How To Compete When You Can't Compete On Price
From: Ameen Kamadia
Many loan officers feel the only way to compete is by price. They think that if they have the lowest rate and fees, they should be flooded with business. And in many cases this is true. Take a look at Wal-Mart. They have become one of the largest companies in the world if not the largest, and their main claim to fame is "Always Low Prices".
Does that mean no one can compete with them? Hardly. Target competes, so does Nordstrom, and every other retailer in town. A dollar spent at Wal-Mart is a dollar not spent anywhere else. So how do others compete? Target stresses high design at low prices. Nordstrom stresses service and quality at high prices.
Not everyone shops by price alone.
But money is a commodity right? One mortgage is the same as any other correct? So what's a loan officer to do when others are advertising lower rates than you have access to and no fees?
To answer this question I want to use Circuit City as a case study.
A couple months ago I was in the market for a Tomtom GPS navigation system. Online I went to pricegrabber.com to see what it would cost me. Prices for this gizmo ranged from $699 to $599. Circuit City was the most expensive, by a hundred dollars. Why would anyone pay $100 to buy the same gizmo? So Circuit City probably doesn't sell any of these units at all right? Wrong. They sell more then anyone else. The interesting thing is why.
They sell more because they can offer what the others cannot. I saw one of their commercials just a few minutes ago. In it they didn't talk about price, it talked about their main advantage - that you can order online at their website and pick up the merchandise within 20 minutes at one of their stores. And since you can pick it up at the store, if there is anything wrong with it, you can also return it or exchange it at the store. You can't do that with the others.
So when someone is buying one of these gizmos they have to decide:
Do I want to pay less money, but pay shipping and wait for it to arrive? Then take a chance that there might be a hassle if it has to be returned. Or pay more, get it right away, and get piece of mind?
I ended up buying it at a Circuit City store and paying $699. (By the way, their so-called price match guarantee is a con. They don't match prices on the Internet.) I figured that since I was already paying a lot of money for this thing, it would suck if it didn't work. And I have had a ton of bad luck when it comes to electronic stuff not working for me the way it is supposed to.
Would I have liked to save the $100? You bet. But I wasn't going to risk it.
And that is precisely the mindset that many of your prospects have when searching for a loan officer. They want to get the best deal, but not if it means getting the wrong loan, or losing the house.
What you need is a benefit that others do not provide even if you are more expensive. Come up with something that is unique to you, like Circuit City's buy online and pick up at the store concept.
What can you do to add more "oomph" to your service? When you come up with something, make it the focus of your marketing instead of price and you can stop worrying about competing with others.
Happy Originating!
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Comments
I like everything about this story, but Circuit City. This is a company that is closing it's door left and right. So if you charge to much on a loan, you may be out of a job. Also if you don't charge enough you'll be out of a job. This business isn't always about having the lowest fees and rates. It about relationships! The stronger the relationship the easier the loan is to sale. I make about 1.5% on each loan that I do and i feel that is very fair.