A recent New York Times article on the decline of Coca-Cola as a brand raised some interesting points that apply to the mortgage industry. The article noted that while Coca-Cola has long been viewed by market analysts as the ultimate value stock — delivering steady returns in good times and bad — a recent earnings report could indicate trouble ahead.
This made me think about our current mortgage market, where executives are bemoaning increased regulations but are not discussing the trend that half of the homes purchased today are being paid for in cash. The shift away from financing is of particular concern because it means consumers believe that mortgage finance is cumbersome and difficult. Not a good sign.
When looking at how Coke’s management is handling disappointing sales growth, there are lessons for senior mortgage managers. Coke stressed that it would increase its advertising budget a billion dollars to support its brand. In the mortgage industry, companies attempt to improve business results by hiring more sales professionals.
But the core problem is deeper for Coke than simply advertising more or for our industry, recruiting more bodies. In Coke’s case, research shows that the average Coca-Cola drinker is 56. Younger consumers are turning to alternative beverages like energy drinks. In our industry, the average originator has gray hair and a goal of retiring in the next five years which does not address the issue of how to get Gen Y prospects to finance a new home. Many Gen Y consumers have decided that renting is a better way to go.
The reality is that to regain brand relevance, Coke has to try and meet changing consumer goals. In addition to the aging of its core market, Coke’s internal politics have compounded its challenges. One former executive claims that “management sees their role as defending the status quo and not defending the customer and their dreams.”
Marketing guru Seth Godin also weighed in on Coke’s situation, observing that “the problem for Coke is that they think their assets are physical but the real assets are trust, share of mind and a story. So they should obsess about making something new, creating services, experiences and interactions that people will happily pay for.”
Godin makes a great point that pertains to housing finance. The market now requires mortgage companies to think outside of the box and not just cut expenses. For sales teams, the issue is how they deliver the customer’s experience in purchasing a home. It needs to be easy, convenient and customized to each buyer’s needs. It needs to “wow” the buyer and be a positive experience instead of a painful one. It requires originators to be knowledgeable and deliver valuable insights. This is more than having just a loan product that amortizes properly. It requires keeping the customer in the forefront of everything we do as an industry.
How good is the customer experience delivered by your originators? Today is the time to address this issue before it is too late.