Invisible Brand

CCHM’s Managing Director, Paul Gordon, reflects on the comparative lack of advertising in the UK mortgage market and wonders if things may be set for change.

TO BE HONEST, for a while now, it’s been a matter of some regret and mystification to us at CCHM that we don’t have a client in the mortgage market.

Our reasoning has been simple, in the way that agencies’ reasoning often is, it’s a huge and still-buoyant market, so if we had one or more clients in this sector we’d be doing large amounts of great work and generating valuable revenues.

On closer examination, though, our reasoning may be missing a point. Because, considering what a huge and stillbuoyant market it is – and, furthermore, one with cut-throat competition – there’s surprisingly little advertising in it. Leaving aside the trade press and the specialist consumer mortgage mags it seems from where I sit that, wherever you look in the market, you’ll find a bit of advertising going on but not a lot.

There are one or two mainstream national mortgage brand advertisers (notably Cheltenham & Gloucester); a fair sprinkling, but not a real downpour, of off-the-page rate-led advertising, especially in personal finance sections; one broker (Charcol); a bit of low-key stuff from a couple of specialist lenders in areas like buy-to-let and sub-prime; heavyweight campaigns from a couple of leading offset, or integrated, providers (Openplan and IF); and, of course, a certain amount of mortgage flavouring within the overall brand campaigns of major High Street players like the Halifax and Barclays.

This may sound like a longish list, and in a sense it is. But the interesting thing is that for every organisation that’s in it, there’s a much bigger group of more-or-less similar organisations that aren’t.Why is Charcol the only broker whose ads are worth talking about? If Barclays are right to promote their offset mortgage as a product brand in its own right, why doesn’t anyone else? And whatever happened to the building societies?

There are, of course, textbook answers to some – but not all – of these questions.The three main ones are: Mortgages are a sufficiently infrequent purchase that you’re wasting your time advertising to most people most of the time.

For large and diverse providers such as banks; ‘It would be too expensive and difficult to provide individual promotion for all of our product areas, so it’s better to advertise at a higher level of abstraction, creating an overall brand image to support the full spectrum of our offerings’.

For smaller providers: ‘Our business is all intermediated, and brand doesn’t matter in the intermediary market.’ All of these propositions are open to challenge.

Remortgaging, and especially serial remortgaging, very seriously challenges any historical assumptions about the frequency of mortgage transactions. Providers don’t get much bigger or more diverse than Lloyds TSB or Barclays, but in different ways they both do support their mortgage businesses individually. And if there’s still so much intermediary business, why on earth has there only ever been one intermediary doing proper advertising, PR and marketing?

Of course the biggest and most important reason why a lot of organisations are doing little, or nothing, in terms of advertising is, very simply, that they’re writing very nearly all the business they want without it.

This situation always seems rather unfair to agencies. Occasionally I’ve been involved in campaigns that have been pulled because demand has outstripped expectations (or equally because supply hasn’t been equal to demand). This can be gratifying, but not enough to make up for the reduced business.We naturally prefer our campaigns to be successful enough to be worth continuing, not more or less. Looking ahead, the central issue is whether demand will continue to be so strong that advertising, brand development and other forms of marketing continue to be a nice-to-have rather than a need-to-have.Time will tell, but there are a few straws in the wind. First and foremost, it seems to me that the industry is already starting to have second thoughts about its highly-successful strategy of encouraging churn by giving away loans on one- or two-year special offers with no redemption penalties. Speaking as someone who will certainly be switching out of my current deep discount the moment it runs out, I’m grateful to the lender for giving me such a generous subsidy on the cost of my home.

But from the lenders’ point of view, it’s a lose-lose situation: not only are they ensuring that I, for one, will be a lossmaking customer, but in addition they’re encouraging a whole generation of borrowers to embrace promiscuity and short-termism rather than loyalty and inertia.

At its simplest, there are two ways to sell more.

You can cut your margins to the bone, or you can add value. In the longer run, for the large majority of players, the second is the only really viable strategy.

But there are other reasons to think that more focused, distinctive and value-added mortgage propositions are likely to increase from now onwards. Although the housing market has proved remarkably resilient, it wouldn’t take a lot of a downturn to bring about a good deal more competition between lenders. Forthcoming mortgage regulation will increase transparency, and eliminate some of the traditional ways in which lenders leverage intermediary distribution. And the continuing development of more sophisticated mortgage products will increasingly demand dedicated marketing – there’s not much point in building the proverbial better mousetrap if it remains hidden away at the back of the shop.

I suspect that developments like these are still no more than gathering clouds from the point of view of many providers, who’d (not unreasonably) prefer it if their loans just kept walking off the shelves. From my point of view, though, I like the sound of them.They give me hope that there may be opportunities for CCHM to fill that gap in its client list before too long.