Preparing for Economic Recovery: 2010-2011

Excerpts from GlobalSpec

Executive Summary

It’s true that during difficult economic times, many companies are unable to in­crease their marketing investments or are forced to cut marketing spending. These tough decisions put those companies in a difficult position because they may lose market share or have greater ground to make up as the economy improves.

The important question during a downturn isn’t whether or not the economy will recover—it will; it always does. The important question is whether your company will be in position to surge when the economy begins to grow again. To a large degree, the level of your success will depend on your marketing efforts and capabilities: what you have done during the downturn and what you put in place now to win business during the recovery. You will need to make strategic decisions about choosing new media, entering new markets, and positioning products.

Success will also depend on the timing of your efforts. Now is the time to establish marketing plans for the recovery—formulate strategies, design campaigns, make media choices, justify expenditures—so you are ready to go with an approved marketing plan when your company’s budgets open up and you have marketing funds to invest.

But you must remember that as you plan for the future you will not be able to return to the old ways of marketing. Your customers and prospects now go online first to locate products, services and suppliers. And the demand for marketing accountability and measurement is stronger than ever. Both these trends were well documented before the economic downturn hit, and they will continue to be more important than ever as the economy recovers.

That means marketers must choose an appropriate mix of targeted online pro­grams that complement their traditional marketing efforts, offer measurability and ROI, and provide evidence to support marketing decisions. Only in this fashion will industrial companies be able to emerge from the downturn in a strong position to win business.

Recover from Marketing Cutbacks

If you were forced to reduce your marketing exposure during the downturn, it’s essential that you regain momentum early and quickly as recovery begins. Your visible presence in the market through sustained and frequent marketing will give your company a jump start before the market becomes overcrowded with mes­saging from competitors. Then, as demand begins to increase, you will have an advantage because potential customers will have been continually exposed to your messaging and have an affinity to work with you.

If you did cut back, you likely need to do more now to catch up. You will need to remind customers and prospects that you are here, a strong and viable company ready to serve their needs. Even if you did maintain marketing during the downturn, you must continue or increase your marketing efforts because the competition for customers is only going to increase as the economy recovers and companies hungry for new business compete aggressively.

Plan Now to Ensure Success

A typical marketing cycle looks something like this: establish marketing strategy, identify marketing objectives, define target audience, research media options, con­ceive campaigns, calculate costs, craft messaging, gain executive endorsement and marketing funds, execute campaigns, measure effectiveness, refine tactics.

As every marketer knows, that’s a lot of work. If you save it all until budgets open up and your company is ready to invest more in marketing, you’ll end up scram­bling to put together marketing plans and seeking budget approval. By the time you actually get out there in the market, you’ll be well behind competitors who got an early start.

That’s why it’s imperative to get as much of the planning work done now. Here are two guidelines to help accelerate your planning process:

Decide which markets to attack first. Some industries will recover faster than oth­ers. According to the August 2009 Manufacturing Institute for Supply Management (ISM) Report on Business, 11 of 18 manufacturing sectors reported growth when comparing August to July. Those sectors include: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Computer & Electronic Products; Transportation Equipment; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Chemical Products.1

In addition, some sectors have been less impacted by the economic downturn than others. Biotechnology/pharmaceuticals, utilities/energy, aerospace/defense, and packaging machinery have fared better than most industries.2

1 “August 2009 Manufacturing ISM Report on Business.

2 “GlobalSpec 2009 Economic Outlook Survey: How Industrial Companies can Succeed in the Current Economy.”

These sectors might be good first targets, if your company’s products and ser­vices are a good fit. You may need to re-purpose some of your marketing materials to focus on the needs of these industries or seek out marketing options that target these specific sectors. Get started on that work now.

Keep in mind that not only will certain sectors recover faster, but certain geographic markets will recover faster as well. Today’s industrial economy is a global economy, and you should seek out opportunities where they exist. Don’t limit yourself region­ally unless the nature of your business dictates that you do. The Internet makes it easy to find and be found by target customers anywhere in the world.

• Evaluate potential media partners:  If you had cut back on marketing during the downturn, you may have lost touch with your media partners. Some of your traditional media outlets may not even exist now, and many of them are no longer effective.

This is a good time to explore possibilities with new media partners. Be sure to ask them these questions:

1. Do they have the attention of the target audience you are trying to reach, in both existing and new markets?

2. Can they keep your company, products and services visible to customers and prospects at all times?

3. Do they offer a variety of integrated marketing programs that align with your marketing objectives?

4. Do they deliver targeted, quality leads with full contact information?

5. Do they provide reporting you can use to measure the performance of your marketing and justify your marketing investments?

Once you have lined up potential media partners, work with them to put together a program that will help you accelerate lead generation and branding visibility as you ramp up your marketing efforts. Have the program designed, approved and ready to launch when marketing budgets open up.

It Won’t Be “Marketing as Usual”

If there’s one big lesson for marketers in this downturn, it’s that old forms of marketing will not perform well and will not be tolerated. Avoid this critical mistake: don’t go back to the same old way of doing things.

As a marketer, you must be prepared to think differently about your approaches to connecting with customers, prospects and markets. Even before economic prob­lems hit, marketing was trending away from traditional media such as printed trade journals and in-person trade shows, and towards online media such as online search, e-newsletters, virtual events and banner advertising. Your audience has already migrated online, and will continue to stay online as the economy recovers.

Evidence of the shift online

Here are a few statistics that demonstrate how the behavior of your customers and prospects has changed:

• More than 80 percent of engineering, technical, manufacturing and industrial professionals use the Internet to find components, equipment, services and suppliers, and to obtain product specifications. 73% spend three or more hours per week on the Internet for work-related purposes. Your audience is online; you need to be there to connect with them.

• Four of the top five resources that technical professionals use when searching for products, services and suppliers are online resources: General search engines, online catalogs, supplier Web sites, and GlobalSpec. The only non-online source to make the top five is “peers/colleagues.”

• Engineers and other technical professionals prefer e-newsletters to printed trade magazines as an information source. Over the past 12 months, 30% have reduced their use of printed trade magazines, continuing a documented trend over the past several years. However, 56% receive three or more e-newsletters, and 46% read e-newsletters at least daily or several times a week.

If it is Not Marketing as Usual, What is the Supplier Doing?

Few if any experts expect the old ways of marketing and advertising to come back. Even advertising agencies they see the writing on the wall. According to AdWeek:

“Experts say agencies will not be able to simply return to business as usual. Some will be better positioned to grab a greater share of spending than others, say industry watchers, and those with the edge will be the ones that can optimize the use of digital media.”12

The article goes on to point out that post-recession marketers will “rely on a portfolio of marketing and media vehicles, allowing them to reach with greater precision and greater accountability than they ever had before.”13

On the supplier side, many manufacturers have already adopted the new reality of marketing. According to the recent survey, “Trends in Industrial Marketing 2009,” 30% of industrial marketers are reducing trade show attendance and 38% are reducing print ads. What is taking the place of these traditional media? 48% report that online marketing is a greater portion of their marketing budget in 2009 than in 2008.14 In addition, three of the top four sources of leads for manufacturers in 2009 are online programs: company Web sites, GlobalSpec and e-mail marketing.

Measurement and Accountability are here to Stay

The measurement of marketing effectiveness was becoming a priority before the downturn. It commanded increased attention as executives demanded account­ability from marketing, and measurement will remain a mandate as the economy recovers and marketing is the beneficiary of more investment.

Manufacturers recognize the need for marketing measurement and in a recent survey strongly agreed with this statement: “There is greater pressure to demon­strate accountability and return on marketing investments.”15 Like most companies, manufacturers are loathe to invest marketing dollars not knowing what they are getting for their return, but the fact is that the effectiveness of print ads, trade shows and other forms of traditional marketing have always been difficult to measure.

In response to economic conditions, 69% of manufacturers will closely evaluate the performance of marketing programs and reduce or eliminate programs that don’t perform well, and 53% will choose marketing programs that are measurable.16

The demand for measurement is also infiltrating the world of advertising agencies as clients have come to expect more accountability. Agencies will need a good understanding of measurable programs, know which ones will work for specific client objectives, and be able to deploy them for their clients.

Emerging from the Downturn: A Six-Point Checklist for Success

1. Build marketing plans and justify expenditures now. Don’t wait to hear that funds are available for marketing. Proactively plan your marketing efforts for the recovery and gather evidence to justify your expected marketing expendi­tures. Make sure you receive executive endorsement so you’re ready to go as soon as possible. Otherwise, you might fall behind competitors.

2. Prioritize marketing investments. You won’t be able to start everything at once, which is why it’s more important than ever to prioritize your marketing investments where they will deliver the most return. Seek integrated marketing programs that use multiple tactics to maximize your exposure and opportuni­ties for sales leads and that ensure you are reaching your prospects and clients at every stage of the buying cycle.

3. Explore new markets. Your products and services may be a good fit for one of the faster-recovering sectors. Manufacturers that can display their products and services simultaneously across multiple markets will have the best opportunity to gain new customers. Online industrial ad networks, e-newsletter advertising and vertical search engines are effective ways to target specific customers in new markets.

4. Update marketing materials and fine-tune messaging. Make sure your marketing collateral and Web site are up-to-date with current messaging and the latest product versions. If you choose to enter new markets, you may need to revise some messaging and re-purpose existing case studies, white papers and other materials. Do it now to avoid long lead times.

5. Emphasize measurement and ROI. To get any marketing plan approved going forward, you will need to demonstrate accountability. Today, the most effective marketing programs are online programs whose performance can be measured and analyzed. Online programs are built around impressions, clicks and conversions. You can easily see what is working and focus marketing dollars on the most successful programs, which will help reduce waste while increasing results.

6. Work with new media partners. Preparing targeted, online marketing pro­grams for the economic recovery may be new to you, and you shouldn’t have to do it alone. This is a good time to consult with an experienced online media partner that understands and has the attention of the industrial audience you need to reach. Discuss your marketing objectives and have them show you an integrated marketing program that will help you achieve your objectives and provide measurement and accountability. 

The Economic Benefits of Investing in Clean Energy

How the Economic Stimulus Program and New Legislation

Can Boost U.S. Economic Growth and Employment

Yesterday, I was engaged in a very lively conversation with a talented group of business entrepreneurs on where we need to be with regard to our country, its economic opportunities, future prospects of employment, and oh yes....how we can not only contribute to the healing of our planet, but how we can economically benefit.

After a lot of thought processing last night, this is my take and sharing with anyone that can have an open mind and the tenacity to act.

The United States in the 21st century faces an enormous challenge—successfully managing the transformation from a predominantly carbon-intensive economy to becoming a predominantly clean energy-based economy. The reality of global climate change due to rising carbon emissions makes it imperative that the U.S. economy dramatically cut its consumption of traditional fossil fuels, the primary source of carbon dioxide (CO2) delivered into our atmosphere by human activity. Rising levels of CO2 in the atmosphere is in turn the primary cause of global warming.

This economic transformation will engage a huge range of people and activities. But there are only three interrelated objectives that will define the entire enterprise:

Ø  Dramatically increasing energy efficiency.

Ø  Dramatically lowering the cost of supplying energy from such renewable sources of energy as solar, wind and biomass.

Ø  Mandating limits and then establishing a price on pollution from the burning of oil, coal, and natural gas.

It is crucial for economic policymakers and the American people to understand the likely effects of these three overarching objectives as much as possible. Specifically, we need to gauge our success in curbing CO2 emissions alongside the broader effects on the U.S. economy, particularly on employment opportunities, economic growth and people’s incomes.

This dialogue examines these broader economic considerations—jobs, incomes, and economic growth—through the lens of two government initiatives this year by the Obama administration and Congress. The first is the set of clean-energy provisions incorporated within the American Recovery and Reinvestment Act, initiated by the Obama administration and passed into law by Congress in February. The second is the proposed American Clean Energy and Security Act, co-sponsored by Rep. Henry Waxman (D-CA) and Rep. Edward Markey (D-MA), which is now before Congress.

The commented analysis in this blog shows that these two measures operating together can generate roughly $150 billion per year in new clean-energy investments in the United States over the next decade. This estimated $150 billion in new spending annually includes government funding but is notably dominated by private-sector investments. We estimate this sustained expansion in clean-energy investments triggered by the economic stimulus program and the forthcoming American Clean Energy and Security Act can generate a net increase of about 1.7 million jobs. This expansion in job opportunities can continue as long as the economy maintains a commitment to clean-energy investments in the $150 billion per year range. If clean-energy investments expand still faster, overall job creation will increase correspondingly.

These job gains would be enough—on their own—to reduce the unemployment rate in today’s economy by about one full percentage point, to 8.4 percent from current 9.4-percent levels—even after taking into full account the inevitable job losses in conventional fossil fuel sectors of the U.S. economy as they contract. Our detailed analysis, based on robust economic-modeling methodologies that are explained in detail in the paper and in Appendix 1, beginning on page 48, calculates that roughly 2.5 million new jobs will be created overall by spending $150 billion on clean-energy investments, while close to 800,000 jobs would be lost if conventional fossil fuel spending were to decline by an equivalent amount. It is not likely that all $150 billion in new clean-energy investment spending would come at the expense of reductions in the fossil fuel industry. However, we present this scenario to establish a high-end estimate for reductions in conventional fossil fuel spending, and the net gains in employment that will still result through spending $150 billion per year on clean-energy investments. In appendix 2, we also present these figures on net job creation broken down on a state-by-state basis for all 50 states and the District of Columbia.

The stimulus program enacted in February to help the economy recover from a deep recession already in its 18th month includes a range of measures to begin building a clean-energy economy. These measures include:

Ø  $24.4 billion in federal government spending to promote energy efficiency.

Ø  $23 billion for transportation investments.

Ø  $25.3 billion for renewable energy.

Some of this funding will be in 2010, but a significant amount will also spark new economic activity between 2011 and 2014.

Congress still must pass the American Clean Energy and Security Act, or ACESA, and the president must still sign it. But the legislation contains three broad categories of initiatives that are unlikely to change in substance:

Regulations aimed at promoting clean energy.

A mandated cap on carbon emissions that will be phased in through 2050.

Measures designed to assist businesses, communities and individuals successfully manage the transition to a clean-energy economy.

The general thrust of this forthcoming legislation and the clean-energy provisions within the economic stimulus program is to promote energy efficiency and renewable energy. Yet as an economic stimulus program, ARRA operates through direct government spending and financial incentives to promote private investments in clean energy. In contrast, ACESA will boost clean-energy investments mostly by private businesses; investors and households through new regulations that encourage the clean and efficient use of energy and discourage the use of high-carbon fuels. Many of the regulatory initiatives proposed within the ACESA are not fully fleshed out within the legislation itself. As such, it is more difficult to estimate their effects on overall clean-energy investments than is true with the spending initiatives advanced by the ARRA.

In the following links, first examines the basic clean-energy features of the economic stimulus program and the proposed ACESA. Specifically, we will detail the distinct features of both measures and the ways in which they would operate in concert to encourage investments in clean energy and energy efficiency as well as discourage spending on conventional high-carbon fuels.

It will then explain how ARRA and ACESA operating in tandem would create new employment opportunities across the United States by spurring $150 billion a year over the next decade in new clean-energy investments. Understanding how we calculated these investment levels over 10 years requires an understanding of the different economic models available to analysts and why we chose a simple but reliable method for estimating employment effects based on data generated by the U.S. Commerce Department’s industrial census. It explains the reasons for their analytical decisions on pages 15–20, beginning with how they estimated the effects on jobs of shifting spending in the U.S. economy away from high-carbon fuels and toward clean-energy investments. It will show why our simple approach offers a robust framework for understanding how a shift in spending from conventional fossil fuels to clean energy generates a net expansion of employment that will be sustained as long as the U.S. economy maintains its commitment to clean-energy investments.

It then presents detailed employment estimates. The key finding is that clean-energy investments generate roughly three times more jobs than an equivalent amount of money spent on carbon-based fuels. We consider some of the implications of this result, including how a large-scale shift from conventional fossil fuels to clean-energy investments—on the order of $150 billion a year—would affect conditions in the U.S. labor market.

The report then turns to the various economic models used to estimate the impact of a carbon cap on the long-run growth trajectory of the U.S. economy. Our key finding: All of the models, without exception, forecast that a carbon cap, such as that proposed in ACESA, would have, at worst, a minimally negative impact on the U.S. economy’s long-term growth path. Moreover, these models generate this basic finding without considering some of the major ways in which clean-energy policies can stimulate economic growth. These include the expansion of employment opportunities itself, a reduction in the trade deficit, promoting technological improvements and thus falling prices in renewable energy sources, and reducing the negative impacts on economic activity of greenhouse gas emissions and unmitigated global warming.

To be sure, any economic modeling effort that estimates changes in employment growth, economic growth, and income growth will result in forecasts that are problematic by nature. We make this clear in our paper wherever we rely on our own economic models and those employed by others. But they also take pains to examine the relative strengths and weaknesses of all the modeling approaches—including our own. This enables us to cross check our own conclusions with those of other researchers to reach the most reliable possible understanding of the overall impact of advancing a clean-energy agenda within the U.S. economy.

For more information see:

Read the full report (pdf)  

http://www.americanprogress.org/issues/2009/06/pdf/peri_report.pdf

Download the executive summary (pdf) 

http://www.americanprogress.org/issues/2009/06/pdf/peri_report_execsumm.pdf

State fact sheets: Clean Energy Investment Creates Jobs in Every State

Interactive Map: A State-by-State Look at Clean Energy and Job Creation

Sales Strategies For Uncertain Times

I’m not sure that a double dip recession is really in the cards, but that doesn’t mean that the fear of it isn’t impacting buying behavior.  Here’s some advice, based upon conversations with numerous sales experts and top sales managers, that can help you sell more, even when your customers are hunkering down and waiting to see what happens:

Cultivate Your Inner Sales Guru.

You may be worried about the economy, but you can’t let worries rule your thoughts and actions.  Rather than focusing on the economy, act as if you’re starting a new sales job that presents some interesting challenges to overcome.  Remember: even during the worst of times, some people end up winning.  Make sure it’s you.

Reaffirm Your Company’s Viability.

Take a good, hard, realistic look at your company.  Is it still in good shape?  Are its offerings worthwhile?  Do you add value to your customers?  Would YOU want to do business with your company?  If the answer is no, find a job somewhere else. But if your company is basically sound, there’s no reason for you not to go out there and sell with confidence.

Re-craft Your Corporate Message.

Figure out how you’re going to communicate the value of your company in a way that the customer will understand and believe you. Show the customer enough detail of your corporate financials so that they know, beyond all doubt, that your company is going to be there to help them in the future.  Make buying from you a safe bet, no matter what happens.

Retune Your Solution Message.

What’s works during times of uncertainty are messages of low risk (protection, security, stability and cost savings).  However, you needn’t be glum. People want some positive messages, too, so add those into the mix. Show how your offering helps position the customer for future growth, and how your offering helps THEIR customers.

Expand Your Pricing Options.

Work with your CFO or other financial gurus on alternative financing plans, delayed payments, subscription fees, discounts, whatever… Many small businesses continue to have cash flow problems, so you want walk into EVERY sales situation with a bag of tricks that will allow them to buy from you.

Prioritize Your Opportunities.

Run though your entire list of leads and opportunities and, based upon what you know and can learn with some research, prioritize your opportunities.  Lower the priority of long-term “strategic” opportunities and raise the priority on the customer who are most likely to buy, regardless of what happens to the economy.

Tighten Your Lead Qualification.

Each time you get in contact with a prospect, confirm that they are a real opportunity early in the sales cycle.  Then use the flexibility of your financial options to determine the payment plan or method that will both make it easy for them to say, “YES!”  Do this religiously and, as a bonus, you’ll spend far less time following up on dead leads.

Focus on the Right Numbers.

Set up an ambitious schedule of working through the steps of your sales process, then follow it.  A sales process forces you to focus on the mechanics of selling rather than your concerns about closing business.  The regularity of selling is a great way to get a sense of accomplishment, even if your “hit” rate is lower than it used to be.

Become a Thought Leader.

It might be a bit harder to make the deals than it was when times where good.  So what?  If you’re doing everything above, you’ll be outselling the competition.  There’s a saying that true leadership consists of being able to remain calm no matter what.  This is a good time for YOU to remain calm and make the best of the situation.

Enjoy What You Do.

When things are difficult, you need to give yourself credit and lots of it, simply for plugging away.  Your challenge is to enjoy yourself and your job, even though times are tough.  So DECIDE to feel good.  If you’ve got the emotional moxie to stay calm when everyone else is creeping out, this could be the most successful years in your career.

Pros and Cons of Reverse Mortgages-Think Before Acting!

In a TV commercial, debonair actor Robert Wagner invites viewers to take a closer look at reverse mortgages. The former star of the series "Hart to Hart," Wagner offers a free DVD that explains how these mortgages work.

Cash-challenged seniors who want to stay in their own homes have kept reverse mortgages high on the public radar. But, despite glowing testimonials from some customers, such as the ones on Wagner's DVD, not everyone thinks they're such a good idea. 

Reverse mortgages hit the scene in the 1960s, according to a 2005 report by the National Council on Aging. Although the public has been generally hesitant to embrace them, their popularity continues to climb. The National Reverse Mortgage Lenders Association recently reported the number of federally insured Home Equity Conversion Mortgages administered by Housing and Urban Development (HUD) rose from 43,131 the previous federal fiscal year to an all-time annual high of 76,351, a whopping 77 percent increase.

Not surprisingly, five of the top 10 reverse mortgage markets are in California. Also on the list: New York City, Phoenix, Boston, Denver and Coral Gables, Fla.

However, the reverse mortgage market is minuscule compared to that of regular mortgages. The Mortgage Bankers Association estimates that 10.7 million mortgages were originated last year. Reverse mortgages represent a drop in the bucket -- about seven-tenths of 1 percent of regular mortgages.

How they work: 
 In general, a reverse mortgage converts home equity into cash in several different ways, ranging from monthly payments to an equity line to one-time payouts -- or a combination. The amount you can borrow varies according to your age, the value of the home, current interest rates and loan fees.

Are reverse mortgages a good idea? Most news stories imply they are. Reports suggest reverse mortgages can be a source of ready cash when it's needed -- similar to other investments. But, like anything that impacts your bottom line when your earning potential is limited, taking out a reverse mortgage isn't a no-brainer. That's why candidates for these mortgages should consider both the benefits and the drawbacks before jumping in.  

The cons?  
Zoran Basich, an elder law attorney and operator of Nursing Home Solutions, a California-based company, says he believes reverse mortgage lenders fail to give seniors the full story when it comes to cashing out home equity.

"What they don't tell you is ... that the front load is very high," Basich says. He says lenders like reverse mortgages because "these (loans) are very profitable to write in the short term."

Front-loading refers to upfront costs, paid out of the home's equity at closing. As with conventional mortgages, reverse mortgage lenders make money the old-fashioned way: through interest, origination fees and points. The interest rate varies according to the market. However, closing costs are significantly higher with reverse mortgages.

In addition, borrowers continue to be responsible for real estate taxes, conventional homeowners insurance and home repairs, and have the added burden of paying for mortgage insurance, too.

Why would borrowers have to pay mortgage insurance? After all, that insurance is required for regular mortgages if borrowers don't have a large enough down payment, and its purpose is to protect lenders in the event of a default. With a reverse mortgage, there's no such risk to lenders.

But other risks exist. Mortgage insurance guarantees the lender will receive its full repayment. For example, a decrease in the property's value adversely affects the lender's reimbursement. Mortgage insurance also covers the lender in the event the mortgage is held over a very long period of time and accrued interest exceeds the value of the home.

It should be noted, though, that when it comes to a home appreciating in value, there is virtually no difference between conventional and reverse mortgages. The lender only recovers what it's actually owed. After the lender's loan, fees and interest are repaid, anything left goes to the homeowner or heirs.

Refinance instead? 
  Basich believes seniors should consider borrowing against the value of their homes only as a last resort. If there's no way around it, he says it's smarter to refinance as a 30-year fixed loan.

Here's how that would work: You own a home valued at $300,000. You find yourself in need of a large amount of cash for major home repairs and want a lump sum in the bank for future emergencies. You borrow a combination of cash and upfront costs (rolled into the loan) valued at $100,000 at 6 percent. Exclusive of taxes and insurance, you'd be paying back a little under $600 per month on a 30-year loan. And you wouldn't need mortgage insurance because you still have plenty of unencumbered equity.

The rub here is the monthly payments. However, Basich contends that the fees for this type of loan are lower, and your remaining equity isn't subject to interest and other costs associated with a reverse mortgage.

True, in a conventional mortgage, the money must be paid back starting right after closing, while reverse mortgages don't fall due until the home is vacated. But, Basich argues, since the payments on a conventional mortgage are stretched out over a longer period of time, they're lower and more manageable.

In the case of a reverse mortgage, younger borrowers can't cash out as much equity as older borrowers. To qualify for a reverse mortgage, you must be at least 62 years old. Since banks are repaid when the house is sold, it's quite possible a lender might have to carry the note for 20 to 25 years or more. For that reason, a 79-year-old is a much more attractive loan candidate from the bank's perspective.

As for the borrower, whether he lives six months or 30 years after the loan is closed, he still pays stiff upfront fees. Of course, statistically speaking, older borrowers are less likely to accumulate as much interest as younger ones.

The matter of Medicaid
:  Depending on where you live, Basich says the proceeds from a reverse loan could prove a barrier to qualifying for Medicaid, which counts loan proceeds as an asset.

Although each state differs in the fine print, untapped equity in the home is not considered an asset in determining Medicaid eligibility, as long as it's owner-occupied. Recent federal legislation placed the home exemption ceiling at $500,000.

For a homeowner with property worth more, there's definitely an argument for obtaining a reverse mortgage and then spending down the cash. But that cash is also subject to Medicaid's new time limitations on asset reduction. Talk to an eligibility specialist early in the process to see where you stand.

Additionally, according to Basich, the terms of many reverse mortgages knock homeowners out of their homes after a period of absence, which varies from lender to lender. He says some reverse mortgages require the full loan balance plus accrued interest be repaid when the house is vacated by the owner for a specified period of time -- like a prolonged, but temporary, nursing home visit.

"Can you imagine if you have nowhere to go to?" Basich says. "What incentive do you have to get better?"

Views of an advocate: 
Eric Tyson, author of "Mortgages for Dummies" and other books about personal finance, tends to see reverse mortgages as valuable retirement tools when homeowners understand them.

A former financial counselor, Tyson says counseling -- mandatory before entering into a reverse mortgage -- educates seniors to which lenders are reputable and which fall short.

"They should take their time, do their homework, do some reading about the topic," he says. "There's a lot of jargon and lingo they should get down."

He agrees fees associated with reverse mortgages run high. "That's usually the light-bulb moment for prospective borrowers," he says.

But, he adds, traditional 30-year mortgages also come with high price tags. Older people can find it more difficult to qualify for a mortgage since many retirees no longer work and have limited incomes. "People lose homes all the time when they default on their mortgage," Tyson says.

The majority of Americans rely on Social Security for their retirement. Problem is, there's often little to supplement Social Security -- except the home.

"What are you going to do with that equity? You can't take it with you," he says.

Investigate all the options
:  George Downey, past chairman of the Massachusetts Mortgage Bankers Association, says reverse mortgage are wonderful when used properly, but shouldn't be considered a financial panacea.

"The first take-away should be that every case is different and should be determined on a case-by-case basis," Downey says. Reverse mortgages make sense for some, but for others, there may be better solutions than tapping into home equity.

Downey says before committing to a reverse mortgage, take a look at other services available in the community. For instance, if a senior suddenly needs a lump sum amount to replace his home's heating system, home equity should not be the first resource to consider. Many power companies offer low-cost financing for heat, air conditioning and energy conservation improvements. And the local branch of the National Council on Aging is a great resource for other senior programs.

"In rural Massachusetts, we had an 83-year-old who needed to replace a furnace and some windows," says Downey. "She was doing a reverse mortgage and consumer counseling was required. They were HUD-approved counselors, totally independent of the transaction, there to make sure the senior knows what is going on and provide a system of checks and balances."

In this case, Downey says, one of the counselors was from the same small town and was aware of programs and grants available in the area. One program offered free furnaces to qualified individuals. She ended up with one and also received some windows at no cost.

"There are little pools of money around seniors that they are not aware of," he says.

Downey identifies yet another factor that may muddy the waters -- the influence of other family members or caretakers who push the senior toward a reverse mortgage for selfish reasons, or counsel against it because they want to inherit the property intact. He advises anyone considering a reverse mortgage to take a good hard look at what other people stand to gain from the situation -- if anything -- while considering outside advice.

Emotional Baggage:  
Boyce Watkins, a writer and finance professor at Syracuse University, says one often neglected aspect, and downside, of reverse mortgages can be the emotional impact.

"You're facing your own mortality," Watkins says. In addition, reverse mortgages impact where the homeowners live, how medical bills will be paid and what the future holds inasmuch as financial security is concerned. Most, older adults nurture the idea of leaving something to their children and believe their home is sacrosanct. Parting with even a little of its value can be traumatic.

Watkins sees reverse mortgages as similar to secured credit cards. "It looks a lot like free money and a lot of people miss the fine print," Watkins says. "Many customers only pay attention to two or three variables in a loan."

Watkins echoes Tyson's advice concerning the value of good counseling -- and takes it a step further. He says to talk to someone you trust, as well as a counselor -- and ask "a zillion questions, such as 'What will happen if I get sick and go into a nursing home?'"

As Watkins points out, almost all of the downside of reverse mortgages can be weighed before moving forward. Read about them (the Federal Trade Commission has some great information). Also, get several quotes from reputable banks, understand the implications of ill health and find out how a reverse mortgage could impact Medicaid eligibility.

Ultimately, the decision is yours. Base it on what's right for your individual needs.  However, it is almost best to take your time before making such a decision.  Also note: The Lender Always Wins!