How Mortgage Originators Can Diversify Offerings and Win New Clients

October 28, 2019

Diversification has always offered a sound investment strategy that reduces risk. It’s all about avoiding putting all your eggs in one basket so you don’t become too vulnerable to the volatility of any one market. As a mortgage originator, you can use diversification to attract new clients. When you diversify your offerings, you can weather negative changes in the market, and even come out ahead.

Competitive Advantage

In theory, if you focus your business growth strategy on market penetration you can offer your existing products to the current market. By leveraging competitive advantage, you stand a better chance of grabbing a larger chunk of market share. Usually, the bigger companies who can make changes to things such as pricing strategies or put out special offers more easily acquire market share.

Right now, online lenders like Quicken Loans, are using market penetration strategies in direct competition with the mortgage origination industry. They are stealing your business away. You have to diversify so you aren’t affected by this type of market disruption.

The Ansoff Matrix 

In the 1950s, Igor Ansoff was a mathematician and economist working for the aerospace company Lockheed. He developed the “Ansoff Matrix” to help decisionmakers visualize existing and new markets for a quick comparison with existing and new products. It’s a tool used by Fortune 500 companies to achieve growth. However, even independent brokers like you can use it as a helpful tool to consider market development and diversification.

Diversification

Before allowing competition to eat away at your customer base, you have to be ready to develop a diversification strategy. By focusing on business growth with new offerings, you can reach new markets. Ansoff’s horizontal diversification tactic helps avoid the need for massive investments both time-wise and financially. Ansoff’s tactic introduces new products unrelated to your core products for existing markets.

To achieve long-term growth, introducing new products into existing markets is highly effective if you leverage existing expertise. You shorten your learning curve but increase the odds of success by reaping the rewards more quickly.

Horizontal Diversification

To horizontally diversify your services simply offer similar products to existing markets. So, you basically offer other types of mortgages targeted at the same properties. You can narrow your focus to segments not targeted by larger competitors. Realistically you won’t be able to compete against their ability to reduce fees and lower rates. Instead, look for opportunities such as real estate investors who might have difficulty qualifying for traditional bank loans. This way you reduce competition from major banks that avoid certain types of customers. You can also justify higher fees when your service becomes more specialized.

Service the Untapped Markets

Looking at multifamily, mixed-use and small commercial properties as well as combined mortgages for residential one to four unit investment properties for investors is an example of where to start. Often investors do not qualify for traditional financing with banks. You can tap into these markets and offer products that suit their unique needs. Investors are more likely to provide repeat business as opposed to home loan customers who average a new mortgage every five years.

 You can leverage your knowledge and current offerings to create similar products to diversify your offerings. This will help protect you from market disruptions caused by growing online competitors.

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