing a fine, the regulatory agencies can closely monitor and require companies to submit reports to make sure there are no future violations.

Third-party service providers can also be audited and, if they are not delivering the necessary compliance capabilities, they, too, can be penalized or even shut down.

When the CFPB comes knocking, therefore, lenders need to be ready to demonstrate their ability to comply with all the relevant rules. Documented policies and procedures alone are unlikely to be sufficient.

What's needed is a robust technology-based solution that incorporates mechanisms integral to the processes being regulated. These mechanisms cannot be hard-wired--they must be responsive to variations in both the rules and their interpretation that are sure to come about over time.

In other words, the solution must ensure that regulatory requirements are handled flexibly as well as automatically.

In addition to requirements imposed by MAP, such as those described already, a viable solution would need to hold legal disclaimers (per state), license numbers and other essential information as editable data fields such that they are always correctly reproduced in printed and electronic communications with prospects and customers.

Levels of management control

At the same time as lenders can expect close attention from the regulators, they also understand the need to produce sustainable results. So, in addition to satisfying stringent compliance demands, management has to take an active role in ensuring that the company's products are competitively and consistently communicated--whether driven from central operations or by loan originators--without inhibiting genuine creativity and individual initiative.

In this regard it's essential that today's marketing solutions provide graded levels of management control over the players in the marketing process. Management simply has to decide what degree of control is appropriate in relation to each of the system's key functions.

The levels of management control might follow the following pattern, working down from the most to the least restrictive (see Figure 1):

* Prohibition: Different types of users can be prevented from accessing specific system functions by means of a customizable permissions capability.

* Authorization: Marketing materials created by users at lower levels in the corporate hierarchy cannot be implemented until approved at the center.

* Alerts: A defined set of fields is monitored and changes reported via an online feed, enabling quick action to remedy any departure from company policy.

* Oversight: Users at higher levels in the hierarchy can view users at lower levels, giving management an instant window on the activities of originators.

* Audit trail: Online access to a real-time log of actions taken by users provides a comprehensive history of everyone's involvement with the system.

* Reporting: Dashboards of mission-critical metrics provide information that allows management to hold users at lower levels accountable for their performance.

Marketing automation

Although every mortgage company and most loan originators have databases of information about their prospects, customers, business partners, loan transactions, past communications and more, they have lacked sophisticated tools for leveraging this static data into active intelligence. CRM was a start, but CRM systems provide only functionally unorganized and non-automated toolkits that enable originators to perform sales-specific tasks such as lead qualification and "to-do list" management.

CRMs are, in effect, glorified electronic Rolodexes[TM] that are great for collecting contact information and providing schedule and task reminders. However, they require a great deal of human intervention to deliver significant bottom-line benefit.

For CRM functionality to make a contribution to a mortgage lender's revenue growth, it needs to sit inside a comprehensive marketing automation solution.

This is the second factor driving the transformation of CRM to something bigger.

Mac McIntosh, consultant and founder of Sales Lead, North Kingstown, Rhode Island, captures the distinction most succinctly: "CRM is like building a car from a kit. All the parts are there, but you need the time and skill to put it all together. Using marketing automation is like buying the car you need, with all the features you want already installed and some gas in the tank, ready to drive."

Forrester Research Inc., Cambridge, Massachusetts, defines marketing automation as "tools and process that help generate new business opportunities, improve potential buyers' propensity to purchase, manage customer loyalty and increase alignment between marketing activity and revenue."

According to Marketo Inc., San Mateo, California, "Marketing automation is the technology that allows companies to streamline, automate and measure marketing tasks and workflows so they can increase operational efficiency and grow revenue faster." The adoption of marketing automation technology is expected to increase by 50 percent by 2015, according to SiriusDecisions Inc., Wilton, Connecticut.

"Thanks to marketing automation software, we no longer have to devote huge chunks of time on manual tasks associated with lead generation and nurturing. It helps eliminate human error, and gives more time to be more productive in tasks that require creativity and brain power," says Christabelle Tani, digital marketing consultant with g2m Solutions, Neutral Bay, New South Wales, Australia.

That's why marketing automation can significantly increase the productivity of salespeople. At the same time it enhances the efficiency of marketing staff and reduces administrative overhead.

Evidence of the efforts being made to migrate to marketing automation is the fact that traditional CRM providers are trying to bolt new marketing features onto their products. The results are mixed at best, because marketing systems need to be built on a very different, relationship-based architecture.

It's true that some traditional CRM products claim to incorporate some or all of the following marketing requirements: lead capture and management; audience segmentation and targeting; email campaign setup and management; email response tracking and reporting.

However, few if any CRM applications have mastered such essential marketing needs as: online content creation and management; print mail marketing and sales collateral; multimedia marketing programs and measurement of marketing return on investment (ROI).

Powering superior performance

An enterprise-level marketing automation platform will power superior business performance along two key dimensions. First, it will model the entire mortgage marketing process for converting opportunity into revenue. Second, it will provide a collaborative environment that leverages the expertise of the many players in the mortgage marketing process.

That first dimension of modeling the entire mortgage marketing process for converting opportunity into revenue means that marketing automation solutions need to cover the following functions (see Figure 2):

* Lead capture and qualification--Engage each lead in an automated marketing program of strategically timed one-to-one communications for nurturing them in relation to their status (likelihood to purchase) through to conversion (loan application).

* Database management and mining--Maintain clean, detailed and de-duplicated contact records of prospects, customers and business partners, including data enhancement via application programming interfaces (APIs) with third-party sources, to enable deep opportunity analysis and modeling.

* Audience segmentation and targeting--Use multi-criteria tools for identifying relevant recipients for marketing messages, via both automated strategic programs (drip marketing) and on-demand tactical campaigns (including retention, cross-selling and up-selling of current customers).

* Content creation, storage and management--Maintain multi-level libraries of campaign content and collateral materials, including tools for easy copying and editing, with permission to access based on user role and content purpose.

* Multimedia delivery--Run campaigns from the corporate level or by permitted branch managers and individual loan originators, utilizing traditional print mail as well as electronic media (given that email opt-outs are increasing and response rates declining).

* Fast and secure execution and fulfillment--Ensure speed to market, given that windows of opportunity open and close quickly in today's roller-coaster market, while satisfying legal requirements regarding data safety and security.

* Real-time response tracking and reporting--Monitor campaign performance, branch/originator productivity and sources of business via off-the-shelf ROI dashboards and user-driven analytics, facilitating budget management and resource allocation.

Second, the marketing automation platform will provide a collaborative environment that leverages the expertise of all players in the mortgage marketing process (see Figure 3). Those key players include:

* Corporate/regional management--They need to know how the company's money is being spent, via reports and analytics, in order to take corrective action as necessary.

* Compliance/legal counsel--They need tools to protect the company from violations of mortgage marketing rules and regulations before they happen.

* Branch management--They need oversight of originators on a day-to-day basis in order to ensure maximum performance and productivity.

* Business strategists--They need tools to identify marketing opportunities, define target audiences and construct professional messages.

* Creative specialists--They need to use their copywriting and design skills to breathe life into marketing messages and the corporate brand.

* Brand managers--They need to ensure a consistent look and feel in all marketing materials, including personalized communications and sales collateral.

* Loan originators--As the ultimate guardians of the contact relationship, they need marketing activity to be synchronized with the system's integrated CRM in order to manage follow-up action.

The bottom line

Marketing has become mission-critical in today's highly competitive, highly regulated environment. Outbound communications must not only correctly reflect the lender's brand but also satisfy all legal and regulatory requirements. In addition, the communications must still be delivered with optimum relevance, frequency, professionalism, consistency and efficiency.

To make today's challenge even greater, many lenders are forced to do more with less. Loan officers are under pressure to produce, often with fewer support staff and resources to assist them.

What's needed are technologies that efficiently identify high-quality leads, drive them to the point-of-sale and initiate targeted personalized communications for converting them to customers, retaining them over time and maximizing their lifetime value.

When lenders embrace mortgage-specific marketing automation, they improve all touch points with potential and past customers--from the first contact through the closed deal and beyond.

By means of their strategic nurturing and audience segmentation capabilities, marketing automation solutions create highly targeted programs and campaigns that reach the appropriate contacts with the appropriate messages at the appropriate times.

This is not enough, however. Your solution must also address corporate needs for management control, organizational accountability and adherence to increasingly stringent regulatory demands. In short, it needs to provide a controlled enterprise-level environment in which all players in the marketing process are empowered to collaborate in driving new business--efficiently, securely and compliantly.

Stephen Margrett is chief executive officer of The Turning Point Inc., Sedona, Arizona. The company's flagship product, MACH3[TM], is a unified mortgage-specific marketing automation and CRM platform delivered as software as a service (SaaS). He can be reached at
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Title Annotation:MARKETING
Comment:CRM R.I.P.? Compliance-centric, enterprise-level marketing automation delivers where traditional CRM can't.(MARKETING)
Author:Margrett, Stephen
Publication:Mortgage Banking
Date:May 1, 2013
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