A new infomercial campaign for National Finance Corp., a mortgage bank in Albany, NY, is trying to explain in 30 minutes what other companies try to do in 60 seconds or less: Explain the meaning of “subprime lending” in a language most consumers can understand.
The term refers to the practice of lending money to consumers with spotty credit histories. Subprime lenders usually charge a higher than average interest rate because of the risk involved in lending to people with poor credit. Subprime rates are usually less than credit card rates, which presents an attractive option to consumers who carry large debt loads.
This kind of lending can get complicated when it involves using as collateral the equity in a consumer's home, but National Finance wants to use its infomercial to demystify that process and find qualified customers.
Perhaps the biggest campaign coup is the appearance of New York Yankee legend Phil Rizzuto in the half-hour program. Rizzuto has a strong brand identity with National Finance's largest rival, The Money Store, Union, NJ, which featured him in commercials between 1972 and 1992. Those commercials with Rizzuto aired heavily in the Northeast, where National Finance is testing its campaign before a national rollout in April.
“Money Store made a huge mistake letting Phil Rizzuto get away from them,” said Mike Zapolin, president of Zapolin Transactional Ventures, the Los Angeles producer of the infomercial. “Money Store spent probably $100 million during the 20 years that Phil was with them, building the brand, building his integrity and showing his character. I don't think Money Store realizes how much they left on the table with Phil Rizzuto.”
The Money Store did not return calls for comment about the nature of any non-compete agreement it may have signed with Rizzuto (see related story, page 13). A former Money Store advertising executive who now works for First Plus Financial, the subprime lender in Dallas, TX, said Money Store had dropped Rizzuto six years ago when it decided that after 20 years, the company needed to freshen its image with another jock, baseball's Jim Palmer.
“Phil Rizzuto is a great spokesperson,” said Mauro Appazato, director of advertising at First Plus Financial. “There's no question he has a lot of brand equity, but it was important for The Money Store to update its image.”
The National Finance infomercial cost about $250,000 to produce, excluding the national contracts with Rizzuto and the show's host, Jim Lampley, a sportscaster. While the list of subprime lenders who air DRTV spots is long — The Money Store, First Plus Financial, Champion Mortgage, Eastern Mortgage Services, to name a few — National Finance decided that a half hour program was necessary to explain a variety of lending options.
“Spots have already been done in the subprime mortgage market,” said David Silipigno, founder and president of National Finance. “I just felt that a lot of consumers out there are uneducated in a lot of things and a 30-second spot, although it's been effective for some companies, doesn't fully explain everything a customer needs to know.”
One product that is explained in the half hour is the 125 percent equity program, which allows a consumer to borrow up to 125 percent of the value of his home.
“The infomercial goes through all the things a customer may be concerned with,” Silipigno said. “If they've had credit problems, it makes them feel comfortable. It talks about different types of programs and why people would take out a home equity loan or do a refinance. It gives us a lot of credibility from the standpoint of having Jim Lampley and Phil Rizzuto involved.”
The program tested in Jacksonville, FL, Chicago, Ohio and in regions of New York state and New England in an attempt to reach people who respond to well-recognized sports figures. The resulting response merits a national rollout next month. Silipigno said his company is prepared to handle the rise in call and loan volume which is expected to result from the airings.
“There will have to be tweaks here or there, but we've been running overstaffed for quite some time in an effort to get people trained up,” Silipigno said. “We're prepared to do a great deal more volume than we do right now.”
National Finance has 400 employees, six regional offices and is forecasting a loan volume of $130 million during the first quarter, which is slightly less than it had forecast in earlier statements. Its loan volume was $250 million last year and it had forecast a total volume of $750 million this year.
“We're a little off our projections, but we're really stepping up,” Silipigno said. “We expect to grow with our infomercial airings.”
subhed: Wall Street is Watching
National Finance, founded in 1990, has a $200 million line of credit with New York investment bank Bear, Stearns, which is expected to underwrite an initial public offering of the company's stock in October.
As the IPO approaches, it is important for the company to build awareness, said Zapolin the infomercial producer, who used to work for Bear, Stearns.
“He [Silipigno] needs to be branded,” Zapolin said. “He needs Wall Street to take notice of him. When they think of Phil Rizzuto, when they think of Jim Lampley, they think of mortgages, we're set to take on The Money Store head on.”
While Zapolin and Silipigno believe in the power of DRTV, other marketers at subprime lending banks say that direct mail is still a better way to find qualified leads.
“We continue to test DRTV, unfortunately, it's not nearly as targetable as mail,” said Gene Devine, direct marketing manager at Eastern Mortgage Services Inc., a subprime lender in Trevose, PA. “Right now, with the kind of segmentation and profitability analysis that we do, we're able to do a much better job in getting higher approval rates and a lower cost per loan on mail than we were on TV.”
His company, which began airing DRTV spots last year hosted by quarterback Fran Tarkenton, has found that DRTV does produce a low cost per lead, but a more important benchmark is the cost per funded loan. DRTV marketing produces a cost per lead in the $200 range, but it becomes uneconomical if the cost per funded loan is 10 times that amount. The average loan is in the $50,000 range in the subprime industry.
“In TV, the fallout rate is a lot higher than in targeted disciplines, like mail,” Devine said. “That's about right, the problem with TV is that you have credit guidelines that aren't always met by reaching everybody. We discovered that with surgical media buying practices, we could make DRTV practicable.”
While Zapolin said that the National Finance infomercial is breaking new ground in the subprime lending industry, he does not deny the importance of other forms of marketing in building the company.
“The building of brand is important,” Zapolin said, “but what really got National Finance to this level was outbound telemarketing. Now, the company need a vehicle that could hopefully get qualified leads at a fraction of what the industry pays for the lead.”
