Market Analysis Summary
Over the past 20 years, the competition in the financial services industries has intensified. Currently, there are numerous financial products/services being offered by the financial community to a wide range of business customers.
Finance companies are an important source of funds for small businesses (less than 500 employees). The area where funds are sought is in leasing of motor vehicles and purchasing equipment. Arrow Mail notes these trends and has created unique strategies in marketing both equipment loans and motor vehicle lease programs to small businesses.
4.1 Market Segmentation
Arrow Mail will focus on two customer groups:
- Top 20 financial firms;
- 2nd tier financial firms.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Top 20 Financial Firms||0%||15,000||15,015||15,030||15,045||15,060||0.10%|
|2nd Tier Financial Firms||1%||1,500||1,508||1,516||1,524||1,532||0.53%|
4.2 Target Market Segment Strategy
Finance companies provide loans and leases to consumers, as well as short- and intermediate-term loans and leases to business firms.
This segment of the industry sector is quite concentrated, with the 20 largest firms accounting for more than two-thirds of total industry receivables. There was essentially no change in the concentration in the finance industry during from 1996-2001.
Over the five years the total assets of the 20 largest firms grew from $524.9 billion to $770.3 billion. Over the same period, their share of total industry assets fell slightly, from 70.1% to 68.8%. There are an additional 1,200 2nd Tier firms that have captured the remaining 31% of the market.
The total receivables of finance companies grew by almost 50% over the past five years. In mid-2000, about 45% of the industry’s portfolio was comprised of business loans.
4.3 Service Business Analysis
Finance companies are an important source of funds of small businesses, firms with less than 500 employees. Of the loans and leases to business firms in mid-2000, 57% were for business equipment other than motor vehicles.
At mid-2000, 21% of finance companies’ portfolios was invested in motor vehicle loans and leases, down from 26% five years earlier. The past five years marked a major shift by business firms towards the leasing of motor vehicles. Finance companies’ portfolios of business leases of motor vehicles grew at an annual rate of 23.6% over the five years.
Arrow Mail notes these trends and has created unique strategies in marketing both equipment loans and motor vehicle lease programs to small businesses. Arrow Mail will sell services to 2nd Tier Firms.
4.4 Competition and Buying Patterns
The competition between direct marketing firms is intense yet many of these firms are not focused on marketing financial loan and leasing products to small businesses.
Traditionally, the firms build a track record with specific product to a specific target customer group. Financial services is still an emerging product line for direct marketing firms so there is no clear leader in the field.
The buying pattern for financial firms is similar to the selection process in a marketing campaign. Direct marketing firms present proposals for a campaign and the company selects the proposal that best fits their budget and overall marketing strategy. The duration of the marketing campaign is one to three years.
Building company loyalty is the most crucial element in winning market share. Companies will stay with a company that has proven to be a valued partner.