A loan with a twist.

Author:Eimer, Pete
Position:Residential loans - Cover Story

About a year and a half ago, the management at Goldome Realty Credit Corporation, Buffalo, New York, decided to get back to basics. Just how basic, you ask? About as basic as coach Vince Lombardi when he said to the Green Bay Packers, "Gentlemen, this is a football."

Asking basic questions such as "what do we sell, what makes us different and why do (or don't) consumers come to us?" can be a painful experience. Other questions can be equally perplexing, such as "What are consumers really looking for in a mortgage? Do consumers consider all mortgage products alike? Are we caught up in a vicious cycle, selling on the basis of rate?"

At Goldome, we believed there was a good chance that the answers to these questions would give our sales and marketing strategy regarding loan production a sound basis. However, in order to make such a strategic fact-finding effort worthwhile, there were a number of hurdles to clear first. Most important, all preconceived notions as to what consumers look for in mortgage products had to be discarded. Further, entrenched notions about what consumers think of products and services and what product attributes are most important to them also had to be tossed out. We realized that only a fresh and unbiased look at the mortgage market could lead to a defined consumer marketing strategy.

With the rapid pace of change taking place in the economy, simply relying on past trends and consumer behavior will not necessarily provide proper guidance for decision making going into the future. Prompted by this belief, Goldome started on a road that led not only to a new residential lending strategy but to a new product as well. Ron Leet, president of Goldome Realty Credit Corporation, focused the company's management on his idea of introducing a new mortgage product that would be the catalyst to implementing the company's new strategy.

Analyzing the mortgage customer

Clearly, each geographic market has its own particular characteristics that influence consumer behavior. The seasonal homebuying patterns that Goldome's St. Petersburg, Florida office sees certainly are not the same ones that prevail in the Buffalo, New York market. The demographics of these two markets also differ considerably.

While market differences tied to geographic location are recognizable and very important, these differences are more important in determining sales and marketing tactics rather than developing a focused, overall marketing strategy. Therefore, our first step in finding answers to the basic questions we had posed was to avoid getting bogged down with differences between various geographic markets. Rather, we went after the tougher issues related to the needs, attitudes, desires and the general "psyche" shared by all consumers looking for a mortgage.

The "science" of marketing

While many view marketing as closer to art than science, marketers rely on a method using a focus group to gather data about consumers' attittudes. The technique encourages a group of consumers to discuss their feelings, attitudes and perceptions about a topic. While focus-group findings cannot be extrapolated to the general population, they are extremely useful in gaining an understanding of the customer.

Goldome held focus-group sessions with consumers who were in the market for a new home. The information Goldome uncovered shed some light on attitudes of homebuying consumers, and in particular, cast doubt on the commonly held belief that the mortgage rate is the most important factor to people shopping for a home loan. Consumers ranked attributes of a mortgage loan as follows:

Affordable monthly payment, not rate--was the most important issue to potential homebuyers. The interest rate made a difference only to the extent that it affected the affordability of their monthly payment. The interest rate itself was viewed only as a shopping guide. Monthly payment was the bottom line.

Down paument--was ranked as the second most important issue to potential homebuyers. This was especially true of first-time buyers.

Payment stability--was important to all consumers tested; however, each individual had a...

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