I work with a lot of portfolio managers that can’t dig themselves out of a stalled out portfolio.
I hear them lament “Every time I put more loans on the street, my default end up going higher and I shut off marketing and try to recover… what can I do?”
Well, before we get to the solution, let’s push on this subject. Why is it that they can’t scale?
For one, there are plenty of demand out there. Sounds like they have no issues finding customers wanting to take out a loan with them. But the issue is where are they finding their customers.
I noticed that most of the lenders out there has zero or very little control over their marketing.
You would think that marketing is the most important aspect of anyone’s lending program, but not many lenders have the discipline or skills to run a marketing department.
Marketing in this case isn’t brand building. It’s all about performance marketing. And performance marketing isn’t about placing ads on facebook or Instagram either. You have find those customers that are in need of additional financing.
And who are they? Well, those that are looking, or with high credit card utilization or early signs of delinquency on some of their tradeline.
Some of the readers must be screaming their heads off right now, believing that this is not the population you want to go after. Well, should yon advertise those with perfect credit score and always pay off their credit cards? They don’t need your loans…
Now, let’s get back on topic on why these portfolio managers can’t grow their portfolio. Because they rely on lead generators to send them their leads.
Without knowing where these leads come from or how they are manufactured, these managers will buy a ton of lead and end up not converting any of it. Why? Most of the leads are fake.
Shocking? Right? Not really, if you look at lead generators model, you will understand why this all make sense. First, they don’t care about your conversion. Their number one goal is to sell you leads, and as much as you are willing to buy and as high as you are willing to pay.
Oh, if you want to grow your portfolio? You have to pay us more for higher quality leads. What they are trying to tell you is that high quality means those leads that haven’t been picked at by someone else. That is to say that if you give lead generators more money, they will show you these precious leads first before they show it someone else. That’s a little disingenuous.
Which brings me to my second point. These lead generators are saying the same thing to all your other competitors, all the time.
It’s in their best interest to sell as much leads to as many parties as possible. Who cares if the consumer (if it’s even real <- I will get to this point in a second) takes on multiple loans. Lead generators are not responsible for your loan portfolio.
If you complain to them, they have a perfect excuse, “it’s your underwriting.” They take zero responsibly to the well being of your portfolio.
These are just a few reason why lenders that rely on lead generators can’t grow their portfolio. The game is rigged against them period.
There are a few more reasons why lenders can’t grow their portfolio but I’m going to leave that for the next episode.
Oh, you are still here looking for answers? You should try prescreen direct mail. Take control of your own destiny. Try it Monday.