Which area should Affirm expand its loan product to next? Home improvement, elective health products, or automotives? Please stack rank your priorities.

• Clarification questions: 

  • Can you provide examples of elective healthcare products? Is this related to aesthetic cosmetic procedures and tools (e.g. red light therapy masks)?

  • Is automotives related to purchasing cars for personal use?

  • Is home improvement related to home renovation (changing floors, redoing kitchens) or is it related to buying furniture?

• Goal: What is the goal of the expansion? 

  • Increase engagement for existing customers? Then we would focus on cross-selling to existing customers who have already purchased products with Affirm.

  • Attract new customer segments?

• Market attractiveness (strategic considerations):

  • Market size: The car market is probably the largest and the elective health market the fastest growing.

    • Car loans: ~40.000; secured

    • Home improvement: ~18.000 average spend on home improvements; unsecured

    • Elective procedures: ~500-1.000; ~75.000 for more major ones

  • Recurring revenue: Customers who buy elective procedures are likely to purchase again, don’t need to spend money acquiring new customers.

  • Riskiness: Home improvement loans are most risky due to their large size and unsecured nature.

• Ease of entry (product perspective):

  • Product type: Elective procedures are most like our existing loan products due to the smaller loan size and unsecured nature.

  • Customer segments: I’d like to examine who are our current customers in terms of age and types of purchases they make with Affirm. I would prioritize the lending product that’s the most likely to be purchased by our existing customers using Affirm financing. I would hypothesize our typical customers are digitally savvy millennials and Gen-Z shoppers with less money who typically buy clothes and electronics using Affirm.

  • Merchants: Which merchants are most likely to agree to offer us as a financing option? Probably merchants offering home improvement products, such as Ikea. We would need brand new relationships with car manufacturers and providers of aesthetics procedures.

  • Competitors: The elective procedures market is probably the least saturated because banks already provide car and home improvement loans.

Conclusion: I would first go into the elective medical procedures market because: 1) Market is growing and lends itself to recurring revenue, 2) Loan type is similar to our existing products, 3) Customer profile most similar to our existing customers, 4) The market is likely less saturated than car and home improvement financing. I would follow with the home improvement market because we could probably leverage existing merchant relationships to launch.