zipcar
Dear Mrs. Chase
We would like to thank you for providing us (Intellect Consulting) the opportunity to access your company, which we believe has great potential. When analyzing Zipcar’s performance to date, we came across four major inconsistencies relating to the business model, which we believe require immediate attention.
a) Initiation fees and security deposit: We believe that you need to waive off the initiation fee and security deposit, as convenience and cost savings are the main value drivers for Zipcar. We do realize that the deposit is currently essential for Zipcar’s operational structure, however, the benefits of waiving the fee can be realized through a larger membership gain. This new structure meets the needs of your target group, which are young professionals and college students, who do not have the monetary resources to commit $325 as an upfront cost. On the other hand, an alternative option is to reduce the initiation fee from $325 to $100 ($75 deposit and $25 initiation fee) providing Zipcar with additional revenue yet attracting the target demographic with lower setup fees. A benefit of reducing the security and initiation fee includes adding a switching cost to consumers who choose to switch to a competing service..
b) Daily Rate: Currently, the Zipcar business model operates through two payment structures. Customers can either book the car for an entire day at $44 (125 free miles) or rent the car on an hourly basis, which includes both an hourly charge and a mileage charge. The September data shows that an average customer uses the Zipcar for 1.4 trips per month, uses it for 9 hours per trip and drives 49 miles per trip. This indicates that people are using the car for longer than what was anticipated in the May financial plan (22 miles per trip and 4 hours per trip). This payment structure places Zipcar’s offerings at a rate below the rental car offerings. Zipcar is not in the business of replacing the rent a car service but instead
We would like to thank you for providing us (Intellect Consulting) the opportunity to access your company, which we believe has great potential. When analyzing Zipcar’s performance to date, we came across four major inconsistencies relating to the business model, which we believe require immediate attention.
a) Initiation fees and security deposit: We believe that you need to waive off the initiation fee and security deposit, as convenience and cost savings are the main value drivers for Zipcar. We do realize that the deposit is currently essential for Zipcar’s operational structure, however, the benefits of waiving the fee can be realized through a larger membership gain. This new structure meets the needs of your target group, which are young professionals and college students, who do not have the monetary resources to commit $325 as an upfront cost. On the other hand, an alternative option is to reduce the initiation fee from $325 to $100 ($75 deposit and $25 initiation fee) providing Zipcar with additional revenue yet attracting the target demographic with lower setup fees. A benefit of reducing the security and initiation fee includes adding a switching cost to consumers who choose to switch to a competing service..
b) Daily Rate: Currently, the Zipcar business model operates through two payment structures. Customers can either book the car for an entire day at $44 (125 free miles) or rent the car on an hourly basis, which includes both an hourly charge and a mileage charge. The September data shows that an average customer uses the Zipcar for 1.4 trips per month, uses it for 9 hours per trip and drives 49 miles per trip. This indicates that people are using the car for longer than what was anticipated in the May financial plan (22 miles per trip and 4 hours per trip). This payment structure places Zipcar’s offerings at a rate below the rental car offerings. Zipcar is not in the business of replacing the rent a car service but instead