Ideal Business Support Services
Market Analysis Summary
Ideal will be focusing on a very specific part of the business market, the insurance industry. Within the industry there are two types of agents, exclusive agents that represent one specific company, and insurance brokers who represent multiple insurance companies.
Everyone needs insurance. Some types, such as car insurance is mandate by law. Other types, such as homeowners, just make good fiscal sense. For these reasons alone, the insurance industry is going to be around for a while and it makes sense to concentrate on them.
Salem has several support service companies but none as focussed as Ideal and none with the same industry knowledge that Ideal has.
4.1 Market Segmentation
The insurance market that is in need of support services can be broken down into two segments:
- Exclusive agents: these agents represent only one type of insurance, such as State Farm. While the selection here is limited, the advantage of the exclusive agent is that they have a strong relationship with their representative company which is good for any claims issues. The stronger the relationship the agent has with the insurance company, the more effective of a cheerleader they can be for you.
- Insurance brokers: these agents do not have an exclusive contract with any one insurance company. They can offer insurance from multiple companies. The advantage of this set up is that they can offer a wider range of service offerings than an agent who only sells one brand of insurance.
|Year 1||Year 2||Year 3||Year 4||Year 5|
4.2 Target Market Segment Strategy
Ideal Business Support Services is focusing on the insurance industry because the agents that represent the insurance companies are often located in small offices. An insurance agent will have one or two support staff in their office in addition to the agent. This is a perfect atmosphere for a support agency because the services Ideal provides are typically out of the field of expertise for the normal support staff.
Another reason for focusing on a specific industry is that it is easier to be competitive when the focus of a business is narrow. Too often a business will stagnate when they try to do to many different things to too many customers. A narrow focus is very beneficial for a company, particularly one that is just starting up.
For these reasons, Ideal Business Support Services will concentrate on the insurance industry to be able to quickly grow and obtain market share.
4.3 Service Business Analysis
There are approximately 70-100 different insurance agents in the Salem area alone. While some are in larger offices, many are one or two person agent offices. This high concentration of small insurance agents is due to a previous historical trend where the service offering of insurance was done at the local level by “someone you could trust.” Recently there has been the trend to offer insurance without an agent, via the phone or Internet. While this method of service delivery has gained market share, there is no reason to believe that it will eclipse the original agent-customer relationship. For many people, insurance is a very personal thing and they are more comfortable to discuss insurance needs in person with an agent as opposed to taking a chance and purchasing a commodity-like insurance over the phone or Internet. There is significant value in having the agent who knows you personally as your advocate against the insurance company if problems arise. For these reasons, the insurance agent will be around for a long time to come.
4.3.1 Competition and Buying Patterns
The competition consists of many different support service companies that offer a very wide range of service offerings. These companies replicate the offerings of Ideal, however none target the insurance industry only.
The buying patterns of the agents mimic a long-term relationship. If they are happy they will generally stay with the same service provider. The reasons for this is that there is generally a break-in period where both parties spend time getting to know each other, and the different needs each has. If this can be done up front once and never again, then it is more cost effective then jumping through the hoops each time.