Bank Offering Pre-Approved Loan Via Magazine Ad : Marketing: Selected Sunset subscribers are receiving no-fee, no-application pitch. Targeting trend worries privacy advocates.

First Interstate Bank is offering pre-approved home equity loans in selected copies of the October issue of Sunset magazine, the latest example of how consumer marketers are using magazines to zero in on prospective customers.

The Los Angeles-based bank said 250,000 Sunset subscribers in 13 western states are receiving offers for no-fee, no-application loans of up to $100,000. The subscribers were handpicked by First Interstate based on information provided by credit bureau TRW.

The pitch is believed to be the first targeted magazine ad involving a pre-approved loan. In recent years, marketers of products ranging from cars and alcohol to cigarettes and long-distance service have sifted through magazine subscriber lists to reach specific consumers.

“It is the quintessential marketing tool,” Diane Spencer, director of print relations at the New York advertising agency of Young & Rubicam, said of targeted ads. “It allows advertisers to reach consumers in a very personalized way.”

By comparing subscriber lists to credit and marketing information gleaned from questionnaires and other sources, advertisers can target consumers based on income and spending or consumption habits. In the case of First Interstate, the bank is soliciting only those Sunset subscribers who meet its lending guidelines.

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The bank said it placed the offer in Sunset because the publication caters to people interested in landscaping, home improvement and travel. About 80% of its 1.5 million subscribers are homeowners.

“It is an audience that can benefit from the offer,” said Ramona Vasquez, vice president for direct marketing at First Interstate.

Such customized pitches represent a refinement in magazine advertising. For most of the last decade, Time and Newsweek, among others, have allowed advertisers to target subscribers by broad demographic characteristics or by region. Advertisers can buy ads in copies sent only to subscribers identified as business managers, or upscale women, or seniors. Newsweek allows advertisers to target “highly motivated and acquisitive” owners of single-family homes. (The editorial content of the magazines doesn’t vary.)

Within the last five years, some of the larger magazines have allowed advertisers to reach a more narrowly defined audience.

Audi in 1993 was among the first companies to try its hand at custom ads, targeting 2.5 million subscribers to Time, Sports Illustrated and Money magazines. Those people were culled from the magazines’ subscriber lists based on 120 lifestyle and demographic traits, such as whether they earned more than $75,000 or drove an imported car.

Chrysler is using vehicle registration information to target Chrysler owners who subscribe to about a dozen magazines, including Newsweek and Time. The ads offer a special deal if the subscribers visit their dealers for parts or service. In some cases, non-Chrysler owners who subscribe to those magazines will see an ad for a new car instead of a parts and service ad.

“It eliminates a lot of waste in our advertising,” said Cliff Mathis, Chrysler retail services marketing manager. He said feedback from dealers indicates the targeted ads are working.

But privacy advocates are troubled by the trend. Plans by Phillip Morris Cos. to target smokers in several Time Inc. magazines two years ago caused a stir, out of fear the list could fall into the wrong hands--an insurance company for example.

“Suppose they use supermarket buying information to develop a list of people who buy hemorrhoid preparations. This could get into very sensitive areas,” said Beth Givens, director of the Privacy Rights Clearinghouse in San Diego.

Privacy advocates were less bothered by pitches for financial products or services. They said such pitches seem less intrusive because consumers already receive credit card offers in the mail. What’s more, people who don’t want to receive such offers can tell credit bureaus to remove their names from marketing lists, privacy advocates said.

First Interstate said it did not have access to subscribers’ credit information. The bank rented Sunset’s subscriber list and turned it over to TRW, which selected names based on First Interstate’s lending criteria.

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Advertising executives said a broad proliferation of custom ads isn’t likely any time soon. Though the cost of such ads is similar to direct mail, they can be twice as expensive as a non-targeted magazine ad, said Young & Rubicam’s Spencer.

In addition, she said, few publishers have the ability to print narrowly customized editions. Sunset’s parent, Time, is among the few that can, Spencer said.

The promotions from First Interstate are inserted in plastic that is wrapped around the magazine. First Interstate’s Vasquez expects a 2% response from the offer, about double the response rate to its conventional direct-mail pieces.

Borrowers are pre-approved for a home equity loan of up to $100,000, depending on the equity in their homes. The interest rate offered to California subscribers starts at 6.99%, rising to the prime rate plus 1% after June, 1996.