Zipcar Case
The proposed venture in this case study has great potential in highly populated areas with a need for transportation. Since Zipcar provides the cars in areas close to the customer, this service would be easy to use. The drawback would be finding a way to make the benefit of utilizing Zipcar more compelling over other forms of transportation such as owning a car, using other car rental services, taxis, subways, or buses. The nice component of Zipcar is that it offers hourly services which can attract people who need a car only for a doctor’s appointment or grocery run.
Zipcar has been able to progress its venture which is notable since funding and parking have been an issue. Most of the funding was used to start building the wireless technology to serve as the operating system. Unfortunately, the shortcoming in Zipcar’s progression could be because the “ Z-card” reader is not finished. With no asset and few angel investors, Zipcar can seem as a risky investment. Instead of rushing to start operating the business perhaps Chase could have gained investors by guaranteeing that she had a system that functioned. Despite the technological setback, Zipcar was able to obtain 3 cars and rely on members to keep a driving log to track usage. The advantage of Chase and Danielson starting Zipcar early is that since both lacked a degree of expertise, Zipcar would be able to grow by observing customer’s usage patterns and understanding the operational and financial parameters of running a business.
Zipcar’s first business model was influenced by European car-sharing. This model gets revenue by charging a membership fee, security deposit, application fee, per mile fee, per hour charge, and a late fee. For the target market, requiring a $300 membership fee is steep and expects the users to have a greater disposable income. After revising the model to a $75 membership fee, the company makes up the difference by increasing the variable costs such as the per hour charge. This model also incorporates a daily charge of $44. This makes users consider daily renting more. With the $300 security deposit, Zipcar can profit a small amount from interest income. In the first model the costs of leasing and parking are lower than expected, so the second model adds $600 to parking and $400 dollars to leasing.
From the actual operations in September, the exhibit shows that Zipcar’s expectations exceeded what was actually met. Zipcar expected attrition to be an optimistic 5% when it was actually 15%. The data also shows an increase of members with the number of car uses being greater than the number of its members. As expected many users would take advantage of the convenience of the hourly rate which would explain the higher demand for hourly uses over daily uses. The 60% in night and weekend trips is a probable percentage since it’s a behavioral trend to use cars more during the weekends for social needs. It’s evident that the structure of Zipcar is to generate revenue from its hourly uses. Hourly uses generate a significantly greater value in mileage revenue in comparison to daily usage. Even with hourly uses being preferred by customers, the difference in hourly and daily usage revenue does not quite show this. For this to be confirmed with the operations data the range of revenue should be higher.
In Chase’s pitch, she should state the paucity of car-sharing in the United States and its success in European cultures. She should emphasize the target market of Zipcar and their slogan “wheels when you want them”. The service is for someone who wants a car temporarily, but does not need to own one. Explaining the meaning of Zipcar would highlight the importance of convenience, simplicity, and cost effectiveness of car-sharing. These components should be the focus of her pitch and not the environmental benefits. She should hint the competitive advantage of offering hourly service and promote her website so investors can find out more about Zipcar and potentially aid her business. She should state why Boston was an ideal location (parking, population, urban city, college-educated, and web connected). Lastly, she should state any additional progress, sales, customer retention, and angel investors before her plea for financial assistance from investors.
1. How would you characterize the service that Zipcar provides? Why does Zipcar exist? What consumer needs was it designed to meet? Which firms are its competitors?
Zipcar is in a nut shell a US headquartered car membership based car sharing program that provides automobile reservation and use to its members. This concept started in Boston by two entrepreneurs named Robin Chase and Antje Danielson in the end of 1999. This year 2013, a deal was struck where Avis Budget Group acquired Zipcar for $500 million in cash, becoming a subsidiary of the group. The company provides a great service to its members by being able to let them reserve a car a year or even minutes in advance charging an hourly rate or for the day. There is not hassle with a Zipcar automobile, the hourly fee usually as low as $4.50 (depending on the city) covers all expenses from fuel, insurance and maintenance.
This way of car sharing through memberships is very unique and it really goes into how through the use of modern technology (self-service) one can create a revolutionizing business or concept. Zipcar’s service solves an overwhelming need for young adults living in the city (generation Y). Zipcar targets those individuals who live in dense metropolitan areas. College students also benefit from this type of service, those that are in big state schools or universities. The issues of parking, insurance and monthly car payments are long gone with Zipcar’s business concept. They really meet exactly what the customer was looking for, which is to be able to use a car or automobile for a short time period and not worry about the big problems that arise when owning a car in any big, dense city which is parking, gas and insurance. This concept in a way gives members a perception that they own the vehicles per say, but with the a lot less responsibility/commitment.
Today many firms within the car rental business have adopted methodologies and strategies pioneered by Zipcar. Companies such as Entreprise, which in my perspective is the closest peer to peer competitor, have announced car membership sharing campaigns. Other companies such as Uhaul, Carpingo, Cars2go and others have almost the same concept but what might vary is the car type/model and obviously locations. They are also other forms of car sharing services offered by companies that can really be a good competitor to Zipcar. These companies offer members privately owned vehicles that are shared/loaned to them and used for a couple of hours for a fee, paid directly to the owner of the vehicle and probably pay a commission to the company. Any company where someone needs to pay for a use a vehicle/automobile is a competitor of Zipcar.
2. What is the customer motivation for choosing Zipcar? Do you agree that Zipcar is a very large move towards self- service (that the customers are having their operating role as customers being expanded, and they require no benefits or salaries to be paid)? Please explain your thoughts on this.
Customers are motivated by Zipcar because of its convenience and reliance. As mentioned before, once you become a member of Zipcar you feel that you are indeed an owner of a vehicle. Also, not having to worry about parking the car when you are finished with it, insurance and monthly car payments are all the benefits and motivation the average young adult who lives in the city must have to become a member of Zipcar. It really is a win-win situation for the person who is constantly on the go, who likes taking public transportation and occasionally needs a vehicle to resolve issues.
Zipcar’s services can be described as a large move forward towards self-service. Members really have to do some tasks, but these tasks are not far from the tasks done when doing a traditional car rental. Filling up gas towards the required amount once the car is returned, leaving the car parked in the same spot/same way it was parked and paying high fees for any penalties or late return are all of the same tasks when choosing Zipcar. Although there is some difference when being a member of Zipcar, you really do not have to deal with lines or other people in the back of the counter as well as wait for an employee to bring you the car around from the parking lot. The experience in a way is the same from renting a car but different because it is more of self-service rent a car.
In my view, Zipcar self-service model has its advantages and disadvantages, first your really do not have to deal with any disgruntle employee when taking out a car, with this concept you are doing it all by yourself. Second, you have even better options to take different types of cars with Zipcar than a normal rent a car (type, color, model, etc.). On the other hand, there are many disadvantages of using Zipcar. First, it can be a little more expensive than conventional car rentals. Per day traditional car rentals are definitely more inexpensive, but per hour rentals Zipcar has the edge. Second, car rentals seem a little old fashioned now a days, Zipcar is the better “hipper” choice. At the end, it all goes down to what you are looking for in a car rental and where you live. Zipcar is meeting and exceeding consumer needs within heavy populated cities and creates value to them in an innovative way.
3. What are the critical factors that influence the customer experience?
Zipcar membership and experience is considered to be somewhat radical to the norms of car renting. Still, this modern company rose in an era of customer-centricity and instant-feedback-sharing has inspired overt negativity indeed worth discussing. And upon further review online, it is clear to say that Zipcar’s customer experience is indeed veering off the course. The reviews coming in from members make it abundantly clear that they are underwhelmed. But as the innovator and leader in the space, Zipcar is supposed to represent the best. It is supposed to be the standard. With no inherent reason to lag behind other services or fall short, any such shortfall can be directly attributed to a flawed service experience. Although they have had a bad review in the recent years of operations due to bad customer service over the phone and online, they still create value to its members.
There are many critical factors that influence the customer experience within Zipcar’s concept. First, members or customers feel, as mentioned before, like they own a vehicle. Members really feel like they have ownership of the car, without the hassle of paying for gas and insurance. Also the option of parking is also another perk, since most of the Zipcar locations within a city, being everywhere, it is very easy to find parking. Second, members really feel more in control about the vehicle because they just need to reserve the car that they want, pick it at the nearest location they have indicated in the reservation and drive away. If the car is low in gas, on top of the wind shield on the driver’s side there is a credit card that can be used to fill up the tank or enough to when you are finished with the car you return it and park with at least one-third tank of gas. Third, although having bad customer reviews, it still has some sort of support that can go beyond what you receive from traditional car renting agencies. Finally, the self-service experience is unique because you are in total control of the car from initial reservation to last minute return.
4. What mechanisms do they have in place to manage consumer behavior? What are they intended to accomplish? Are there, if any, adjustments you would recommend that the company should make to better manage consumer behavior?
Zipcar has various mechanisms in order to properly manage consumer behavior. Zipcar’s online complaint handling, which would provide the most vivid, public glimpse into how a business is approaching customer negativity (especially for a business that uses email, phone and social media as its key support channels), suggests that an attitude of protected satisfaction might be reigning within the organization. Also, as an online article can point out, Zipcar’s Twitter interactions reveals that the organization far prefers to engage with positive feedback than negative commentary. While the company is right to notice and respond to its loyal supporters, its disregard for frustrated ones is both troubling and unintuitive in an environment predicated on fixing customer dissatisfaction.
Even if one temporarily ignores the importance of customer service, there is little marketing rationalization for Zipcar’s effort. Cultivating loyal brand advocates is valuable, but managing customer complaints and preventing customers from leaving are also huge marketing objectives. With a strategy that discharges those elements, Zipcar is not using social media wisely. It is not conscious of the manner in which social, by virtue of empowering word-of-mouth, can affect reputation. Of course, one should not ignore customer service, and the poor response times are an issue there. While negative responses are not the only responses Zipcar ignored, it has overlooked some positive and neutral comments, making them seem like they are far less capable of attracting the company’s attention.
Problematic from a perception issue it suggests that Zipcar does not care about righting its wrongs, it is also problematic from an experiential perspective. Based on reviews and other articles online several of the complaining customers were referencing either ongoing issues which were the ones that needed resolution or the ones that could prevent them from successfully doing business in the future. Without resolving these issues, Zipcar is not only belittling its customers but also not upholding its commitment to serve them.
In all when it comes to an insufficient, ineffective customer care platform, Zipcar is far from alone. Many organizations today are as or even more unresponsive on social networks. But the Zipcar situation is notable because the impact of its inefficacy is so clear and apparent. Customers are censuring the brand on social networks. Major media outlets are attacking the business’ customer service model. In all, a company known for being cool, hip and modern is building a reputation as an organization with bad traditional customer service, to a point in which customers cannot rely or want to try it.
5. Have you used Zipcar? If you did, what is your opinion of it as a consumer? If you haven’t, would you try it?
Zipcar has become a must have for any individual or couple that is living in a crowded city such as New York. I am a current member and user of Zipcar. I used to own a vehicle when I was living up in Inwood in the Bronx, a couple of years back, and parking was acceptable. Once I moved to the Upper East Side, parking was worst and I decided to commute at the time by train to work. I got rid of the car and maybe a couple of weeks later someone told me about the Zipcar concept and I thought it was rather “cool” (word of mouth marketing). I started to investigate more about the company and what it does, finally deciding to go ahead and become a member. When I had a car, my girlfriend and I would always go to a big store such as Stop and Shop or Path Mark to do our grocery shopping, and then when I returned the leased car we started to buy in small stores around where we live (Key Foods, Fairway, etc.). We noticed that the food was costing us more than what we were used to, so Zipcar came into the picture. On a monthly basis, now I take out a car from one of the various locations/parking lots around our apartment and go for grocery shopping or any special type of shopping. At the end we found out that by doing this it was much cheaper and we can buy big quantities of items at one time.
My opinion of Zipcar is that of convenience, for me it serves the purpose and that’s’ it. If you need a car for a few hours to get things done yourself and not depend on anybody, than this business concept of car sharing is perfect. I would also say that they have a lot of work to do regarding car interior maintenance and fees. What really got me to become a member was the very low rates that they offered, but once I reserved the first car it came to me that the rates were a couple of dollars higher than originally thought. For me that was the first deception but it was still lower than renting a car for a couple of hours, so I figured it would still be beneficial for what I need it for. Another deception was that they charged my $50.00 dollars because of a late return item, which I thought the amount was outrageous, since reserving and using the car was a lot less. The reason for late return was that I was in heavy/unusual traffic and it also took time for me to put gas on the vehicle. At the end, they charged the late fee but credited back once I made a complaint over the phone and sent them an email explaining what really happened. Within this regard they really treated me well.
In my couple of months of experience using them, I think they have an acceptable customer service, but I still see that they need to work on it. They also need to ensure the quality of their vehicles, once I had a car that smelled like a guy smoked a cigar the whole day; it was an overwhelming smell, at the end I had to change the reservation and go pick it up to another parking lot. Zipcar has to find a way to have a better maintenance system of their automobiles and keep them in a good condition both in the interior and exterior.
6. What do you think Sal should have done? Leave his interview or stay? What about Anita? Are you concerned that Anita might not get her car? Can a sizeable late fee discourage Sal’s behavior in the future?
With having somewhat of an experience using Zipcar, I can say that it is very easy to get discouraged with their services. Not finding the car at the time you reserved, finding the car in bad condition both in the exterior and interior, and having to pump gas because the last person who used it left it empty, all of this can really make you think twice of staying as a member or even becoming one.
In my view, Sal should have really mentioned to his interviewers what was happening with his Zipcar reservation, I am sure that they would have understood. But I also recognize that he was in a bad situation to discuss this with them. If this happened to me, I would have stayed and not say anything. Just for leaving to speak with Zipcar, I could have lost the job opportunity. I would have stayed and when the interview was finally finished, I would have called Zipcar and explained everything before they added any late fees. At the end, Zipcar would have perfectly understood.
In Anita’s case, I would have called Zipcar and made a big deal about her situation. Maybe they would have reserved her another/better car than the one she reserved, or maybe give her some free hours using the car. In this case, the only thing that Zipcar can do is to give her extra hours to use the car, and send her to the nearest parking lot to get her car, or if this other parking lot is too far than she would ask for another type of car regardless of type and cost for the same fee.
In both cases, if Zipcar does not act properly and think about the customer, they will indeed loss two members. If Sal, had been charged a late fee (usually $50 for the first hour past, $25 every subsequent hour after), than he would have been definitely terminating his membership. In turn, Sal would be looking for another means for transportation. Also, if Anita would not get any type of compensation for the time she wasted procuring to call Zipcar, she would have indeed terminated her membership.

Zipcar Case
1. Describe Robin Chase’s ”Business Model”.
Business model concept bears a broad meaning in a business world which is usually used to qualify business in its entrepreneurial setting or often approached by companies to identify business’ internal environment in respect to the value it creates, delivers and captures. First of all, business model depends on the type of products or service a company offers and to whom.
In a given case, Chase and Danielson recognized possibilities in car-sharing business idea and ventured a deal. Zipcar emerged as a start-up company which offers car sharing service operating on a B2C basis. Zipcar offers on-demand vehicles and delivers mobile and timesaving service focusing on urban areas and its residents. Consequently, Zipcar business model in terms of its target market is segmented mostly according to geographic and psychographic factors (urban area people). As it follows, Zipcar mission statement flows out of its business model and aims to enable simple and responsible urban living.
Business model most of the time integrates or is integrated within business strategy. Since Zipcar offers transportation service its business model/strategy in the first place is the car-sharing concept. Secondly, according to Ansoff’s Matrix framework, Zipcar business strategy is market development as long as the company offered existing product to a new geographic market. Chase and Danielson recognized the implicit need in a new market for already existing product/service on time and went for it. Zipcar was designed to offer car-sharing idea which evoked and brought that same hidden need onto the surface developing company’s potential market.
Business model is closely tied to business’ objectives. Zipcar Company’s key objective for business growth and development appears to be a future where car-sharing members outnumber car owners in major cities around the globe.
2. What are the major differences between financial plans shown in Exhibits 3 and 5?
* Exhibit 3 and Exhibit 5 display significant difference in year revenues forecasts. For example, Exhibit 3 First Year Revenue – 235,928$; Exhibit 5 – 355,388$. It can be seen that differences in revenues are caused by different pricing strategies (decreased annual fee – increased hourly & mileage rates)
* Different variable costs expectations for lease and parking per year – Exhibit 3 lease costs - 4,000$; parking – 0; Exhibit 5 lease costs – 4,400$; parking – 600$.
* Profit differences. Exhibit 5 yields higher profit each year which is due to different pricing strategies each year and less significant difference in variable costs.
3. As an investor in Zipcar, would you have any concerns about these changes?
I would be concerned about the increase in profit after the first year of operation that company might generate throughout consequent years. Therefore, I would be very willing to have an explanation and empirical evidence for such a change in profit in order to exclude fraud concerns. Secondly, I would also question the pricing strategy in order to make sure it is reasonable and efficient.
4. What are the key points that Robin Chase should make to potential investors at the Springboard 2000 New England forum?
In the first place, Robin Chase should be able to provide a critical and coherent executive summary of the Zipcar business idea which would be the highlight of the whole business plan presenting all of the key points and emphasizing business objections and prospective benefits. I think that Chase should provide a thorough-ground arguments in explanation and support of the choice of its target market in respect to various factors (demographic, geographic, psychographic), explaining why North America, why urban areas, why urban residents etc. Consequently Robin Chase will be able to derive on the differentiation and positioning strategies resting on thorough and reasonable arguments, which also would be important and supportive of the competition part, which is vital in respect to investors’ interests indeed. Robin Chase should be able to explain and ensure investors that Zipcar is a profitable and scalable business providing relevant financial information. For instance, Chase should draw investors’ attention towards such ratios as return on equity, profit margin, price-to-earnings and current ratios.
5. If you were a potential investor at the Springboard 2000 Forum, what questions would you ask Robin about her project?
If I were a potential investor I would definitely start my questions asking about the roots of the idea and the knowledge and expertise in the entrepreneurial activity and car business in particular. I would absolutely question business’ sustainability and growth possibilities, highlighting market threats and opportunities, major risks. Indeed, I would be concerned the most about the financial condition of the business questioning its potentials and business’ liquidity. If company’s presentation would lack some key points like revenue estimate, for instance, I would definitely ask for it in detail, so that I had an idea of the return on my investment or the breakeven point of a business and could make reasonable decisions.
6. What topics discussed in class about Entrepreneurship are illustrated in this case?
Zipcar case illustrates a lot of Entrepreneurship-related topics discussed during the lectures so far. For instance, analyzing Zipcar business model brings into highlight such concepts as differentiation and positioning strategies, competitive advantage. Talking about the three pathways to new ventures, Chase and Danielson chose to create a new venture. Zipcar case demonstrates how founders took an already existing concept and applied it in a different geographic market creating a new value that the product/service was aimed to deliver to its target market. Chase and Danielson did not invent anything originally new or unique, yet they recognized the need (at some point they actually evoked this need) and introduced the “niche” product/service on-demand in a new market. Also, the Ansoff’s Matrix framework discussed in class can be related to a given case. Since Ansoff’s Matrix is generally used by businesses to identify possible efficient strategies we can assume how Zipcar might have built its business model/strategy. Indeed, Zipcar case highlights the idea and implications of the strategic planning which is the central topic in the Entrepreneurship II course.
7. Was Robin Chase successful with her Zipcar business?
They say “go where your competition don’t”. Chase and Danielson did. Robin Chase recognized in time the hidden need for the niche product/service such as car-sharing and went for it with Antje Danielson where no direct competition settled down yet. Zipcar offered time convenience and mobility, and the word-of-mouth built the brand around the value it delivered. In March of 2013, Zipcar was acquired by the Avis Budget Group for approximately 500$ million which might have opened up new pathways to successful business growth and innovation. Zipcar sound acquisition for 500$ million signifies