Vehicle Recovery - UK - September 2014
“The vehicle recovery market is mature and looking at ways of further developing business is of interest to all those in the sector. While recent years have seen the emergence of price competition in response to the UK economy suffering from the effects of the economic slowdown it is clear that this is unsustainable. With the economy strengthening many vehicle recovery companies are now looking at growing revenues. This is vital with our research suggesting that companies need to focus on how they best deal with untapped opportunities within the market.”
– Neil Mason, Head of Retail Research
This report looks at the following areas:
- Price erosion remains an issue
- Age, gender and income are important factors when choosing a company
- Is the age of long distance travel at an end?
Since Mintel last reported on the vehicle recovery market back in September 2013, the UK economy has recorded a significant improvement such that by July 2014 GDP had surpassed its previous high in 2007. Personal expenditure is once again climbing with the automotive sector being one of the main beneficiaries. As such, we are much more positive about the prospects for markets such as vehicle recovery services than we have been for some time.
Yet despite the positive signs given by the economy and consumer expenditure, the market for vehicle recovery services remains one that is in a mature stage in its development. Membership of recovery organisations has been relatively stable for the last few years, with the market dominated by three main players (AA, RAC and Green Flag). The onset of recession led to difficult times for these and smaller companies with a growing emphasis on price competition. Although a focus on value remains a feature of the sector there is evidence that during 2014 a number of companies have sought to refocus their attention on non-price factors.
Mintel’s research suggests that such prioritisation of the customer and away from mere price competition is likely to bring about an improvement in fortunes for those in the market. A number of potentially profitable customer groups exist within the market, most notably older adults as well as drivers in higher socio-economic groups. Research also suggests that some consumers are still wedded more towards price with customers of Green Flag and some of the smaller players in this market less likely to shrug off price as a factor when selecting vehicle recovery insurance.
The main reason for taking out vehicle recovery insurance remains one of peace of mind, with women in particular likely to want to get back on the road as quickly as possible. As for channels, these remain varied although the use of bundling appears to be growing in importance with a growing percentage of members acquiring insurance through the purchase of an additional product or service.
Looking ahead, those in the market will need to be more sophisticated in how they promote themselves to their existing customer base and to potential customers emphasising the attractiveness of staying with a company long-term. Moving because of a price hike or discount by a rival are identified as the two most obvious reasons for moving from an existing provider. Although continued economic recovery is certainly set to lead to an improvement in market conditions for all those competing in this sector, it is not expected to diminish the high level of competition that currently exists.
This report covers vehicle breakdown recovery services available to private car owners, whether on a direct or indirect basis, as is common in the marketplace.
The value of the vehicle recovery services market is made up of fees from memberships, paid either directly or indirectly, as well as revenue from the ad hoc sector.
Membership fees comprise any premiums paid to ensure that a vehicle or person is insured in the event of a breakdown. Fees can be paid either direct by the consumer to the recovery company or indirectly through an intermediary who will offer insurance to the consumer often as part of a bundle of services.
The value of the ad hoc sector is revenue from motorists who are not members of an organisation and therefore use the services of a recovery operator – normally an independent – on an informal or ad hoc basis.
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