ZipCar Marketing Case Write-Up
Company

ZipCar provides a low-cost alternative to car ownership, traditional car rental services and other vehicle leasing programs. ZipCar operates a subscription based model. Members are required to pay annual fees that would in affect grant them the right to reserve a car at a pre-specified time. ZipCar is headquartered in Boston and commenced operations in 1999; by 2005 it became the largest active car-sharing company in the United States with over 30,000 registered customers1. ZipCar provides a convenient service for individuals who either (i) do not own or could not afford a car, (ii) instances where cost of inconvenience is too high ( i.e. parking, maintenance and insurance) and (iii) Students. ZipCar has forged partnerships with leading several universities across the United States to provide a fleet of fuel efficient cars in exchange for parking spaces. This has allowed for Universities and institutions alike to meet their environmentally friendly targets. ZipCar has recently expanded its fleet to include luxury cars.

Customers

The customer base for ZipCar tends to include young professionals living in major cities where car ownership would be exorbitantly expensive. Campus universities provided students the option to use ZipCar to meet their green initiatives. ZipCars were conveniently located at parking spaces in densely populated areas that are highly accessible by train and public transportation. ZipCar grew its customer base by establishing themselves as a low cost alternative to car ownership and traditional car rental services. Membership requirements include a $25 fee for driver’s license verification. Annual membership fees ranged from $50-$250 per year depending on the plan selected. Car rentals could range anywhere from a few hours to several days1.

Members could go online and reserve a vehicle up to a year in advance to even a few minutes prior to picking up the car. Customers stand to benefit tremendously from the flexibility in reserving a car unlike traditional car rental services, prices did not fluctuate greatly if cars were reserved minutes before use. Each ZipCar was assigned a permanent parking space. All Memberships included a ZipCard that customers used to unlock their reserved cars. ZipCar members would pay hourly fee that would include, insurance and gas. Members who washed their cars would receive an additional free hour. The option to rent a car by the hour is an added benefit for customers, who may only require use of the car for just a few hours. Traditional car rental services charge by the day so if a customer only needed the car for an hour he or she would be charged a flat daily rate ranging from $30-$60 as opposed to paying an hourly rate of $8.50 in the state of North Carolina1.

Collaborators

ZipCar has established a unique network of public parking lots to house their fleet of vehicles across the United States. ZipCar would only pay to occupy a few parking spots. ZipCar has cleverly forged strong partnerships with universities which have granted ZipCar various assigned parking spaces for their fuel efficient vehicles in order for the university to meet their ‘green’ initiatives. Students and faculty would still be required to pay usage and membership fees should they desire to use the ZipCars. ZipCar has subtly provided the user with incentives to be a collaborator, for example members who wash their reserved cars upon return are either refunded $15 or granted an additional free hour of usage. The Customers are also responsible for returning the cars to the same exact locations where the cars were picked up. ZipCar operates a business model where the onus of responsibility lies mostly on the customer.

Competition

ZipCar has uniquely positioned itself in car rental business for students and young professionals. The firm has significant cost advantage over companies like Hertz, Avis, and Enterprise. ZipCar has diversified its revenue stream in the form of membership fees and usage fees. ZipCar’s fleets of cars are located on parking lots in major cities and urban areas and do not have any offices or staff working at these locations hence keeping operation expenses minimal. ZipCar has invested substantially in technology to make its operations more efficient. Members are granted a ZipCard that allows them to unlock reserved car as they are scheduled to be picked up. ZipCar has differentiated itself for its cost leadership for short term car rentals. Members have the flexibility to rent cars by the hour this allows cars to be utilized at a greater rate than traditional car rental services, with the potential to generate more profit per car. However, traditional car rental services are actually cheaper if customer usage is greater than a day. ZipCar’s meteoric rise could subject itself to be a potential takeover candidate from its competitors. Competitors like Hertz, Avis and Enterprise would find it difficult to compete in this niche market because they run the risk of significant cannibalization. Therefore a potential take-over would be more likely. However, ZipCar competitive advantage will not be sustainable if it does not continue to provide innovative service offerings and establish brand loyalty. ZipCar has recently expanded its operations outside of the United States where it is poised for even greater growth.

References:

1 Harvard Business Review: ZipCar Influencing Customer Behavior – Francis X. Frei – June 30 2005