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Banner Ad Advertising state that brand is not important on the internet. Only 2 percent of consumers indicated that they select a mortgage company because of brand. As expected, the majority of consumers (59 percent) instead choose a mortgage company based on the rate.
In addition, 75 percent of consumers surveyed felt that they could get better rates on the Internet. This is in contrast to the 2005-07 survey, in which consumers indicated they did not think they could get better rates on the Internet. It is our feeling that this belief in the availability of better rates on the Web will cause increasing numbers of consumers to go online to shop for mortgages.
The second most important issue to the consumers we polled was service. Thirty-one percent of consumers stated they chose a company based on service. Because it is difficult for consumers to detect how good the service is on a mortgage company Web site, it is quite likely that there is a strong referral component resulting from word of mouth. This word of mouth factor may be even more powerful online than it is offline because of the ease of communication via e-mail and electronic message boards.Consequently, more than 78 percent of mortgage companies agreed that Internet consumers are more price sensitive than any other group of consumers, but were undecided when it came to the issue of whether loan applicants were able to take advantage of better prices on the Internet. However, it should be noted that the majority of companies (58 percent) felt that loans could be originated via the Internet at a lower cost than through traditional media.
Therefore, if brand is not important, spending large sums of money on portals to build a brand does not make sense. The key to success in the online world may depend on building a Web site that provides consumers with all the information they need to make a buying decision and having a strong back office to support the application once it comes in. Online companies that take applications but do not close them successfully may be killing their true business potential, as word of mouth spreads and companies that have a higher level of service start capturing market share.
Although the Internet may commoditize mortgages, the fact that consumers are concerned about the service aspect means companies can differentiate themselves by providing a better process to the consumer for researching, applying for and closing a mortgage online.
Also, one should take into account that what consumers say may not be entirely consistent with what they do. Countrywide’s King says he, too, believed that the Internet consumer was driven by price and not brand, but found contradicting results while conducting a series of experiments on the QuickenMortgage.com site, on which Countrywide is a participating lender.
“We dropped our rates to be extremely competitive, and then we raised them to be not as competitive and thought that the volume of loans we received would change depending on our price,” says King. “However, we found no correlation between loan volume and our rates, so it appeared that consumers were brand-conscious and price-insensitive.”