Know your enemy

Competition in the UK mortgage market has never been more intense for brokers, lenders, networks and packagers than it is at the moment. Which is good news for borrowers. Greater competition has the effect of creating more choice, driving down prices and ensuring service quality remains high. There is plenty of evidence of all of these happening in the mortgage market right now.

When competition intensifies in this way, it is quite natural for companies to keep a closer watch on their competitors. I have no doubt that in marketing departments up and down the country, competitor product ranges are being scrutinised, advertising campaigns compared and contrasted, and sales strategies being put under the microscope.


Marketing can become a game of brinkmanship, with companies constantly looking for opportunities to get one up on their competitors. The name of the game is trying to anticipate who is going to make the next move and what it is likely to be. Paranoia? Maybe, but it is life in the manic world of mortgage marketing.

Keeping a weather eye on your competitors does assume, of course, you know who your competitors are and which companies are likely to cause greatest concern in the future.

If you think this is a silly statement, look at the way in which companies in other industry sectors have been hit by competition which they didn’t see coming or take seriously enough.

Did Kodak realise that a major source of competition would be Nokia, as cameras in phones became all the rage? Did Filofax anticipate their yuppy leather-bound organisers being replaced by PDA’s? And did manufacturers of fax machines really understand the threat posed by e-mail? The list goes on.

The problem is that paranoia can bring with it a bad case of myopia, when it comes to seeing where the competition is coming from. You can become so fixated watching those companies that pose a threat to you today, you forget to keep a eye out for companies that may not even be operating in your market at the moment but which have the potential to pull the rung from underneath your business in the future.

Looking over your shoulder

So which shoulder should intermediaries be looking over? Is the internet a potential threat? Possibly, but I’m not really convinced it is going to pull the rug from under the feet of financial advisers. The internet is a great source of information and is already transforming consumers into better informed individuals. I would argue, however, that the information overload that can result from a 20 minute product search on the internet actually reinforces the need for professional financial advice. I don’t see the internet as a threat to intermediaries; I see it as one of their greatest allies.

The whole issue of information overload does give me some ideas as to where the competition may come from in the future. There is no doubt that we now live in a world where almost limitless information is freely available. Even the most financially unaware individual can get hold of data about virtually any mortgage product they care to research in a matter of seconds. Type ‘fixed rate mortgage’ into Google and you get 1.2 million results. Where do you start?

Which is my point really. Some consumers will recognise the need for professional help and seek out assistance from a local intermediary. Others will throw their hands up in despair and resort to the ‘try pot luck’ approach. Others, not knowing where to start, will resort to a course of action that has usually held them in good stead when making other buying decisions. Choose the brand rather than the product.

When the going gets tough, choosing a well-known and respected brand means you may not necessarily get the very best product available, but neither are you likely to buy a complete howler. And which is the lesser of the two evils? Most people will go for a middle-of-the-road product, knowing they can at least sleep at night, safe in the knowledge that they have not committed to the duff deal of the decade.

Brand power

Brand marketing is powerful and becoming more so as consumers lose the ability to make genuine buying decision based on a reasonable analysis of the facts. If you think this is irrational, try looking at it from a consumers perspective. Have you tried choosing a mobile phone network recently? It’s an almost impossible job to compare deals on a like-for-like basis. Even products like cars can be hard to differentiate on a feature-for-feature comparison basis.

It is no wonder that consumers end up buying brands rather than benefits. We’ve all done it at some time. In the world of financial services, which brands are consumers likely to turn to when life becomes too confusing? Halifax, NatWest, Nationwide? Possibly, but they are financial services companies and financial companies are not exactly the most trusted of organisations. Consumers perceptions are that they are greedy, profiteering and not averse to stitching-up clients.

How about Tesco, Asda and Sainsbury’s? Or Marks & Spencer, Next or John Lewis? Despite recent media coverage that the supermarkets are too big and lean too heavily on suppliers, they do so on behalf of their customers so are viewed as being OK. Consumers trust these brands and are willing to buy not just sandwiches and socks from them, but insurances and mortgages.

Interestingly, Asda has recently announced its intention to sell houses. Who will consumers trust more with their homes – the people who have been responsible for driving down their weekly shopping bill, or those happy to take 2.5 per cent in commission for not doing much in return? The supermarkets are going to be big players in financial services in the future. If you want to know where the real competition is likely to come from, look no further than your local out-of-town shopping centre.

How can you defend your corner? Do what supermarkets can’t hope to do – provide real added value advice. And don’t forget to build your brand. We certainly intend to at Mortgages plc.