My Current Mortgage Rate

This post is written by a friend of mine, Notorious Rob. I know that after reading this your brain will either be scrambled or incredibly enlightened. Either way, I am now unleashing “the” ROB.

When Daniel asked me if I would consider writing once in a while for Mad Mortgage World, my initial response was something along the lines of, “When Hell starts importing space heaters.” The reason is simple: I don’t know jacques sheet about mortgages. Well, except that mine is extraordinarily high, and that I would like to get rid of it.

But beyond that, really, my knowledge of the mortgage market is akin to my knowledge of sequential melting of charmonium states in an expanding quark–gluon plasma — which is to say somewhere between None and Laughable. (Actually, I might know a little more about mortgage than charmonium, seeing as how I had no idea that ‘charmonium’ was even a word, never mind a scientific fact until about 23 seconds ago, whereas I have heard of the word “mortgage” before now.)

[Total aside: does the following paragraph even sound like English to you?

In particle physics, quarkonium (pl. quarkonia) designates a flavorless meson whose constituents are a quark and its own antiquark. Examples of quarkonia are the J/? (which is a charmonium, or charm quark/anti-charm quark state) and the ? (a bottomonium, or bottom quark/anti-bottom quark state). Because of the high mass of the top quark, a toponium does not exist, since the quark decays through the electroweak interaction before a bound state can form. Usually quarkonium refers only to charmonium and bottomonium, and not to any of the lighter quark/anti-quark states.

Well, I for one am extremely glad to hear that quarkonium does not refer to any of the lighter quark/anti-quark states. I mean, imagine the chaos if it did!]

In any case, Daniel insisted that I need know nothing whatsoever about mortgages, so long as I said nothing about them. Indeed, he didn’t particularly care to know my thoughts on mortgages or the home finance industry.  The words he actually used were, “I would rather ask my cat.”

Instead, he thought I should write about something about which I do in fact know one or two things (and really, only one or two, when it comes right down to it…) — namely, marketing, interactive marketing, branding, and how this brave new world of the Interwebs changes the game.

As it happens, when it comes to making outlandish unsupported statements about topics related to marketing, branding, the Web, and business, I am your man, Daniel.

So it is with great trepidation, and enormous awareness of just how little I know about your industry that I blithely plunge in.

First Rule of Blogging: Smile!

Unconventional Advice Time

For my first post, I will follow my teachers at the Marcus Junius Brutus School of Blogging and stab my kind and generous host in the back. I hear that’s good for building relationships and getting invited to all sorts of cool parties with hot model-actresses in the Denver region of the United States.

Daniel wrote a while back in I’m Too Sexy for this Taco:

To establish brand loyalty in the mortgage industry is difficult but, not impossible. This is just one among quite a few posts in the near future that will deal with building a brand in the mortgage industry.

Au contraire, mon frere.  Upon further consideration, I do not believe that it is possible to establish brand loyalty in the mortgage industry.  To be more precise, while it is possible to establish brand loyalty, the cost of doing so is not justified by the benefits of “branding”.  So, do not build a “brand” in the mortgage industry — it will do you no good.

The reason, frankly, is commoditization.

There is literally nothing that is more of a commodity than money. Even iron ore can have quality differences. People differentiate between Light Sweet Crude and Brent Sea Crude. But money? There is absolutely zero difference between the $10 bill in my pocket right now, and $10 bill in your pocket. They are identical in every meaningful respect. Indeed, that identity, that commodification, is the whole point of money in the first place.

People have tried for centuries to brand commodities for some sort of a competitive advantage. It cannot be done to a degree where the cost of branding makes sense. In order to brand anything, you have to spend some sort of resource to do so. Advertising dollars, some number of manhours of effort, etc. At the end of the day, however, what matters to the customer is quality, quantity and the price. Period.

There are folks who believe that commodities can be branded.  Some of them even have a point.  However, I note that most of them work for companies that charge money to provide branding advice to commodity producers, and that when you delve into their advice, it turns out that they’re talking about something a little bit different than branding pure commodities, like copper or oil or money.

For example, Chiquita bananas are branded.  It is assumed that they command a premium price over unbranded bananas.  I believe that assumption is wrong.  Shoppers buy Chiquita bananas not because of the brand, but because the bananas themselves look larger, yellower, fresher, whatever.  In other words, the quality of the commodity appears higher than the unbranded banana.  When the unbranded banana looks identical to the Chiquita banana, but is 15 cents cheaper per pound, guess which one ends up in the shopping cart?  (Hint: it ain’t the Chiquita.)  Test this by taking the Chiquita sticker and putting it on a pile of brown bananas and piling it next to some unbranded fresh bananas.

Brand loyalty, schmrand loyalty.

When it comes to money — which is what mortgages are — the “quality” issue utterly disappears. So now you’re left with simply a discussion about quantity (amount of the loan) and price (the interest rate and fees).

There is simply no way I can see someone running an ad with the following copy:

“Come to Dan’s Mortgage World! Our mortgages are guaranteed fresh!”

It just doesn’t make any sense.  (Although, perhaps as an ironic post-modern commentary on commodification, that ad copy might work….)

“But Rob, you moron,” I can almost hear Daniel muttering right now, as he’s looking over this post. “Obviously the money is fungible, but our services are not. I’m talking about branding the service we provide, not the actual dollars!”

Branding Services

That’s a good point, Daniel.  I can agree that I’m a moron.  But on the branding-of-services thing… well, see, the thing is… branding a service is usually a waste of time and money.  Many of the standard concepts simply do not apply. Consider, as an example, the ultimate service provider: your doctor.

Oh, oh, oh! Pick me! Pick MEEEEE!

Why did you select your particular family doctor?

1. Was it because you picked the one closest to your house on the approved list for your health plan provider?
2. Was it because a friend told you to use Dr. So-and-so?
3. Was it because he’s been your family doctor since you were 3 years old?
4. Was it because he ran an ad talking about his expertise, his integrity, and his caring service philosophy?
5. Was it because the receptionist was a total hottie?

Chances are, your answer is probably either #1 or #2. You picked your doctor because of (a) convenience (coupled with lack of choice), and/or (b) referral from a trusted person.

The convenience factor makes a ton of sense because medical service is largely commoditized. This despite the fact that there is a wide range of quality between doctors. Some doctors are just better than others. Some are friendlier than others. For most of us, unless we have a reason to suspect our doctor is a bad physician — a botched diagnosis, or some bad experience with the doctor — we have no reason to believe that we are getting anything less than the best medical care available. After all, we’re not sick, right? He must be doing something right.

The referral factor also makes a ton of sense, and gets to the heart of why branding services is so difficult and usually pointless. Unlike a physical good of some sort, with services, the only way to determine quality is to actually use it. With products, you can go to the store and examine it, look at the packaging, compare it to the other products on the shelf next to it, maybe even get a demo. Because products of a particular brand, make, and model are all consistent and from a single manufacturer, you can rely on a host of reviewers as well. With services, that’s far more difficult.

Even if there were some poor sap who tried every doctor in your neighborhood with the same sickness, and then rated each one on professionalism, efficiency, skill, cost, etc., you are not that guy. Maybe the doctor he found rude is someone you would get along with great. Maybe Dr. Smith, who the reviewer thought knew nothing about his skin condition, is exactly the guy you need for your stomach pains. Until and unless someone has actually used a service provider, there is no real way to determine quality of the service.

Hence, we end up relying on the word of people we trust.

The least likely of the answers from the list above, is #4: some ad that you saw in which the doctor proclaimed his expertise, integrity, and caring.  I believe this is even less likely than the hotness of the receptionist, because I happen to know some young friends who have selected physicians on precisely this criteria.

For one thing, as a modern consumer bombarded with advertising practically every waking moment, you immediately discounted any sort of advertising as a bunch of hooey.  Here in New Jersey, there’s a series of radio ads I hear all the time from some hospital chain that goes something like this:

Joe is sick.  Joe goes to some random hospital XYZ.  Hospital XYZ’s incompetent doctors do a terrible job, and Joe ends up dying on the operating table.

Jack is sick.  Jack goes to our totally awesome rad hospital.  Our superior doctors, direct descendants of Asclepios, the Greek God of Medicine, work miracles upon Jack.  Jack is not only not sick, he’s fifteen years younger and has a hot girlfriend now.

Truth be told, that ad makes me want to try that particular hospital less.  I figure, any doctor who has to tout his expertise like that is missing something.  Maybe it’s just the cynic in me, but whenever I hear an ad, I just reverse unverifiable claims to be the opposite of what they say.  Car dealers who talk up their “friendly service department” seem staffed with unusually surly individuals.  I’ve never gotten worse service than at Walmart.  Or had less fun than when eating at McDonalds, no matter what the commercial’s jingle says.

Daniel and Me at the last Inman BloggerConnect

Street Cred Is All