in Blog, Incentive Compensation, Mortgage Lending by Kelley Mangel

Leveraging LO Comp to Manage Marketing Expenses

As entrepreneurs and community ambassadors, loan originators need a certain amount of autonomy to effectively serve their local clientele. A marketing campaign that works well in one region may not work so well in another. For example, radio spots may be just the ticket to generating leads in a senior-dominated market, whereas capturing the business of suburban borrowers with growing families may be best achieved through Facebook ads.

But the administrative costs of supporting branch- and originator-level marketing efforts are substantial. Line items include software subscriptions and seat fees for point-of-sale, loan origination, CRM and marketing automation platforms; direct mail, newspaper and radio ads; targeted social media and Google AdWords campaigns; happy hours, luncheons, and of course swag — just to name a few. Equally as striking is the tremendous amount of work that each LO puts into developing the marketing strategy that works best for his or her market.

With margins as tight as they are in the current market, lenders must leave no stone unturned when it comes to managing costs — but it can be tricky to give LOs the freedom to operate in the way they see fit while simultaneously holding them accountable for marketing expenditures.

Leave no stone unturned with LO Comp - LBA Ware
To solve this conundrum, many lenders are turning to LO compensation as a way to manage marketing expenses. Of course, the best way to control marketing expenses will not be the same for every lender. That said, the following practices may help you shape a shared marketing expense strategy.

Allow LOs to Request a Marketing Budget

Giving LOs ownership over their marketing budget can be just as integral to protecting your bottom line as it is to generating leads that drive volume. This can be achieved by having LOs submit a quarterly marketing budget that includes software, advertising and other marketing related expenses. The lender can decide to share in the cost by contributing to a portion of the budget. Once approved, the expense that the LO is responsible for is then deducted from the LOs comp over the quarter. The LO can then be reimbursed for marketing expenses up to the amount of their approved marketing budget.

When using this approach, lenders should stipulate what happens if actual expenditures vary from the budget. For instance, if the entire marketing budget is not used, the remaining balance can be rolled over to the next quarter; or, if additional marketing resources are required, those expenses can be prorated across the following quarter.

Other ways lenders can manage marketing expenses include:

  • Providing LOs with a fixed budget that is adjusted periodically. The LO’s will be responsible for any expense above the budget amount.
  • Allow LOs to earn marketing dollars based on the amount of volume they produce. Higher originations will allow the LO to qualify for higher marketing dollars. Marketing dollars spent wisely will yield higher volumes, benefitting the lender and the LO.
  • Have LOs to pay for their own marketing upfront but allow them to submit an expense report to request reimbursement.
How are marketing expenses kept in check at your branch? Let us know in the comments. And if you are looking for a platform that simultaneously promotes sales performance while automating the recovery of marketing expenses, we’d love to give you a tour of CompenSafe and explore what it can do for you
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