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The selling of Freddie.

The Selling of Freddie

If they sold mortgage commitments off the shelf at the 7-Eleven, what would you reach for - a can of Freddies or a can of Fannies? Or maybe today's special, off the rack near the cash register, from a private investor, might grab your interest instead. The price is right and the product is so creative and unusual.

Retail marketers of consumer goods and services have spent years learning what motivates the buying habits and brand loyalties of consumers. Now, one of the professional students of the buying behavior of American consumers has joined the ranks of Freddie Mac to see if she can apply her sophisticated research techniques to sellers of mortgages. But before you get too carried away, don't expect to be included with a group of four year olds unleashed in a room full of brand new Fisher-Price toys, in front of a one-way see-through mirror. Let's face it - you could put a bunch of Gold PCs on the floor but I doubt anyone would have much fun with them.

Cynthia Travers, vice president of marketing at Freddie Mac, joined the agency in March 1991. It's not like she has mastered corn flakes and now she is moving on to financial products and services for a change of pace. Travers brings "nearly 20 years of experience in consumer product management, mortgage originations and strategic sales and marketing planning" to the job, according to the official Freddie Mac bio.

Notably, her career path includes a stint as an executive vice president at Citicorp Mortgage, Inc., where she "managed customer service, product and distribution channel marketing, advertising, market research, training and sales management functions for the business development division." Her impressive background also counts some time spent as primary business and marketing management advisor to the vice chairman of Arthur Young and Company. But before all that, she learned the ropes in retail consumer goods marketing, where the techniques have been honed to perfection and where the marketing research can spell the difference between a product that sells, and one that strikes out big-time with fickle American consumers. Travers has 12 years combined experience at General Foods Corporation and Bristol-Myers Company.

Mortgage Banking interviewed Travers recently to find out how she and Freddie Mac are going to capitalize on all that combined experience by putting the preferences of mortgage sellers under the microscope.

Q: What is your specific role at Freddie Mac, and how does your department fit into the larger management structure there?

A: I'm the vice president of marketing and I report to Warren Raybould [senior vice president of sales and marketing and national sales director]. Our department is one that is being newly defined and growing here at Freddie Mac. Our overall purpose is essentially to provide strategic direction and support for our sales force and our sales and marketing effort, in terms of aligning our deliverables to customer needs and desires. So, we're trying to take much more of a classical marketing approach than has been taken probably either at Freddie or in the financial industry as a whole.

Q: Could you detail what it is you mean by the classical approach?.

A: I think that there's probably, in general, a lot of confusion when you hear the word "marketing." To some people, I think it means retail marketing in a store. To other people, it means advertising. To other people, it means sales. As you get away from the houses of classical marketing, the consumer-package-goods places, such as General Foods and Bristol-Myers and Procter & Gamble, it takes on pieces of meaning. True marketing is really a philosophy of business management. In a classical sense, is it says you manage your business smartly, according to what your market wants and needs. [This is] opposed to a manufacturing mentality, which is, "Well, I made this thing, what am I going to do with it? Or where am I going to sell it?" So, you base what it is you deliver to your marketplace on what it is they say they want. And you take that market base and you cut it, slice it and dice it, because not everybody wants the same thing. Different segments or different portions of your market and your target audience have different needs and you have to deliver accordingly. Whether that's the business we're in here at Freddie Mac, or whether it's in consumer package goods. It's all the same business principles, in terms of defining what the market is, defining what portions you want to target to, understanding all of the characteristics of that portion of the marketplace, [and] proactively researching that portion of the marketplace [to determine] what it is they need and want from you. [You] then develop your products and services accordingly and position them with the marketplace, so that they'll be successful there and you'll be a profitable business entity.

Q: In defining your target audience, what are the top three markets that you're most seriously going after, or that you're trying to get a larger share of business from?

A: You can segment, cut and define your market in a lot of ways. We most

recently rolled out MSIP, our market segmentation implementation.

Q: What's that?

A: It's our marketing segmentation roll-out. It's the internal initials, which mean nothing to anybody except internally. But what we did there is we segmented the marketplace on a needs basis, and we broke it into key accounts, corporate accounts and national accounts. National accounts, obviously, we have very few of them. They're very large, large customers. They're market-makers, the originators who are the market-makers, such as a Citicorp or Sears, the giants of the industry.

We have our key segment. And they are [made up of] accounts that require negotiation because there's a complexity in doing business with them. Yet, it's nowhere near as complex as the national accounts.

Then we have what we call our corporate account, which tends to be smaller in nature, but also has simpler needs. They have pretty plain-vanilla needs, in terms of deliverables according to the guide. So that's the way we took our first cut, in terms of complexity of interaction with Freddie Mac, in terms of being able to meet their needs the best, depending on how complex those needs may be. You can also look at marketplaces geographically, [and] prioritize things geographically.

Q: Are you doing that? Is that something you've got some preferences you're going after?

A: Well, I wouldn't say we have preferences, but I would say that we're starting to better understand the needs of our different geographic markets. It's not a matter of doing one in lieu of the other. I think what we're trying to do is further fine-tune our understanding of the marketplace right now. We've done the three basic cuts. I think now we're trying to look at: how do we cut it further? Do we cut it on a geographic basis? Do we cut it on an institution-type basis - S&Ls versus mortgage banks, versus commercial banks? And [we can] start to understand not only how large and important those portions of the marketplace are from an origination standpoint, but what the big differences are in terms of the needs they may have from Freddie Mac.

So we have not, at this point, said absolutely "this is number one." We're at the point where we've taken a major cut at it and are starting to fine-tune and refine it now. We're really only starting to take the classical approach. I've only been here six months. So I really can't say what happened five years ago. But just basically from being involved in the financial industry versus having been involved in package goods - I grew up at General Foods and Bristol-Myers - the financial industry as a whole is very much less sophisticated [in terms of marketing research and techniques].

Q: Did that surprise you?

A: Probably not, because when you're at General Foods you kind of know - and that was years ago. That was in the early 1970s or through the 1970s that I was there. You kind of heard how sophisticated you were, how smart you were to be running businesses this way. Until you left there, you didn't understand how true that was. It's amazing because it's not that you were so smart. It's just that it's down to a system there, where the understanding of the marketplace is so good, and it's cut to such a fine degree, that's why they can do their business so smartly. It's not a bunch of people sitting around in a conference room making decisions. The decisions that are being made are being made on [the basis of] quantitative input from interacting with a given customer base. That's pretty much what classical marketing is about. That's pretty much what we've been trying to do here.

Q: So what's on the plate in terms of getting a better definition of what that target customer wants? And what research campaigns do you have either on the drawing board or underway?

A: Well, we have a couple that I can talk a little bit about, but not too much because they are proprietary in nature. However, I'm hoping to be able to apply some real quantitative, ongoing, classical kind of market research approaches to our customer base that have not been used before, to not only help us better understand their needs in terms of product and service development, but to also help better understand them, because then we communicate with them better. And in that better communication, we can facilitate our business dealings with them, and consequently, deliver better service levels.

Q: When is this going to start?

A: Hopefully we should start it relatively soon. It's a whole cohesive effort of different research events that will go on, and will, over the next year or so, be able to give us a lot of information about our customer base.

Q: So everyone that's been a customer of Freddie Mac's from the beginning of time can expect to be part of a focus group or something from you or will be contacted in some way?

A: I think quantitative [study], not focus groups.

Q: Okay.

A: No, focus groups I think are everybody's idea of real market research. And what a focus group is, is a beginning. The quantitative study is the real research. Hopefully, we'll be getting into more sophisticated techniques as we go along. But will everybody be involved in it? No. Everybody who was ever a potential customer or who could be a customer is in the pool to essentially be picked from randomly to partake in the research.

Q: If you were to define the mission, your marketing mission, is it essentially to keep all the past Freddie Mac customers in the fold and not defect to Fannie Mae? Or is it to get some of Fannie Mae's customers back or bring them for the first time into Freddie's fold? What is your strategic mission all about?

A: Well, [for] the things you're talking about they really aren't a mission. They're almost strategy-tactical ways of doing your business. I think our strategic mission, if you will, is to proactively identify what it is customers need, whether they be Fannie/Freddie customers, Fannie-only, [or] Freddie-only customers, and to create and deliver products and services against those. I see that as our strategic mission, which is a very essentially, market-driven approach to running the business of Freddie Mac from the seller servicer's standpoint. Whether we do it by never losing one of our own customers or getting extra customers from Fannie or getting old customers who we had before, really gets down into the tactical implementation of how we go about making that happen. The important part of it is: what is it they want and what is it they need, so that it's worthwhile doing business with us; so that we have the distinctive competence versus Fannie Mae.

Q: So you are then trying to differentiate Freddie against Fannie - in what way?

A: Well, if I told you that, then Fannie Mae would know.

Q: Okay.

A: We're trying to differentiate ourselves from Fannie Mae and I am sure my counterpart is sitting over at Fannie Mae trying to differentiate himself from us. That's what makes a good business.

Q: In this instance, you must find this [marketing job] unique in terms of having one other major competitor, and just one other. I mean, there are some thrifts and some institutional investors that a seller could deliver to, but [for] basically conforming product they have two choices [Fannie Mae or Freddie Mac]. How is that unique? And how does that work both for and against what you are trying to do?

A: It's unique and certainly it's unique even from the mortgage origination [position] I had at Citicorp, where [it was] the national share leader, but [it] still had a very, very small share because it's such a fragmented business. So it's unique from the lending side of the business I've been on. Certainly it's unique from any kind of consumer package goods [environment], where you have so many competitors that it forces you to understand your marketplace, because everybody's out...trying to appeal to people or target audiences....The uniqueness [of my present marketing challenge] obviously is, you say, gee, it should make my job a lot easier because there's only two of us in the marketplace. And that's unique. At first swipe, it should make it easier. Sometimes it makes it more difficult, because you do have only one competitor. You don't have as much information, as if you had 20 competitors. Not so much about the competitor him or herself, but about your marketplace, because essentially it has been a duopoly since Freddie Mac began. There is a difference between thinking of something as a government-backed duopoly and thinking of something that has to be market-driven for your customer base. And I think we're in that transition now. So while it should make it easier, sometimes the change [involved] in trying to look at the business that way, can be difficult for people who are not used to looking at the business that way.

Q: How much autonomy do you have in practicing marketing as a profession, given the fact that you are in an organization that is referred to sometimes as quasi-agency, sometimes as a GSE? I mean, this is a different animal from a private corporation even though it has shareholders.

A: Right.

Q: How does that effect your job in terms of practicing your profession?

A: I suppose it affects my job, [in] that when you're [in] consumer package goods, and to a lesser degree a big lender like Citicorp, you have big, big efforts going [toward] marketing. They have always been there. Whereas, in something that can be called a quasi-government agency or whatever, a lot of this is new. I'm not sure exactly what it is Fannie is doing, although I have some ideas about it. But relatively speaking, the secondary marketing agencies are very unsophisticated versus a consumer package goods company. So there are two of us, even though I think we're starting to come to the awakening of it. It's slower going. So, I think it affects my job, in that, in a way, it's an educational process, trying to translate some of those business principles that have worked from time immemorial in stockholder companies to something that is a stockholder company now, but still may have some remnants of a quasi-government duopoly. Was that confusing enough?

Q: I think I got it. What are some of the things you were referring to, in terms of the unsophisticated marketing element you were talking about earlier? What were you surprised by when you first came to Freddie Mac, in terms of areas where they didn't have solid information? You probably came in with some expectations that it would be less sophisticated, but you probably also carried in some assumptions that they would at least know such and such. And were there some things that they didn't even know that much about?

A: No, not really. I think it was pretty fair with my expectations. Don't forget, before I was here I was at Citicorp. Even though...Citicorp's been in a cultural change for like 15 years to be more market-driven, they still are not anywhere near as sophisticated as a consumer package goods [company]. Although they're a lot closer to it than Freddie. So I'm not really surprised at all, because I had talked to people at Freddie before I came in here. In fact, I had consulted at one point. So I kind of knew where it was. So there was no big shock. It's all a matter of degree. It's not like, well, they absolutely don't know something they're making business decisions about. It's just how sophisticated - the levels of sophistication that you make the decision based on.

Q: What marketing techniques - I know you've only been there six months - but what marketing techniques work splendidly, terrifically on the consumer goods marketing side, that somehow can't make the translation to the type of audience that you're working with now?

A: Well, it's hard to give out those cents-off coupons. That one doesn't work. Obviously, all those standard consumer promotional kinds of things don't work in this industry, but the trade portion works.

Q: Trade portion, meaning what?

A: Well, when you're at General Foods you sell to the trades. You market to the consumer. Once you sell your product to an A&P or a wholesaler they're gone. You get your money from the trade. The only reason you'll keep getting your money from the trade is if the consumer keeps taking [your product] away. So you're working for those two audiences. Here we're working more against one audience with the sellers. Well, we have very different audiences, but from my perspective, since I'm in charge of the seller services side of marketing, it's more of an industry-to-industry interaction. So in a way it makes it simpler. So you couldn't use those standard consumer kinds of things. The same marketing techniques - the more global basic ones that work for any business - work for Freddie Mac.

Q: So what would be some of those techniques that you would expect to work?

A: I would expect that - it's no one thing, you know? You have to have a judicious mix of a cohesive set of events to work together to create the market presence and the awareness that you need, as well as deliver the goods and services that are meaningful to your target audience.

Q: So would you say that the strategic goal is to try to position Freddie Mac favorably to its potential customer base independently of Fannie Mae, or to try to go head to head in differentiating Freddie Mac from Fannie Mae?

A: Well, I don't think that you go head to head. I think if you've differentiated yourself, you're already not [going] head to head. You obviously have to be aware that you have a competitor, but I think you have to look for the things that you can have the distinctive confidence in over that competitor and deliver on them.

Q: What do you think is Freddie's existing edge over its competitor?

A: I think based on our customer satisfaction study, our customers [including those] who are not only Freddie customers but Freddie and Fannie customers, very much appreciate our approach to doing business with them, in terms of the customization that we use in working with our customers, and in terms of the approach we take and the time we take. That's more customer service types of things.

Q: This question addresses more of the pure advertising side of marketing. Do you think that the better approach for Freddie Mac would be to work on image advertising or particular product and customer-targeted advertising? Where would be the emphasis or the mix, in terms of those two different approaches?

A: I don't know what the exact split is, but I think you need all of them.

Q: So if you had - how many advertising dollars does Freddie Mac, just a ballpark figure, have to work within in a given year?

A: Oh, I can't tell you that. I can, but I can't.

Q: So what do you get from image advertising? How much value do you attach to that approach?

A: I attach value to it and I think that it has a wider purview that it tries to attack. I mean, obviously if you're doing just lending or service advertising, you're going after your fellow servicers. If you're doing investor advertising you're just going after your potential investors, your dealers. Whereas [with] image advertising, you're letting the general public know what it is you are. You're letting Capitol Hill know what it is you are. It's having a halo effect on your fellow servicers. It's having a halo effect on your investors. So it sort of cuts across all of your audiences, as opposed to very specific promises to an individual one. I think that's a good solid base to build on.

Q: Freddie Mac's market share obviously is something you probably keep a pretty close eye on. It dipped a little bit in the past year in 1990, but in the first six months of this year it seems to be coming back. Can you or your department take any of the credit for bolstering that market share?

A: Oh, I don't know that we can single-handedly take any of the credit. I think everybody at Freddie Mac can take credit. I think probably an awful lot of the credit for that goes to the Gold security that was introduced last year. And so I can't take any credit for that because I wasn't even here then. Certainly we have done things to continue to foster the success of the Gold, but I would say when you have something that's meaningful again in terms of deliverable benefits to your audience and your customers, then there [are] the successful business results associated with it. If we had a great, glitzy advertising campaign that said nothing, it probably wouldn't do anything for our market share.

Q: So that's a neat plus for you to have that product.

A: Yes.

Q: Are there other products that you feel are very strong arrows in your quiver?

A: The Gold is really essentially our whole product line because it's the security. Obviously, all of the products that we buy from the origination side fold into that. So it's really [more of] an umbrella, a categorical umbrella, that delivers benefits.

Q: From the market research that you've been able to do so far since you've been at Freddie Mac, did you find that the customer base had a good solid understanding of the Gold products and their particular benefits?

A: I would say that there is a base understanding of it, yes. And that we probably could help in the education process a little more. I mean, it's a new security, so that establishing liquidity takes time, as opposed to, say, the Fannie Mae security that's already existing and been out there. So I think that while people understand it, and while it's doing well, we can always continue to foster the education [of the industry concerning] the benefits associated with it.

Q: How closely does your department work with other divisions or departments of Freddie?

A: Oh, extremely closely.

Q: Can you give me an example?

A: We are organized in such a way that we have individual divisions like all companies do, but we have special mechanisms in place to ensure that we work cross divisionally, so that people are sort of marching in the same direction from the marketing and sales division, from the capital markets side of the equation, from the operation and product development portion, [and] from our systems needs. We have very formalized committee structures set up to make that happen at the division-head level and it pervades down throughout the corporation.

Q: I understand from absorbing all your comments so far that you're a very strong believer in market research and you've done a little bit in the six months you've been at Freddie Mac. How much have you been able to do so far in terms of actual campaigns and other market research?

A: We have done some. We have started. We have not done anywhere near what it is we want to get rolling, but we have done some and we have some that were already in the works in terms of surveys that are more reactive. We have just started to do proactive research.

Q: If there's any one thing that you'd like to accomplish in your first year at Freddie, what would it be?

A: I suppose to ensure that the market-driven approach continues to be fostered within the corporation, and that we listen to the customer first before we go off in a different direction.

Q: How will you know when you've achieved that?

A: Well, I presume I'll know it getting feedback from them on the research side and also [through] our business results.

Q: Any comment you want to make to mortgage bankers in particular, as part of your customer base?

A: To mortgage bankers I would reiterate what we've been talking about all along, that it's really important for us to start better understanding them, and particularly them, because they haven't been our particular base of business. In that understanding, hopefully, we'll be able to better give them what they need in the secondary marketplace.

Janet Reilley Hewitt is editor in chief of Mortgage Banking and Real Estate Finance Today.
COPYRIGHT 1991 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Federal Home Loan Mortgage Corp., otherwise known as Freddie Mac
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Article Type:Interview
Date:Nov 1, 1991
Previous Article:The customer satisfaction strategy.
Next Article:A tough sell.

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