The Continuing Debate of Selling Price vs Value

It seems since time immemorial, organizations have been faced with deciding whether to position themselves as a lowest cost seller versus a provider of value. In fact, just last week, I had this same discussion with an executive regarding a fairly new mortgage start-up. It came as no surprise that the new company believes they can be the lowest cost producer based on their advanced technology. But does this actually make sense?

A smart friend of mine suggested that I track Quicken’s pricing to get a feel for one of the most recognized companies in mortgage banking and the winner five years straight of J.D. Power awards. So I have been monitoring their pricing on the 30-year fixed-rate loan. Low and behold, Quicken has consistently higher pricing — on average an eighth higher or more — than the big banks. Has this strategy worked? According to recent reports, Quicken has increased market share while many of the big banks are losing it. As any bank analyst will tell you, market share is a critical factor in determining a company’s success.

Now, let’s look at top originators. Do they position themselves in the marketplace as offering the lowest price or do they concentrate on value?

Based on my research on top originators and numerous consulting engagements, the best in the business follow a value positioning and are not dependent on having the lowest price. So what are top producers doing differently than their colleagues who are still relying on low pricing to generate volume?

In my experience, top producers are experts at communicating their personal value proposition. As we all know, mortgage lending is a commodity product that is only differentiated by the service delivered by the originator. What is exciting for anyone who is an originator is they get to define what and how they deliver service.

What top producers understand is that THEY are the differentiating factor and approach the challenge by determining what each customer values and then positions themselves accordingly.
Some people value speed, others want friendship and still others want reliability. No two people value the same things. Poor originators don’t seem to understand the unique needs that people have and they think everyone is the same —a price buyer. This assumption is a fatal mistake and the source of their lack of referral business. Poor originators fail to recognize what Warren Buffet has said on this issue: “Price is what you pay and value is what you get.”

Can your originators sell value?