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Loans.co.uk is living proof that the direct marketing model still works. Launched from scratch in 1997 by three men, this year the loan broker anticipates a turnover of £50m, built on the back on a massive DM budget and cracking customer service. In April it was ranked fifth in terms of profit growth among medium-size companies by the Sunday Times Profit Track.

After the initial burst of business generated from ads in the back of red tops began to lose steam, the credit broker launched its first direct mail campaign in September 1999, using the same printer that did its letterhead to print 100,000 letters and lists picked out by the marketing director. If that novice attempt causes a wry smile, it should be immediately replaced with a look of respect at the level of sophistication in the current system.

In 2003 Loans.co.uk was the ninth biggest spender on direct mail according to Marketing Direct's second annual Top 100 Direct Mail Spenders, published this month in cooperation with research group Thomson Intermedia.

Loans.co.uk felt it had to expand from press to direct mail because it had a huge task in explaining what a modern credit broker does and overcome the industry's poor reputation. "I got into this industry in the late 80s when loan brokers helped people who couldn't get credit, but that isn't the case anymore," says marketing director Andy Pelley. Along with posting 4.5 million pieces of direct mail a year, Loans.co.uk also use press ads, TV, web, inserts, door drops, posters and even sponsors the Wycombe Wanderers.

Loans.co.uk has prospered by making life simpler for two distinct customers groups: lenders such as First National Bank, Paragon and Lloyds Bowmaker, and consumers who want hassle-free loans.

As the former CEO of First National Bank before it was bought by Abbey National, Loans.co.uk founder David Cowham Sr understood the needs of lenders, while the two other founders, David Cowham Jr and Steve Hayes, both understood the business from the consumers' viewpoint, both having worked for small loan brokers in the dark days after the 1989 property crash.

What has made the credit brokering different this time round is technology. Loans.co.uk not only has an internet component but has a call centre at its headquarters in Watford and recently took over a call centre in Preston from Norwich Union.

Loans.co.uk acts as middlemen, working with a group of around 10 lenders, which specialise in lending to a different kind of customer, ranging from high income to sub prime.

Marketing by Loans.co.uk attracts enquires from a range of customers, who are telephoned by trained staff to listen to the customer's needs and find the closest match to one of the broker's group of lenders.

But before Loans.co.uk can begin to source, arrange, process and complete a loan or mortgage, it must pull the punters in, using creative produced in-house and data handled by Northampton-based DM agency Iceberg.

When Pelley joined in June 1999, many brokers were using press ads, a medium that wasn't ideal for communicating Loans.co.uk's USP - a high level of consumer service. A different route was needed - enter direct mail.

Today Loans.co.uk spends more on direct mail proportionally and in absolute terms than its rivals. For example, last year Loans.cu.uk spent 94 per cent of its direct marketing budget on direct mail, while Freedom Finance Corporation spent £6m on direct mail, or 39 per cent of the £15m BTL spend.

"All DM activity is underpinned by very accurate response data and analysis. A daily report outlines and analyses exactly where yesterday's business came from: how much from TV and mailings, split in different categories," says Iceberg director Peter Ramsdale.

Iceberg buys in numerous lists, profiles the names and ranks and indexes. It then amalgamates the indexes, dedupes them and creates a data pool, which is run through a number of suppression tools on a monthly basis.

"If we find ourselves in the need of another 100,000 mailers, we can get them out quickly," Ramsdale says.

VITAL STATISTICS

Name: Loans.co.uk

Creative: In-house

Direct mail spend: £21m

DM agency Iceberg: Marketing

ON THE SPOT

Andy Pelley marketing director, Loans.co.uk

Do you open all your direct mail?

Yes definitely. I like to see what other people are doing with their direct mail.

What do you tell people you do at parties?

I probably bore people because I tell them what I do. People are surprised and don't expect you to be excited about what you do.

If you could send anyone some DM, what would it be, and to whom would you send it?

I would send all the people at school who said I'd never make it a copy of this article.

What one piece of advice would you give when embarking on a DM campaign?

Concentrate on getting the data/targeting right. If the data is good and the creative is mediocre the campaign will still be successful. If the data is bad the campaign will be unsuccessful even if the creative is outstanding.