As competition continues unabated in the €125bn European
fleet leasing industry, Leasing Life discovers why SME
fleet business is the most sought after in the market
When, in a recent interview with Leasing
Life, the UK head of commercial vehicles with Mercedes-Benz
Financial Services (MBFS) stated his intention to target the SME
fleet sector, his plan was quickly echoed by other fleet
professionals.
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In the weeks that followed, fellow captive
Volkswagen Financial Services (VWFS), international lessor
LeasePlan and service provider Kwik-Fit Fleet all expressed an
intention to focus growth on their SME customer portfolios, having
identified it as the best prospect for growth in mature leasing
markets.
Alex Matthews, director of commercial vehicles
and direct sales at MBFS, said last month the German captive was
targeting “regional SME fleet business”, a segment which currently
makes up around 20% of its customer portfolio.
“These local, small-town SMEs are major players
in those regional markets,” said Matthews. “When you compare them
with a supermarket chain they are fairly small, but in a regional
area a company that runs 50 vehicles is a big player.”
Whether running fleets of commercial vehicles
like the companies targeted by Matthews, or 15-vehicle fleets of
passenger cars, SME operators represent a big business
opportunity.
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By GlobalDataD
ata from
Leaseurope, the trade body which represents the leasing and
automotive rental industry in Europe, shows passenger and
commercial vehicle leasing makes up 55% of new leasing business
conducted annually by the body’s members, which in 2011 meant a
total of €125bn.
Couple that with data from independent fleet
lessor LeasePlan which estimates 36% of the company car market in
Europe’s eight largest markets is SME fleet business and the
financial opportunity associated with SME business becomes
apparent.
Like Matthews’ commercial vehicle arm
at MBFS UK, LeasePlan, the Netherlands-headquartered global fleet
firm, is specifically targeting SMEs because, as the firm’s expert
in the SME market explains, a healthy growth strategy requires
investment in small business fleet.
“LeasePlan is working on a selective growth
strategy which is sustainable and delivers long-term profits. To do
that, as a company present in 30 different markets, you have to
make sure you are present in different segments,” says Frank
Rolandus, senior development manager at LeasePlan, who has
responsibility for the company’s business success in the SME
sector.
LeasePlan divides its fleet business into four
distinct customer segments, says Rolandus, one of which is small
fleet.
The market is different in each country, he
says, which means the segments being targeted, in terms of fleet
size, are different but LeasePlan is looking to increase its SME
business in its eight biggest European markets – France, the UK,
Netherlands, Germany, Italy, Spain Portugal and Belgium.
“It comes back to our profitable growth
strategy. That healthy balance between the different segments is
different from country to country depending on the maturity and
depending on the market saturation.
“In the most mature markets the top end becomes
more and more saturated,” says Rolandus, meaning it becomes harder
and harder to win new business in the large fleet sector.
It is a natural progression, therefore, to
target smaller fleet business in these markets, Rolandus adds.
It is a progression which has been made by
manufacturer Volkswagen after it identified a gap in its UK finance
business between consumer retail finance offered through its dealer
network and fleet business offered by VWFS.
“What we realised is there is an opportunity
with SMEs which we weren’t really catering for – fleets ranging
from two to 10 or 15 vehicles – and there are huge numbers of these
businesses out there,” Kate Thompson, a spokesperson for
Volkswagen, told Leasing Life.
The company estimates there are around 1m SMEs
in the UK that run company vehicles, and which it hopes its Small
Business Leasing (SBL) programme will cater for.
Volkswagen Group operates 215 dealership
franchises in the UK and 63 fleet business specialists with on-site
fleet experts, which deliver services to larger fleet clients.
In order to cater for the SME fleet business
VWFS was missing out on, the entire dealer network can now sign up
to the SBL programme, which allows SMEs to look at fleet deals
centrally through a dedicated website and call centre at the
Volkswagen head office where clients will be given a quote.
The deal is then passed to a local retailer who
can work through the deal face-to-face with the SME owner before
putting pen to paper.
“We’ve got about 200 dealers signed up, which
is nearly the whole network,” says Thompson.
“What we’ve asked them to do is to have someone
at the dealership become expert in fleet leasing who can give
advice to local SMEs, because many small companies will not have
someone able to manage their vehicles so they could end up wasting
a lot of money if they are not sorting their cars in the best way
and funding maintenance and so on.”
For Volkswagen, adds Thompson, local knowledge
and the ability to conduct this business face-to-face is key to
expanding to SMEs.
Sales approach
It is a strategy similar to that employed by
LeasePlan in its quest for small fleet business, a strategy which
is entwined in its definition of small fleet.
LeasePlan’s Rolandus is reluctant to give a
definitive vehicle number on small fleet because the size of fleets
varies so much from country to country as well as business to
business.
Another reason for his reticence is because
LeasePlan doesn’t always differentiate business segments along
fleet-size lines. Instead Rolandus defines small fleet by the route
to market.
“We classify small fleet not by size but by
sales channel,” says Rolandus.“We classify small fleet as fleet
business which comes into LeasePlan through non-traditional sales
channels.”
For the larger fleet business, LeasePlan
approaches the market using a direct sales force which visits
prospects – a “consultative sales approach,” says Rolandus, because
larger fleets operate a more complex fleet product so require a
more detailed and longer term sales approach.
However,
LeasePlan identifies small fleet business as that generated through
three indirect sales channels – sales through banks, through
vehicle dealerships brokers or intermediaries – and directly
through telesales or online, Rolandus explains.
It is in this approach where the LeasePlan
strategy for small fleet and that of Volkswagen in the UK for SMEs
overlap; an approach to market based on growing customer reach.
“The SME segment is completely different
compared to the larger fleet segment,” says Rolandus, “because the
SME segment is far more a B2C market, rather than a B2B market
where you have to go out and have a direct dedicated sales
approach.
“A B2C market it is far more about reach, the
ability for your prospects to find you and to get to you, whereas
in B2B you have to go out and find the customers.”
The difference in the markets means increasing
points of sale and ensuring a big enough presence in the market,
says Rolandus, and adds it is something LeasePlan is doing “very
actively” across its European markets.
“For the countries where we are currently
already active in SME we are trying to increase that reach and for
countries where we are not yet active we are planning to make our
first steps by opening various sales channels,” says Rolandus.
This special approach to small fleet business
doesn’t make it harder to attract business but it does require
forward planning from the fleet lessor, even before a market
reaches maturity, says Rolandus.
“You have to start thinking about the SME
market approach from a couple of steps back. [In the past], when
the corporate or international growth ambitions opened new
countries, we approached the market using a direct consultative
sales approach as we have always done. Now we have to develop and
design a sales approach targeting this SME segment where we use
different sales channels, but also where we have to look at
different client needs in the SME market,” he says.
Market maturity, however, is not the only
reason Rolandus identifies for, not just LeasePlan, but European
lessors in general, increasing their presence in the SME
market.
“If you look at Europe, the focus on SME
markets also has to do with the slow movement towards acceptance of
operational leasing among SMEs,” he says.
Rolandus says it is difficult to identify a
timescale for an increase in the uptake of operational leasing and
adds it differs from market to market depending on maturity.
“For instance,” he says, “in the UK, LeasePlan
has been active in the SME market for more than 20 years and we are
not the only company there. In other markets we might have been
there for 10 years, and in others we are only just stepping in and
starting to educate the SME market about operational leasing.”
Rolandus’s analysis seems to be borne out by
data from the Corporate Vehicle Observatory 2012 International
Fleet Barometer which showed European fleet decision-makers in
companies with more than 100 employees expect the use of
operational leasing to increase over the next three years, with a
higher percentage in the mature UK market. The same research showed
UK firms of all sizes, including those with less than 100
employees, favour developing their use of operational leasing by
some degree or another.
Regardless of the extent of interest in
operational leasing and the maturity of the European fleet markets
LeasePlan operate in, Rolandus, along with Matthews of MBFS and
Volkswagen, is definitely confident of one thing.
“The SME market is a large market and it
offers a lot of opportunity,” he says.
