August 10, 2018

Competing with Zillow in Mortgages

Zillow has purchased a mortgage originator, Mortgage Lenders of America, as a logical extension of its home finding information business. Zillow already pushes advertising for other lenders' mortgage options (creating 'hot leads' for the lenders) presenting 23 million loan requests in 2017. By comparison, Mortgage Lenders of America originated fewer than 5,000 mortgages last year.

Obviously the risk to mortgage lenders is that Zillow will steer a much greater volume to its new subsidiary. Even if they boost loan originations by 10X it's still a tiny fraction of the number of loan leads. The bigger risk is that Zillow will figure out how to identify the highest value leads (likelihood to convert to a loan times the estimated loan's value) and focus their attention on them, allowing other lenders to fight over the remainder.

CUInsights.com wrote about how credit unions can compete in this new landscape in a article titled 'What Zillow's move into the mortgage business means for credit unions' that suggests three strategies:

  • Focus on trust
  • Take a page from their book
  • Get onboard the digital train

These all make sense. I would add another:  Build awareness. How many of your customers think of you as the lender who 1) already knows me which should make a painful process easier, 2) offers a product I need and 3) delivers it at a great price? Building awareness is challenging. How engaged are customers with you in terms of the number and type of products they have, their level of activity, and the type of interactions? You should know this based on data you have along with estimates of historical and future customer value. What channels do they prefer to learn about what's available and do your messages resonate with them? You might know this based on past successes in winning new business from the customer. When is the customer ready to buy? This is perhaps the most difficult and almost requires alerts from Zillow or the credit bureaus that your customers are out shopping. The idea is to pre-empt shopping by building awareness. You should be the first and only place they need to shop at. It's likely an investment with a very high return especially when focused on customers with high potential value.

One thing lenders can count on is that technology and new entrants will shift the competitive landscape. The only way to insulate your business is to understand your customers better than anyone else and make sure that they understand you. Contact us to learn about how we can help develop your CRM 'awareness' strategy and ensure it realizes its full potential.

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