Online origination: Today's online value proposition

by MPA20 Aug 2014
By Adam Stein
Special to MPA


Editor's note: Over the next few weeks, we'll be running expert online origination advice from Adam Stein, CEO of LoanTek.

Consumerism, as a whole, is not static. Consider the phone book as an example; twenty years ago a display advertisement in the Yellow Pages met the consumer’s validation. Every mortgage company exhausted a significant amount of their marketing dollar to maintain the best position possible in the phone book. Today, however, the print version of the yellow pages is all but eclipsed by the internet. The internet has replaced the phone book as the primary directory to hold one’s services out to the consumer. Meeting a consumer’s value proposition online is not a static event either. What satisfied a consumer yesterday has changed, and will change again, over time.  To be a successful originator online your marketing needs to reflect the consumer’s current expectations accordingly.
 
When online mortgage origination was in its infancy there was a very low threshold of  validation required to capture the interest and, more importantly, the contact information of an online consumer -- a simple animated gif with dancing aliens and a flashing tag line espousing ‘historically low rates’ would have done the trick. This is no longer the case, however. There has been a sea change in the online mortgage consumers’ expectations and what will meet their current value proposition.
 
The two primary drivers behind the trend are:
  1. The consumer’s increased interest in offer validation and detail.
  2. Their prior experience of having their personal contact information commoditized.

The consumer's search for exclusivity

While commoditized leads currently represent the majority of those being sold in the mortgage space, their effectiveness is diminishing and the lead generation industry is shifting to create more exclusive referrals to their advertising lenders. Here’s why: the consumer hates the commoditized experience. In fact, the consumer dislikes the experience so much that, predominantly, they will not reengage an online lending experience in the same fashion twice.

The reason for this is simple -- what they were in search of (validated offers and qualified information) was replaced by five to ten different lenders blowing up their telephones and email accounts. The result, more often than not, is a defensive consumer engaged in an almost hostile experience with multiple sales people all saying ‘choose me’.

If you ask a room full of people to raise their hands if they have ever participated in this experience, a majority will raise their hands. If you ask the same group to leave their hands up if they would ever do so again, there typically none remaining (I have done this exercise on numerous occasions). The lender’s side of the commoditized lead is not very different.

There is a hard cost on the lender to participate in commoditized leads as well. Lenders who compete for these commoditized leads are required to expend additional funds to capitalize technology and personnel beyond the cost of lead acquisition. The primary intention of these acquired assets is to be ‘first’. The first lender to contact a commoditized lead has a 40% greater chance of transacting with the consumer. If the lender is not first they might as well be last. Even with the most sophisticated of approaches the percentage of closed loans per lead is far from optimum in today’s lead market. Further, the effort to compete in the ‘call center’ consumer model surpasses the patience and limits of most mortgage professionals.

The negative consumer experience, combined with the lender’s marginal return on investment, has created a new value proposition. Both the lender and the consumer prefer, and benefit from, a more exclusive contact; specifically, a contact that is singularly initiated by the consumer and predicated upon the consumer’s validation.

Adam Stein is the CEO of LoanTek.
 

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