Zipcar Case Analysis

1.What are the challenges facing Zipcar?

Two prominent challenges that Zipcar faces currently are:
Internal organizational challenges due to Merger with Avis – A merger between 2 companies of different size, values and culture always possess some challenges along with benefits. 3 potential challenges due to this merger could be – creating cultural synergies between a large conglomerate with established business practices with a relatively small entrepreneurial organization with innovative ways of doing things, impact of change in pecking order on organization strategy & executional challenges faced by being part of a large conglomerate. Competition by large rental co.’s and niche car sharing co.’s– Zipcar faces intense competition from car sharing services introduced by large established rental car behemoths like Hertz, Enterprise, U-Haul etc. While Avis can provide infrastructure support to some extent in terms of expansion of car fleet, parking spots etc. Zipcar will have to make product/service enhancements to counter features like No Registration fees, one way rentals, Reward Points etc. Zipcar also faces competition from peer to peer services like Relayrides, Getaround etc. and service like car2go, which offer innovative, convenient and cost effective solution to meet car rental needs of consumers.

These companies might pose a big challenge at a regional level

2.What are 3 possible ways to segment market –

Three possible ways to segment the market are

•Area/location-As more and more people are shifting to urban areas where owning a car is not as attractive proposition as in suburbs/rural areas, Area-densely populated city areas, airports etc.is way to segment.

•Age-Car ownership typically varies with age. Hence age- College goers, singles (25+) etc. is an important way to segment.

•Attitude– Sharing a car requires a mindset change hence segment by attitude is important

3.Develop a marketing strategy for Zipcar

Customer- Zipcar should continue focusing on Primary customer target of young city/urban dwellers & university students and secondary customer target of Business and Government. Competitive Advantage

•Technology-Zipcar has differentiated itself from the start by using proprietary technology. It should focus on further building and enhancing the technical edge and use this edge as a source of advantage over its competitors.

•Historical customer transaction data – Most of Zipcar’s competitors do not have (or have for shorter period of time) this data b’coz of their late entry in car sharing market. Zipcar can use this data to enhance and customize its service offering.

•First Mover Advantage– While most of the competitors are recognized brands, Zipcar has a unique advantage of being the first widely recognized car sharing services brand. Zipcar should leverage this advantage by positioning itself as a though leader.

Differentiation – Convenient, Technologically Superior, Accessible and Trendy Positioning – Contemporary, youthful, technologically superior brand which resonated with core target audience of urban city dwellers/ college goer’s. Also, Zipcar should not let Avis merger influence it’s positioning.

4.What is the one marketing mix variable you would change?

Price – Reduction/Abolition of Enrollment Fee & Annual Membership Registration Fees & reduced hourly rates With close to 81,000 members, Zipcar is a leader in car sharing industry. Annual reports show growth in revenue3 year on year and a positive EPS by 2015. Also, looking at the strength & user engagement of Zipcar’s Facebook page (147,683) and Twitter (24,313) handles, one can conclude that Zipcar seems to be brand well entrenched in mind of its users. Thus, Zipcar has competitive advantage of being an industry leader, rapidly growing business model and high brand awareness. But Car sharing seems to be an industry where consumer’s especially students and urban dwellers would be price sensitive. Eventually they will choose the brand that provides car sharing service for the lowest price given various service facets like – accessibility to cars, convenience etc. are at par. Read Kingsford Charcoal case study

As of now Zipcar seems to be the only prominent service provider which charges Registration fee of $60. Also, hourly rental rates for Zipcar seem to be bit higher than Hertz on Demand. With fast growing competition in car sharing industry, it is imperative that Zipcar at least reduces/abolishes a part of its enrollment and annual registration fees. These fees might have been critical at one time to help Zipcar expand – adding car fleet, extending distribution points etc., recent acquisition by Avis should provide the necessary capital and infrastructure support to expand Zipcar’s operation at improved efficiency w/o charging consumers registration fees. Abolishing/Reducing fees will help Zipcar to avoid any price based competition with big rental companies. Also with time Zipcar should strive to offers service/product parity with features like one way rental, rentals by minutes, reward points etc. as offered by key competitors.

Exhibit 1

Source: http://green.autoblog.com
Appendix
1-http://en.wikipedia.org/wiki/Zipcar
2-http://en.wikipedia.org/wiki/Carsharing
3-NASDAQ:ZIP