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Zipcar (HBR Case Study)
1. Intro to Management 1 Tea Tree Systems Michael Chamberlin Drew Kessler Bill Wenrich Daniel Zhao Bill Wenrich 01 April 2010
2. Who is Zipcar? How should we spend the money? Market segments Memberships Brand image Environment Public transit Analysis Intro to Management Agenda 2
3. Who is Zipcar? Zipcars live in neighborhoods, near businesses, and at transit locations in Boston Shared vehicles that members can drive by the hour or day – from only $4.50/hr No hassle – The hourly fee covers all expenses: Fuel Insurance Maintenance And we are expanding… Intro to Management 3
4. How to Spend the Money Expand into East coast markets Add targeted advertising to the established word-of-mouth advertising Extend Zipcar as a cost-saving resource for business travel Focus on promoting the environmental benefits of car sharing Intro to Management 4
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6. Membership Open to those 21+ with license, deposit Some people with poor driving record excluded Annual membership fee + hourly rate Intro to Management 6
7. Brand Image & Advertising Established through word-of-mouth advertising in urban areas Expand advertising to include posters in proximity to mass transit stations in future markets for expansion Partner with mass transit Help customers chose the best option for them Based on honesty and trust Intro to Management 7
8. Environment 13% of members have sold a car since joining 40% have avoided buying a car In San Francisco, car share members drive 47% less Always aware of miles and hours Equate reducing driving & fuel consumption with saving money Intro to Management 8
9. Partner with public transportation Supplement, not replace existing transit networks Locate Zipcar pods near mass transit stations Begin a journey on public transportation, complete the last leg with Zipcar Putting cars here is also an investment in advertising because they are located in a heavily-trafficked area Intro to Management 9
10. Analysis of Expansion Strengths: Co-founders have experience in business, environmental issues Established relationships with insurance, car manufacturers, parking authorities Weaknesses: The management team is weak - Danielson is distracted by research and is not committed to Zipcar There is a significant investment into a city before any profit can be realized Intro to Management 10
11. (continued) Analysis Opportunities: There are no competing car sharing companies currently operating on the East coast Urban areas with over 25 households/acre frequently have less than 1 car per household Threats: Existing car rental companies are established in many markets and could enter the car sharing market Zipcar’s profits are heavily reliant on steady prices in fuel, maintenance, and parking Intro to Management 11
12. Questions Intro to Management 12 Tea Tree Systems Michael Chamberlin Drew Kessler Bill Wenrich Daniel Zhao
13. References http://upload.wikimedia.org/wikipedia/en/9/92/Zipcar_sign_-_Washington,_D.C..jpg http://www.zipcar.com/business/ http://blastmagazine.com/wp-content/uploads/2009/10/zipcar_boston.jpg http://www.travelyucatan.com/cancun/cancun_bus_station.jpg City Car Share. (2007). Bringing car-sharing to your community. Retrieved from http://www.citycarshare.org/download/CCS_BCCtYC_Short.pdf http://images.fanpop.com/images/image_uploads/Boston-MBTA-Map-2001-metro-maps-46863_1024_1022.gif http://www.themidnightcoders.com/blog/uploaded_images/question-mark-787608.jpg Intro to Management 13
Here it is…http://upload.wikimedia.org/wikipedia/en/9/92/Zipcar_sign_-_Washington,_D.C..jpg
Convenience is the primary aspect. Zipcars offer a convenience over public transit.They are in convenient locations to be useful and attractive to potential users.$4.50/hr (C. Ex. 3)No hassle – fuel, insurance, maintenance Don’t need to fill in paperwork every time your rent (like a traditional rental car) Can reserve and pick up 24/7
Focus on the geographic area Keeps us away from competing car sharing companies on the west coast So far, there is enough demand that it is not worth overextending the company to resistPlace ads where they will be directly visible and memorable to the target audienceFind Zipcar a new revenue streamRecognize the recent trends to pay attention to environmental conservation and impact
Consumer is the existing segment Cost-effective, ecological friendly car for when you need it. Private cars sit idle most of the day. What if others could use your car when you are not? Don’t pay insurance and parking when you aren’t using the car Used for visiting, errands (ie. Places hard to get on public transit or moving things not suited for mass transitBusiness is the proposed addition under this modification to the business plan Expand into a new market segment. More opportunity to increase brand recognition Offer Zipcars to businesses as an efficiency tool The gas is included and there are no miles on an employees car, so the accounting should be much simplified Might actually save money – 180 miles included in a day. If you would use the 180mi at 30mph, it would be 6hr and $27 This is only $0.15 per mile!http://www.zipcar.com/business/http://blastmagazine.com/wp-content/uploads/2009/10/zipcar_boston.jpg
Basic membership criteriaA user is expected to spend around 1200 a year 1100 on general hourly service 75 in annual fees one-time 300 refundable depositBased on (C. p.10)
Already have an established campaign of word-of-mouth (40% of advertising exposure)Postcards are ehhh…. Effectiveness is not establishedCars do have Zipcar logo, but not on driver door Brand recognition is increased as cars are driven, but the driver is not reminded that the car is borrowedBumper stickers allow people to show support of Zipcar even while not drivingEstablished a brand image to fit into the communities young, spontaneous, etcAdvertise for Zipcar around mass transit Remind people that they could have used a Zipcar instead of bringing their heavy packages on the bus Especially useful on routes that go by popular grocery storesWork with mass transit to develop a complete system Admit when renting a Zipcar may not be the best option No benefit to gain one rental at the expense of a dissatisfied customer and negative reviewshttp://www.travelyucatan.com/cancun/cancun_bus_station.jpg
Every Zipcar can take the place of 10-20 private carsThe service is effective in reducing the number of cars on the road, and therefore reduces congestionDriving less conserves energy. When you are paying for usage, you keep track closely and cut down on unnecessary expense When you own a car, you are already heavily invested and the cost of a mile is marginal Drive more to get more value from your investmentBased on City Car Share. (2007). Bringing car-sharing to your community. Retrieved from http://www.citycarshare.org/download/CCS_BCCtYC_Short.pdf
Zipcar is an option, not the only optionMake Zipcar pods available to people coming directly from mass transit Available to complete a journey Comforting to customers that they will have their car reserved and be able to complete their trip right awayThis location can also be considered an advertising expense The cars are highly visible in an area with a large volume of pedestrian traffic This will increase brand recognition – users associate the Zipcar name with flexible rentalshttp://images.fanpop.com/images/image_uploads/Boston-MBTA-Map-2001-metro-maps-46863_1024_1022.gif
Threats:Rental companies offer carsharingIn 2008, a few of the car rental companies made small entries into the carsharing marketplace. U Car Share in 26 cities, all operating out of existing U-Haul centers, Hertz in Boston, and Enterprise’s WeCar in St. Louis. Generally speaking, their advantage comes from economies of scale that is creating a niche business that is not too far removed from their core business, and takes advantage of existing facilities, expertise, and financial support. So far none have made outstanding inroads, in fact the access to their services and vehicles tends to be inconvenient, but that may change as the rental companies learn the carsharing business. Rising fuel costThis economic burden could result in Zipcar raising rates to cover their gasoline expense. And while this may not cause current customers to terminate their memberships, they may decide to reduce their Zipcar use, opting instead to use less costly transportation options or share rides. Higher rates may also deter new members from joining Zipcar.
Opportunities:Consumer attitudes and behaviorsMarket segmentation identifies distinct groups of customers who share specific characteristics and are likely to exhibit similar purchasing behavior. Recent carsharing studies, along with surveys and unsolicited feedback from Zipcar’s membership support the belief that carsharing members tend to have strong views about a variety of environmental and social concerns. They also like to save money and are motivated by convenience. These characteristics work together (an ATM and a Starbucks on every corner) and they are critical to Zipcar’s attracting more customers. Zipcar knows its customers and its Web site contains a wealth of information about their services, along with various tools and testimonials to help potential users to decide “is Zipcar for me?” The key is getting the right people to visit Zipcar’s Web site. Zipcar is a recognized brand with those who use it, but is it with non-members? Most people do not pay attention to information until they have a need for it, or perhaps observe others benefiting from it. Very few people actually sell a vehicle and join a carsharing organization when they first hear about carsharing. There has to be a trigger, some economic or social interruption that creates a need, or at least the need for information about carsharing – Zipcar. Using demographics and promoting Zipcar in proximity to the things that get consumers thinking about it is critical.Increase weekday use of vehiclesZipcars are used heavily at night and on weekends, and many are idle during the day. Scott Griffith calculated for Zipcar to make money on a vehicle it needs to be in use more than 40 percent of the time. This statistic is the impetus for finding ways in which to increase daytime use of Zipcar’s assets. One area of exploration is attracting customers through the organizations that operate during the day and already own fleets or depend on employees to provide transportation to accomplish their work. This could include municipal services and other government workers, as well as visiting care services (nurse, meals, and therapy). One-way travel between cities and designating cars for longer distancesThrough evaluating the driving patterns of its members, and listening to their feedback, Zipcar understands there is a market for, or at least interest in, one-way travel between cities and/or designating cars (and pricing structure) for longer distance driving. This opportunity bears exploration, subject to the consideration of several points. Is there enough consumer demand to sustain such a market and justify applying the resources required to develop and support it? What are the logistics and risks associated with managing cars that are not automatically returned to their home parking location? Zipcar has always been about short-term access, so would adding longer-term options to the service mix be moving too far from organizational purpose? Or is it a move toward creating new or lifetime memberships through greater service usability? Retaining students after graduationZipcar’s established and growing presence on college and university campuses is creating Zipcar fans at a young age. It is a demographic that tends to take action when it comes to environmental and social issues, plus they are innovators and experimenters drawn to cultural trends (like carsharing). The students at universities are really part of the self-service economy, and so the self-service model that Zipcar has really fits in line with that generation. Although buying a new car is a traditional rite of passage after graduation, those students who experienced Zipcar on campus will hopefully change their mindset to where car-sharing is a new alternative to car ownership." Transit connectionsIn Boston Zipcars are strategically parked near subway stations in the city giving members access to cars so that they may continue their journeys to locations not reachable by public transportation. Carsharing industry research supports that the transit connections niche is not fully served, that there is opportunity for growth in this segment. Additionally, Zipcars parked at subway, bus, or train stations outside the downtown area may attract new members.
