Zipcar: Influencing Customer Behavior
Zipcar is a car-sharing service. Members, had to pay annual fees to participate and were assessed usage fees, based on time and mileage, monthly, were provided common use of the service’s vehicles independently of one another. It was started in Boston in 1999 and present in 21 cities with a fleet of 400 cars. It has 30,000 members who are growing at a rate of 1500 per month. Members had to register online with an annual fee of $25 and a refundable amount of $100. Reservations can be done on call or online, a year in advance or a minute before. There are incentives to customers for proper maintenance of cars. Members had to return cars to designated parking locations.
As per its competitive positioning, the major competitors were rental agencies who provided similar services. Other competitors include taxi, cabs and public transport. But Zipcar had competitive advantage of providing flexible services to customers. Supplier power is moderate as Zipcar had its own cars and they don’t have to wait for third party. But buyer power is really strong as buyer may very easily choose for other alternatives like public transport or taxi.
When we see from the framework of nature of the service vs. who is the direct recipient of service. Zipcar would come under possessions and tangible actions i.e. possession-processing (service directed at physical possession) as customers had to do refueling and maintenance.
If we look at the type of variability in the zipcar service, it is EFFORT VARIABILITY. In effort variability, customers expend varying degrees of energy on tasks needed to receive service. It affects other customer’s experience if proper effort by previous customer was not put like in the Zipcar, returning of car on time. Effort variability has impact on service quality and cost, either directly or indirectly. Zipcar tried to reduce this variability by charging penalties to customers who return their car late.
But this late fine can be considered as license to be late. Indeed, late fees often help compensate a business for customers’ costly choices, but they are not always effective in changing their behavior.
Zipcar should focus on Normative control in which it should try to motivate customers about returning car on time and how it affects other customer if they return it late. Zipcar should not only inculcate the behavior of caring for other customer’s but also should find innovate way to promote it. As said by Frances X Frei, Zipcar should opt for Classic Accommodation approach to control effort variability in which it should have backup employees who can compensate for the customer’s lack of effort.
The goal of variability accommodation strategies is to balance the firm and customer value propositions, while maintaining a lead on customer’s willingness to pay. Targeting a narrow set of customers based on their propensity to exert a given level of effort is a way to reduce variability in customer effort without influencing it.
Approaches to manage customer effort variability
• Uncompromised reduction o Target customers based on motivation o Normative approach to preparation and effort
• Classic reduction o Instrumental approach to preparation and effort
• Classic Accommodation o Experienced employees
• Low-cost Accommodation o Customer self-service