San Francisco Limo
Market Analysis Summary
The major core market for San Francisco Limo is the group of communities located within 10 miles of Burlingame. Fourteen of the most important towns have a total population of over 340,000 comprising 126,000 households. Per capita income ranges from $15,000 in some areas in Lynn to $32,973 in Burlingame. The primary sub-group within this population is made up of those with annual household incomes over $150,000 which comes to 3,632 households. Over 26% of these are in Burlingame alone.
There are many limousine companies to serve this population. The goal of San Francisco Limo must be to segment this market and concentrate the company’s marketing efforts on those markets which are not receiving much attention from competing limousine services. The most attractive segments for which a need exists, and where there is adequate wealth to afford limousine service, are:
- Private School Student Transportation: 10 private schools with 3,502 students
- Sightseeing Segment: 25 B&Bs and 44 Hotel/Motels. Many more not listed in the local Yellow Pages.
- Elderly Transportation: 19 retirement and assisted living institutions.
4.1 Market Segmentation
The are many competitors. There are 59 listed in the Burlingame/San Francisco/San Jose Yellow Pages. Six of these now have advertisements of the same size as San Francisco Limo. A further 18 have ads which are larger. An analysis of these ads indicate that most of the competition is concentrating its marketing efforts on:
- Airport Transfers: All 18 large ads stress this.
- Weddings: 11 of the 18 ads stress this.
- Parties/Night-on-the-Town: 13 of the 18 large ads mention this.
The segments of the market which have attracted the least attention are:
- Private School Student Transportation: None of the 18 mention this.
- Elderly Transportation: Only one of the 18 listed this as a service. Another mentioned handicap capability.
- Sightseeing: Only two of the 18 listed this.
It makes logical sense for San Francisco Limo to direct its marketing approach at these latter three segments. In 1999, the market potential for the private school transportation segment is estimated to be around 2,000 customers. The numerous B&Bs, hotels and inns in the area are estimated to provide around 2,700 customers who need sightseeing services. At the same time, the market potential for the elderly transportation services is estimated to be around 1,800 customers annually. Each of these three customer segments is expected to grow at a steady rate of 5% per year. The chart and table below outline the market potential and its growth for each of the three customer segments.
|Private School Trans||5%||2,000||2,100||2,205||2,315||2,431||5.00%|
4.2 Target Market Segment Strategy
Most of the limousine service competition in the area is concentrated in the corporate, airport transfer, and wedding transportation market segment. While these segments have steady demand for the limousine service, the high level of competition has eroded the margins. Further, incumbent competitors have advantages of vehicle fleets larger than San Francisco Limo.
Consequently, San Francisco Limo will selectively focus its marketing strategy on the private school, sightseeing and elderly transportation segments of the limousine market. The market analysis shows that these segments are less price sensitive. Such customers will require reliable, on time pick ups and knowledgeable drivers. At the same time, competition in these segments is very low. San Francisco Limo can gain a competitive advantage by entering these markets and establishing the reputation of being a reliable service provider. This will be achieved by providing premium services to the targeted customer base and relying on customer referrals to generate new leads.
4.2.1 Market Needs
The customer needs in the limousine transportation market are quite diverse. Corporate and airport transfer clients are mostly interested in reliable and fast service. For these clients, limousine services save time and effort compared to using public transportation or personal vehicles. Prom and bachelor party clients are more interested in the social status associated with the limousine service; however, this segment is less loyal and shops around for the best value. At the same time, wedding and funeral transportation clients, who also seek the emotional benefits of using a limousine service, may be less price sensitive than other segments. Further, the sightseeing segment, which is currently underserved, does not only need spacious and comfortable accommodation during the trip, but also benefits from a driver who is very familiar with the area and who can serve as a guide as well.
4.3 Service Business Analysis
Statistics from The Fact Book show operating results compiled from over 9,600 operators nation-wide. These comparative statistics are available by area of the country and are broken down by type of vehicle. The average hourly rate for a sedan in the Northern California area was $39 in 1997. The sources of revenue of operators was:
- Weddings: 20%
- Airport Transfers: 24%
- Corporate clients: 21.5%
- Night-on-the-Town: 15%
- Funeral: 5%
- Hotel/Resort: 10%
- Other: 4.5%
The Fact Book also gives regional average monthly vehicle revenue of operators owning up to 10 vehicles. These statistics are broken out by type of vehicle (limousines, sedans, vans, buses). The average monthly revenue per sedan in the Northern California region was $4,614, as quoted by The Fact Book. San Francisco Limo is presently achieving a monthly per vehicle revenue of only $2,500. These numbers are also available online at www.limousinecentral.com.
4.3.1 Competition and Buying Patterns
The private transportation services market in the San Francisco area is quite competitive. There are numerous limousine services, shuttles, and taxi cabs available for a wide range of prices.
Of the major customer segments mentioned in The Fact Book, the corporate clients choose limousine services with large fleets that will accommodate their varying needs. This customer segment provides longer term contracts but is more difficult to break into and is more demanding. Wedding and funeral ceremonies, as well as the night-on-the-town customers, usually require stretch limousines to accommodate bigger groups of people. Airport transfer customers usually only require timely pickups and dropoffs and have lower expectations for any additional service features. Growing competition in this segment has made these customers price conscious.
4.3.2 Main Competitors
Since San Francisco Limo only operates sedans, it cannot serve the wedding, night-on-the town, or funeral segments mentioned earlier since stretch limousines are the norm there. The corporate client sector (representing 21.5% of the pie) is hotly contested for by five or six giant players, such as San Francisco Coach, which have huge fleets. The competition for the airport transfer business, although large and growing, is stiff including the 1500 taxis of the San Francisco area, shared shuttle service, and virtually all limousine services. The most immediate competition felt by San Francisco Limo’s present business activity is supplied by:
- Northshore Shuttle Service
- Northshore Airport Limo
- Dependable Airport Shuttle
- Northshore Limo and Sedan Service
- R and A Shuttle Service
- New England Livery
Of the total pie of revenue sources mentioned in The Fact Book, two segments remain: Hotel/resort: 10% and “Other”: 4.5%. It is within these segments that the greatest opportunity exists for diversifying San Francisco Limo’s services.