As the traffic problem getting more serious in dense cities these days, more people tend to use public transportation systems instead of private cars. However, people also need to drive to destinations for some reason occasionally. So, Zipcar targeted at this market in urban areas, and obviously, this market is potentially large and relatively untouched in the US. The high parking expenses and limited drive needs in cities are the points to attract customers. Unlike other big car rental agencies, Zipcar provides short-term lease, and also intended to make the car rental more convenient and cheaper for users. Thus, there is a potential market and customers for this venture. And besides Europe and America market, there is also big untouched market in Asia. The business model for Zipcar is car sharing, which provide convenient and cost saving for users. Though car sharing is not a new business model, it is uncommon in the US market.
Zipcar allows its members to reserve cars either online or by phone, and access the nearest available cars with a card. Zipcar generates its revenue from deposit and annual membership of customers, and also hour charge. The major costs of Zipcar’s venture are, parking, attrition, lease costs, and access equipment. Since Zipcar’s business model is car sharing, from the customers’ perspective, the degree of convenience and cost saving should be the key indicators to examine its business model. And at the beginning of this venture, they did not perform very well. Zipcar planned to use card and card reader to let members access the reserved cars, which could be more convenient and simplify the billing and returning process. However, when Zipcar launched their venture, this technology was not ready for use. And some customers reflect that the annual fee is too high, which violate Zipcar’s cost saving idea. And another big problem for this start-up is funding.
As the parking and the lease cost raise up and continuing investment in technology and website design, Zipcar needs more investors. And choosing the right person to manage this venture is also a challenge. And finally, as the demand increase, Zipcar has to make sure that they have enough cars meet meet customer satisfaction. My first recommendation is for marketing. Car sharing is a relatively new concept to Americans, so it is also hard to attract customers. Initially, they could use word of mouth to access its customers, but for long-term development, Zipcar should create a full marketing strategy to attract more customers.
For instance, to maintain customer loyalty, they could give rewards to their members, such as discount. My second recommendation is for its R&D. Considered the Zip card and card readers are critical parts in this business model, and they already put many efforts on this technology and it IP patent, they should maintain its technology development, and apply it to all their cars. And also continue its website design to provide more convenient reserving and paying experiences for its customers. And my third recommendation is their management team. As the case mentioned, they chose a wrong person as the president at the first time, and as Danielson cannot work full time in Zipcar in a short time, they have to choose a person to take charge on this. This person should be familiar with this industry and also have experience in running small businesses.
