Saudi Installment Services Company Marketing Performance - Report Example

New words added 1110 Table of Contents Executive Summary Situation Analysis Market Summary Target Markets Market Demographics Geographics Demographics Behavior factors Market Needs Market Trends Market Growth SWOT Analysis Competition Product offering Keys to Success Critical Issues  Strategy Overview 3.1. Mission 3.2. Marketing Objectives 3.3. Financial Objectives 3.4. Target Markets 3.5. Positioning 3.6. Strategies 3.7. Marketing Mix - pricing : - distribution - Advertising and promotion - Customer service 3.8. Marketing Research: 1.0 Executive Summary (must be updated) Saudi Installment Services Company (Sisco) is a comprehensive Mortgage and Property financing company. Sisco is a local company whose main services include residential mortgage, installment services, leasing and Syndication. Sisco serves Jeddah area in Saudi Arabia. While oppurtunities are immense, the threats too have increased as banks have entered the financial services sector. SISCO must have product diversification strategy along with value addition to the existing products. This could include adding insurance services and even expanding overseas. SISCO should have the right marketing mix and the marketing strategy in place which can be decided upon after a market research. They should focus on using internet as a channel for distribution as it reduces costs and helps in better customer services. SISCO needs to be cognizant of the fact that at any point of time, should the oil prices crash, the market for all its products could come down drastically. The company has to be prepared for this contingency while devising their ambitious plans. 2.0 Situation Analysis During their operation in the financial and mortgage industry, SISCO has developed its own customer base, thus cultivating its own niche market. An aggressive marketing will however lead to a growth of its customer base, thus making its presence widely known in Jeddah. Product/service : Currently, SISCO offers the following range of products; -Residential mortgage (primarily on SREDCO PROJECTS) -Installment services - Leasing - Syndication (in concert with local banks). 2.1 .Market Summary SISCO’s core business shall be the supply of financial services to both individuals and business owners, who have interests in the mortgage and property development industry. Following a study of the target market, the information acquired will hence help the company to better serve the needs of the customers. 2.1.1 Market Demographics The profile for SISCO consists of the following geopgraphic,demographic.and behavior factors. Geographics Jeddah, the geographic target is situated near the red sea. The total targeted population is a little over 3 million “ A year on year increase of 4.48% (the population growth during this time was 2.83%).”(ameininfo) Demographics The kingdom is witnessing a change in demographics of home development. Previously, individuals build at least 98 percent of the homes, whereas developers only handled the remaining 2 percent. The trend is however rapidly changing owing to a drastic rise in both the building materials, and a corresponding increase in development cost. “Suggesting an increase in nuclear families. Thus, demands for all kinds of household goods - white goods, automobiles, bank loans, furniture - will increase.”.(ameininfo) Behavior factors People use their money in investing in luxury assets as, as owning villas and apartments are the main concern. 2.1.2 Market Needs There is a dire need to supply over 200,000 housing units per year. In order to achieve this, a total of 280 million square meters of land is needed. Further, SAR 500 billion needs to be invested in the sector to be able to construct the 1 million housing units. In order to quench this thirst for housing units, the availability of sufficient financial mechanisms are needed (Parker 2007). 2.1.3 Market Trends The real estate market in Saudi Arabia has remained buoyant, thanks to the availability of sustainable demand. As long as there is an economic expansion, there will be a resultant creation of investment opportunities in the region. Demand will thus continue picking up, fuelled by an influx of increased rates. In addition, population growth in the kingdom has been forecasted to continue growing annually at a rate of 2.5 percent, to reach 25.66 million at the end of 2009. At the same time, there shall be a decline in the average house hold size from 5.5 to 5.2 persons for the periods 2005-2009. This will in turn lead to a corresponding increase in housing demand, which has been estimated to be at 1 million units by the end of the same period. This translates into an increase of 200,000 units per year on average. Jeddah is also witnessing a growing trend, in which high rise and luxurious apartment are being designed and developed by real estate developers of repute (Parker 2007). 2.1.4 Market Growth The sector is bound to witness a rapid growth, and which will continue onto the following year. This saw investment into real estate increasing by more than two folds by the end of 2007. This review, which was provided by the Global Investment House, also reported of an annual growth in the sector of 115.9 percent, and which now stands at SAR 100.4 billion. In almost all the segments in this market, demand almost always surpasses supply. While this trend is expected to hold in coming years, real estate prices, as well as rental will more than likely remain buoyant. 2.2 SWOT Analysis This is a description of the company’s strengths, weaknesses, threats and opportunities. 2.2.1 Strengths As a privately owned company, SISCO is not marred in bureaucracy, which is quite common with state-owned firms. Consequently, the making and execution of decisions is quite fast. Alesayi, the parent company of SISCO, is also a pioneer in innovations, hence has ensured that SISCO exclusively specializes in morgue and property financing only. As such, the company has a competitive advantage over other competitors with a large product portfolio. It can thus provide tailor-made services to the customers (Mushtak 2007). 2.2.2 Weaknesses The company is operating in the service industry, which is very volatile, and is dependent almost entirely on the forces of demand and supply, as well as reputation. Owing to this lack of product diversity through specialization, the company may face financial hurdles if the target market becomes saturated with competition (Parker 2007). 2.2.3 Opportunities Owing to the increased housing demand in the kingdom of Saudi Arabia, the company can make use of its excellent management team to come up with packaged products that are Sharia-compliant, thus affording it the competitive advantage of having more loyal customers. (Mushtak 2007). 2.2.4 Threats Banks in Saudi Arabia are also offering financial solutions towards home ownership, and this is bound to offer competition to the company. The banks have also embarked on the awarding of home-financing credit that is Shariah-compliant. Given that such credit extends in the upwards of 25 years, this is bound to offer stiff resistance to SISCO. A joint venture between a real estate developer and a local bank is another potential threat. Such an arrangement exists between Riyadh-based Dar Al-Arkan real estate Development Company, and the Arab National Bank (Mushtak 2007). 2.3 Competition There have been significant changes in the financial/banking sector in Saudi Arabia, with banks now offering new products and services, and changing their distribution channels. In addition, the Saudi government has opened the banking sector to foreign investors and national banks from the GCC states. The customer has now more options to choose from as competition in services increases. This requires that SISCO should segment its target market and must ensure superior service to sustain amidst tough competition. Foreign banks have a disadvantage in offering the desired service level and this is what SISCO should take advantage of. SISCO needs to understand the customer needs and tailor its products. 2.4 Product Offering SISCO should seriously consider product diversifications since competition is very high in the financial services sector. They have been concentrating on the property financing and mortgage sector and they should opt for value added services to housing finance. House insurance is not yet popular in Saudi Arabia and would be an entirely new concept. SISCO can offer bundled services for customer retention. Along with the financing of new housing, SISCO should offer free house insurance for one year. This ensures the client comes back to renewal of house insurance the next year. This would be an excellent strategy to retail loyal customers. Savings and investment is another sector that is fast catching up in the region. To encourage savings and customer loyalty, SISCO can offer an extra percentage by way of interest to its existing customer base. In addition, the company can also consider an annual bonus or incentive for loyal customers. For timely payments of installments there could be an additional incentive. SISCO can also consider branching overseas to countries like Malaysia and Bahrain. 2.5 Keys to Success The key to success in the services sector is the delivery of efficient services along with an innovative product. Every few months there has to be some innovative offering to keep the market alive. There is a general lack of awareness of the products on offer in the financial services market and the key to success lies in the way the products are offered. Having an interactive website would go a long way in attracting the potential investors. At the same time, there is a segment that can gain confidence only when they have face-to-face interaction with the executives. To convert this segment into customers, SISCO should have a different strategy. They should appoint agents to cover certain areas and educate the people about the products offered. This would also help the customers who would like the services without having to visit any office. Since consumer attitude is changing and service alone can differentiate a company, SISCO can adopt this personal services division. 2.6 Critical Issues While the banking products in Saudi Arabia are sharia-compliant, the other financial services do not have any separate regulatory regime and are governed by the Capital Markets Authority. Besides, there is a lack of interpretation of the standardized sharia compliance for financial products (OBG, 2007). This has hampered the growth in the sector. In addition, the market for insurance has been limited due to the religious perceptions. The ambitious development projects have taken place because of the recent oil boom that the Kingdom is experiencing. The Kingdom is under pressure from global forces to bring down the prices as such soaring prices could result in global recession (Ashby & Murphy, 2008). Saudi Arabia fears that a drop in oil process could throw its ambitious development projects and the building of new cities into disarray. Another fear is that if the oil prices remain high for too long, it could strain relations with other nations, especially the US. Besides, there are high chances that consumer countries could develop alternative fuel. Alternatively, if the oil prices are reduced, the Kingdom fears that consuming countries could build up excessive inventories, and this too could bring the oil prices crashing. Thus the financial services sector is closely linked to the oil prices prevailing around the world. Thus every step that SISCO takes has to be after thorough evaluation of the situation. 3.0. Strategy Overview Since the financial services sector is closely linked to the global oil prices, the marketing strategy would have to be in alignment with the global developments. Hence SISCO should initially concentrate on housing finance sector as it demonstrates high growth potential. In addition, the strategy should be to focus on the existing customer base and offer them bundled services. It is not advisable to try to increase the customer base at this stage because it is cheaper to retain customers than to build new customers. Thus market growth will be based on selling more to the same market and new products will be developed for the existing customers. 3.1. Mission To be the leading financial services suppliers with a loyal customer base in the coming 5 years with unmatched brand awareness. 3.2. Marketing Objectives Marketing objective is essential as it helps to control the marketing plan and motivate the individuals. It also helps to develop a coherent group working towards a common goal. The marketing objective of SISCO would be: 1. To increase the market share by 10 percent in the housing finance sector in the coming year. 2. Free house insurance for the first year for those who opt for housing finance. 3. Educate the customers about the availability of the financial products including investments plans. 3. Brand awareness among the developers, insurance agents and potential customers. 4. Brand enhancement of the company among the existing consumers who have already availed of finance in the past. 5. Increase product sales of other products/services like investments and savings by 20% in the coming year. 6. To appoint agents to handle the sales of specialized products like insurance and investment plans. To add distribution channels for insurance and investment plans. House insurance product can also be sold to those who have already availed of finance in the past – both their own existing customers as well as others. 7. To finance at cheaper rates than competitors. 3.3. Financial Objectives It is essential to pursue long-term growth and profitability objectives keeping in mind the shareholders and the different stakeholders. Keeping this in mind, the financial objectives of SISCo would be: 1. Achieve revenue growth of 20% in one year. 2. Earnings should increase by 20% annually 3. Increased net profit margins by at least 5% per year. 4. Increase in dividend payouts by 5% per share per year. 5. Increase the ROI 6. Become an established brand name in the stock market so that stock prices rise up. 7. Precautionary measures during recession and contingencies. Reserves to be build for this period. 8. Increase in direct customer sales 9. Boost channel sales through agents, developers and banks. 3.4. Target Markets Targeting implies renouncing a great number of potential customers and focusing where the demand is the largest with minimum efforts. Thus the focus should not be to sell as much as possible but to obtain the right clients. Housing units are in great demand due to higher disposable incomes but due rise in cost of building materials, people are leaving it to developers rather than building their own homes. Thus the target should be the developers and a tie should be made with them to offer loan and mortgage to their clients. The developers should in fact be used as a channel for sales because the buyers would all approach the developers for financing. The developers should also be given an incentive to convince the buyers of the housing accommodation to insure their homes. In addition, the same housing clients should be offered special interest rates if they also avail of loans for luxury household gadgets and equipments. The developers should again be offered an incentive if the same client goes in for further loans. Since the developers are not tying up with banks, it would be wise to target such developers who are involved in high rise and luxurious housing accommodation. In addition to the developers, SISCO should also contact large corporations offering them special rates if a certain number of people from the same organization take housing loans from them. This would be an added channel of distribution where they do not have to give away the incentives to the developers. 3.5. Positioning After the target market has been defined positioning takes place. This refers to the image and impression about the company that offers services. Once the target market has been defined the consumer characteristics can be ascertained which would help in projecting the right image. The market is not homogenous and SISCO cannot cater to both the luxurious or high-priced segment and the low budget housing loans. Positioning strategies are simpler if the market is homogeneous but today’s market is volatile and sensitive. What appeals to one segment may not appeal to the other. The positioning strategies have also to take into account the reaction from the other segments. Since they have targeted the high-priced segment, and the high-priced segment is sensitive, their offerings and promotions should be based accordingly. The image of the company should not be undermined as that would make it lose valuable customers. Hence, if at a later date they want to serve the underserved customers, they should do so under a different brand name so as not to lose the high-priced segment. As of now the company is perceived among the customers as a brand that offers value for money and the competitors try to imitate SISCO’s strategy. This shows that the company is well positioned in the market but the underserved customers perceive it as a company that is beyond their reach. Hence they should position their services by claiming to provide solution to specific problem – providing free insurance along with the housing loan. They should use this as the differentiation strategy to position their services. 3.6. Strategies (need to be completed) Marketing of services requires understanding the services that will be exchanged in lieu of payments, understanding the target audience to whom the services are being offered. The customer wants value for money, satisfaction and quality. Retail banking, telecommunications, healthcare, education, insurance, data processing, and tourism are the core areas where service has become important to both the provider and the receiver. The financial services industry faces several challenges in meeting the customer’s needs and expectations. This is the reason SISCO needs to adopt a unique marketing strategy. The core strengths of the company have to be communicated to the potential and existing customers on a regular basis. The core strengths include credibility, stability and differential product offer. Since the objective is to educate the customers and offer them practical, reliable consumer-friendly information on varied products, and reach out to the consumers, the strategy should be establish a reputation of offering packaged service – including preparing the proposal for loan and advising personalized investment plans. Each customer should be made to feel important and the education level would depend upon the existing exposure that the customer has about the company and its services. In nutshell, they should work as partners of the customers rather than merely service providers in business to make profits. SISCO should reinforce to the customers that they are concerned about the financial needs of the customers. Their customers are not merely the end customers but also the sales and insurance agents and the developers. The developers need to be convinced about the credentials of the company because most of the time the developers are in direct contact with the end customer. 3.7. Marketing Mix (need to be completed+ include the dollowing) ‘Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organizational objectives’ (Grönroos, 1997). The marketer blends the elements of the marketing mix to optimize profits. The product (which includes services) is priced according to the buyer’s ability, made available to the customer (place) and is promoted to make the customer gather as much information as required before the purchase takes place (Bennett, 1997). When organizations apply the marketing mix principle, targeting the customer involves giving value in relation to quality, value for money, reliability, product performance and cost effectiveness. They should bring innovation in their product mix by introducing insurance with financing and also doubling up as investment. - pricing : Pricing decisions includes the profit margins, discounts, financing or other aspects such as leasing. In the financial services industry it is essential to first do a financial analysis before deciding on the pricing strategy. The fixed and variable costs have to be calculated which will indicate at what turnover it is possible to achieve breakeven. Variable profit would depend upon the discounts and incentives given to middlemen like the developers and the insurance agents. Since the insurance would be an added service, the expenditure allocated to this service should be minimal as costs are already taken care of by the existing loan and financing services. This is fair pricing. Pricing is also based on demand but the demand would have to be first ascertained by SISCo after they have floated the new product, since there are several competitors already in the market, they should maintain fair pricing. They can increase the price if the brand value increases when customers accept the bundled service for which as of now there are no competitors. The prices offered by the competitors would also have to be studied. - distribution Distribution decisions include market coverage, logistics and levels of service. Distribution is a competitive weapon in the financial services sector. Today there are new delivery channels available like the telephone and the internet. In addition to its product differentiation strategy of including free house insurance for a year, SISCO can also consider differentiating in its distribution strategy. Such distribution channels help to reduce costs, improve competitiveness, enables retaining the existing customer base and acquire new customers (Thornton & White, 2001). Nevertheless, consumer preferences have to be considered while deciding on the distribution channels because a firm has to ensure to be available where it is convenient for the customer. Jeddah has an internet and tech-savvy population as many banks offer sms/phone banking facilities. In fact some banks do not have brick and mortar presence and since they have no overhead costs, they offer higher interest rates and pay lower charges thus benefiting the customer (Global-travel, n.d.). Hence the distribution strategy that SISCO should adopt is strongly market through developers and existing insurance agents. In addition launch an effective website and attract potential customers while allowing benefits to the existing customers through the internet. As the popularity of internet business grows, they could cut down on the incentives offered to the developers and thereby increase their profit margins. - Advertising and promotion The effectiveness of marketing depends on how the marketer communicates about the product to the customer. In the words of Kotler (2000), many communication channels are integrated to deliver a clear, consistent and compelling message about the organization and its products (cited by Proctor & Kitchen 2002). Communications through advertising depends upon the market to be captured (Harris & Attour, 2003). Companies have to adopt the local culture for effective communication. Marketing communications must have ethical concerns while designing and advertising campaigns. SISCO should not rely on one type of medium to communicate the message to the target segment. They should extensively advertise in the local dailies urging the prospective investor to ask for this facility through his developer. Today there is a demand for products not only that offer protection but also that double up as investment. SISCO should target such customers they should also send out newsletters or e-newsletters to their existing customers and invite opinions. Using the web2.0 technology they should start focus groups or forums on their website inviting experiences and suggestion from the existing customers. This would also serve the purpose of promotion for the potential customers who would be attracted by what they read and most often it has been found that they also post questions and queries in such forums. - Customer service Customer service has become of great importance as firms employ CRM technologies to augment their services. Relationship management has gained importance where they always try to get a feedback on the experience of the customers and then attempt to improve wherever necessary. This requires management of customer knowledge, which can result in high-quality relationships. It also requires continuously strengthening the network for the mutual benefits of both sides through interactive, individualized and value-added contacts over a long period of time (Gebert et al. 2003). A customer-centric approach treats every customer uniquely and individually. To attain this, SISCO would need to ensure efficient customer service which can be done either directly or through agents. In the beginning SISCO would need the support of agents and developers but they should have strict guidelines which the developers and agents have to adhere to. They would have to ensure that the information on computer system of the developer and SISCO should contain exactly similar details of the customer so that he does not have to face unwanted situations. Inefficiencies lead to a dissatisfied customer who would wait for an opportunity to defect to competition (Galbreath & Rogers (1999). This is where a holistic approach to customers is needed. 3.8. Marketing Research: (need to be completed) Online surveys should be conducted as they are fairly cheap and also allow those who have inhibitions, to participate in the survey. Besides, it is easy to cover a widely dispersed population. This survey would help to determine the awareness level of SISCO’s products in the area; it would also enable to understand the demand for the product and the experience of the existing customers. The survey can also cover questions on the customer’s experience with the dealing agent. This survey would give a thorough idea to SISCO based on which they can decide on the marketing strategy. Self-completed questionnaires would be sent out as this method of data collection allows the ability for unambiguous quantitative data to be collected (Redmond & Griffith, 2003). The format will be kept relatively simple and straightforward as there is little control over the respondents’ interpretation of questions. References: Ameinfo. [online ] http://www.ameinfo.com/123859.html (Accessed September 2,2008) Ameinfo. The changing face of banking in Saudi Arabia [online ] http://www.ameinfo.com/123859.html (Accessed September 9, 2008) Ashby, T. & Murphy, C. (2008). Jeddah meeting tackles oil rage. 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Customer orientations and usage of financial distribution channels. JOURNAL OF SERVICES MARKETING, VOL. 15 NO. 3 2001, pp. 168-185 Read More