Case and Marketing Plan

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Case and Marketing Plan

Zipcar: “It’s Not about Cars-It’s about Urban Life”

Marketing - An Introduction, Twelfth Edition

By: Gary Armstrong & Philip Kotler

BUAD 3010 - Principles of Marketing

A Good Student

June 28, 2015

Table of Contents

Cover Page ……………………………………………………………………1

Table of Contents ……………………………………………………………………2

Executive Summary …………………………………………………………………..3,4

Background …………………………………………………………………..4,5

Situation Analysis ……………………………………………………………………6

Problem/Opportunity …………………………………………………………………..6,7

Alternative Solutions …………………………………………………………………8-10

Marketing Plan ………………………………………………………………..10-14

Controls …………………………………………………………………....14

Conclusion ……………………………………………………………………15

Sources ……………………………………………………………………15

Executive Summary

Zipcar isn’t about it’s many vehicles it owns, it’s about providing an easy and cheap type of transportation for the urban lifestyle. This company is fairly young but has made a huge impact when it comes to people living in bigger cities. By providing a rental car service to its members that is cheaper then other types of transportation and being very convient, Zipcar has grown it’s company to other countries across the world and doesn’t plan on slowing down anytime soon. There have been issues with the company not taking care of the vehicles it owns and other little problems that have been reported, but with a correct marketing strategy to implement Emergency Zipcars for members to have as a back-up plan, they can eliminate some of the complaints, cut back on unnecessary costs, and attract new customers. The strengths of the Emergency Zipcar are that it is a very reliable back-up plan for members to use in case their original car has issues, not enough fuel, or even if it isn’t available for them to use in time. This also prevents the company for imbursing members to use another type of transportation which can cut back on additional costs. By having this secondary option, this can attract new members that were skeptical about becoming a member and reassuring them this is the best type of transportation around a city. The weaknesses of the Emergency Zipcars are that they will require a lot of attention which means that there will be a lot of costs at first. The costs of the additional vehicles, manhours, and purchasing of parking spaces will add up in the beginning. The opportunities, however, are that the company can really show the rest of the community that they are making sure this is the best way to go when it comes to transportation. If you know you can rely on Zipcar to get you where you are going and you can do it cheaper than other types of transportation, then more people will want to be apart of the Zipcar community or in other words, become a “Zipster”. The threats that come with all of this is that there could be a limit of how many available spaces there are in the city for Zipcar to purchase for their Emergency Zipcars. If Zipcar cannot purchase enough parking spaces around the city to station these Emergency Zipcars, then this secondary option will be very limited for people to use. However, with the correct research and marketing team, this plan can really help promote Zipcar as a whole company and make more people want to become members of Zipcar. The more people that join as members, the more it will show that Zipcar is the new way to go for the urban lifestyle.

Background/History

Zipcar was founded in January 2000 in Cambridge, Massachusetts by Antje Danielson and Robin Chase. The purpose of Zipcar is to provide an automobile service to its members by having a car available at their request. The CEO of the company, Scott Griffith, has grown the company to reach across the world. Zipcar is now available for people to use in the very populated cities such as New York City, Atlanta, Boston, San Francisco, Washington D.C., and London. The idea behind it is to limit the amount of cars on the roads for people that live the urban life but also make it cheaper for people to travel so that they do not have to worry about the expenceses from owning a vehicle. Zipcar is not for everyone to use, just for the people that know they will need transportation and do not want to spend a lot of money for it.

Studies have shown that people that use Zipcar can eliminate 20 cars from being on the road and can cut carbon emissions by up to 50 percent (Armstrong, pg. 535). This shows that the company knows that they can help the environment as well as the people in the cities. Figure 1 (Maxfield 2011) shows how much it costs for people to own a car on an annual perspective. In order to become a Zipcar member, a $60 annual fee is required along with paying $7.50 an hour for when you want to use a Zipcar. The benefit for all of this is that insurance, gas, and milage is all included in those payments. Research shows that people that use Zipcar save approximately $600 a month (Armstrong, pg. 536). The way Zipcar works is that they provide a little remote to every member that they can scan over the windshield of the car to unlock their car. To reserve a car, you can either go online, call ahead, or even use the application on your phone to pick a car you want, when you want it, and where you would like it. Then, the meter will start running for the usage of the car and will stop when you return the car from where you picked it up. The idea behind this is that the company wants to make it as convenient as possible so that people do not have to walk that far to access their vehicle.

Some companies recommend using Zipcar in bigger cities which has helped Zipcar the past few years. As Zipcar continues to get bigger, the more locations they start to establish along with the amount of cars they have continues to grow. This has started to affect some of the other rental car companies such as Hertz, Enterprise, Thrifty, etc. Recently, Zipcar has become profitable as the past five years their revenues have reached $270 million (Armstrong, pg. 536). It’s safe to say that Zipcar has made a name of itself and plans on coming up with more ideas to help the people with the urban lifestyle.

Situation Analysis

As of right now, Zipcar has been trying to grow their company and make any improvements that they need to along the way. Zipcar has been trying to go from a Web-based company to a mobile concern since they are trying to focus on implementing device holders in the cars for smartphones that will help with navigation (Armstrong, pg. 536). This will also allow for members to play their music in each car or give quick feed-back on their vehicle and service so that Zipcar can make any improvements that they need to as soon as possible (Armstrong, pg. 536). As stated earlier, Zipcar has started to become profitable so their revenues are increasing, however Zipcar needs to make sure they are keeping their members happy with the product and services they are offering. It is important to make sure that the quality is still acceptable along with increasing the quantity of the units. If Zipcar has a lot of units available for people to use, it will not do them any good if people are not satisfied with how the cars are maintained. This issue can be common when a company starts to grow. If it goes over-looked, then the customers will lose interest and find another source of transportation.

Problem/Opportunity

Zipcar does a good job making it seem like their company has hit all the important areas when it comes to services and customer satisfaction. However, further research shows that Zipcar has many flaws just like every other company. At the end of the day, no matter how responsive the company can be, Zipcar still has rental cars. When people do not own a car, they do not care as much about the car so it is common to see damage done to these Zipcars along with trash, odor, and more important issues like turn signals not working, lack of windshield wiper fluid, and headlights out. These issues are becoming more annoying with people that like to use Zipcars for their daily activities. Along with people trying to perform their daily activities and functions, there have been issues with previous users not filling the gas tank up before they drop the car back off. It is part of Zipcar’s policy that they must fill the gas tank up if it gets to a quarter of a tank. However, some people choose not to fill it up so that makes it so the next user has to take the time to go fill up the tank. Along with filling the cars up with fuel, it has been reported many times that the gas cards that come with the membership have not worked at gas stations which meant that people have had to use their personal cards to pay for the fuel and then had Zipcar reimburse them for the cost. The other problem that goes along the company is that some previous users do not return the car exactly when it needs to be returned, therefore it can make the next user late for something. Not having the car available for members is a huge problem when they are depending on the company to have their car ready for them so that they can go on with their schedule for the day. The other problem that is starting to become noticed is that there is no communication between people who use the car after the previous member to let them know that the vehicle might need fuel. When members sign up for a time slot, they are not including the time it would take to fuel the car up before returning it. Therefore, some members might be charged with a fine for not returning the vehicle at the exact time they said they would.

Even though Zipcar can reimburse their members for another type of transportation, this means that the company has unnecessary expenses that they could have avoided. If you do get the car late and you go over the time you stated you would have the car back by, then a fine is applied to you when it wasn’t even your fault. It is always nice to give feedback to the company, but when these issues continue to happen and nothing is getting done to fix this, then people from Zipcar need to start thinking of solutions for these issues.

Alternative Solutions

The first alternative solution that can be considered to help make the company more successful and cut back on unnecessary expenses would be to provide a few Zipcars available to the members that do not have any issues with them at all and always have full gas tanks. This would be very helpful for when previous users are either late on returning the vehicle or if the gas tank is not up to standards. When this situation occurs, the member would need an Emergency Zipcar. This is what these few cars would be called, and they would be carefully placed based on where the general population of members live. This way these Zipcars would be farely close for anyone to use if they have to. The members that are waiting for their car to arrive or if no fuel is in the Zipcars, they could go to the application on their phone and hit the “Need Emergency Zipcar” button and report why they need to use one of these vehicles. This way, the members are not late on their schedule and the company does not have to pay the members to use a different type of transportation. Once the report is submitted, then employees can check to make sure that an Emergency Zipcar was actually needed for the member’s situation. If it wasn’t, then a fine and a possible temporary suspension of membership could be enforced. The negative side of this solution would be that Zipcar would have to make sure that these cars have absolutely no issues and gas tanks are completely full. This means labor hours might increase along with the other maintanence costs. However, these costs would not add up to how much Zipcar can save from having to pay for another type of transportation for it’s members. This could potentially attract new members that may have been nervous to join the Zipcar community knowing that there is a “Plan-B” of transportation just in case something goes wrong. These new members would mean more revenue for the company which would overcome these extra expenses.

The second alternative solution would be to suspend memberships indefinitely for the members who fail to deliver the vehicle back to it’s original spot on time or with a full gas tank, along with any other damages done to the car. By suspending memberships from people, this would mean they still have the membership, they just cannot use it for a certain amount of time. By doing this, hopefully this would teach them to respect the rules of Zipcar and these issues will not continue in the future. This would eliminate the costs of having to pay for another type of transportation for members and for the costs of repairs to these Zipcars. The downfall to this option is that some of the members could get frustrated and cancel their membership which results to less revenue for the company.

The third alternative solution would be to establish a large storage location near all the major cities that can hold a large number of newer cars and that has more workers to that maintanence can be performed for the older cars. By having this available, when reports come in from members that they had issues with one of the cars, employees can go out and switch these cars with one of the newer ones and take the other one back to fix all the issues with it. This would lead to having more members being happy with the Zipcars, which then these members could help promote more people to use Zipcar. The bad thing about this option is that this would cost a lot of money to open up a large shop and storage location with a large quantity of cars. Zipcar does want to expand the company, however this could be very costly at first and wouldn’t necessary pay itself off for a while.

The best alternative solution would have to be to invest in the use of the Emergency Zipcars so that people can still have another source of trasnportation that falls under Zipcar and not another company. The cost for these few Zipcars would not be as much as it would to purchase a large quantity of vehicles and a storage location. Plus, this option also makes the company more attractive to newer members compared to just suspending a membership for a period of time. By bringing in new members and more revenue, this can allow the company to make more updates and improvements to the cars so that they can install the in-car device holders for navigation and the playlists for the car’s audio system. Once all of this is advertised, then more and more people will want to be apart of this system of transportation.

Marketing Plan

Zipcar was founded back in 2000 and up till now, they have improved their revenues up to more than $270 million and have became profitable. They have a large number of customers and are within walking distance of 10 million people that could potentially use Zipcar. The company wants to continue to get bigger by adding more cars to it’s inventory and start to install in-car device holders for navigation and music playlists functions. However, there have been some reports or reviews from customers that weren’t the best. The downfall to Zipcar is that it is, in fact, a rental car and that is how people treat them. Lots of people depend on using Zipcar for their source of transportation but they will find another source if Zipcar is keeping up with it’s customer reviews and make the necessary changes it needs to.

The vehicles Zipcar provides are some of the nicer brands since they have been using Priuses, BMW, CRV’s and even Volvos. The concern is that these cars are being damaged by users and some of the functions of the car are not working like turn signals, headlights, etc. The other bigger problem is that the Zipcars are being returned without enough gas so that the next user has to take the time to fill up the car which could potentially make them late for an event. However, by using an alternative called Emergency Zipcars, this creates a secondary option for members to use in case they have this situation. Once a member realizes the car they requested is not where it is suppose to be or if it doesn’t have enough fuel, they can go to the application on their smartphone and hit the “Need Emergency Zipcar” button and one will already be stationed for them to use. The member can go on to use the Emergency Zipcar while an employee will check to make sure that an Emergency Zipcar was needed for that members situation. If it was, then the Zipcar will be taken to have whatever it needs done to it, but if an Emergency Zipcar was not needed, then the member will be charged a large fine for the company’s policy of member dishonesty. This alternative will make it so Zipcar does not have to pay the member to use another type of transportation since this can become fairly costly. By eliminating unnecessary costs will lead to more profit for the company to use for other improvements it would like to make.

The competition Zipcar goes up against consists of Hertz, Enterprise, and Thrifty and what makes Zipcar different is that they are promoting a type of urban lifestyle instead of a rental car service. They can be more convienent then their competition which is what people that live in bigger cities really want. Insurance is included in every membership along with the milage. Plus, when people realize how much money they can save by using Zipcar instead of some other company or even compared to owning a car, they’ll even promote Zipcar to other people and even have companies recommend using Zipcar as the prefered type of transportation.

Specific objectives and issues must be considered for this implementation of the Emergency Zipcar. Within the first year, Zipcar would like to attract at least 5% more customers by adding on this secondary option of transportation. People will see that a second option will be more satisfying then just depending on only one car as their transportation and more people in the cities will want to join. Zipcar will also want to see reviews become more positive from it’s members and a reduction on costs for paying it’s members to use another type of transportation. In the second year, Zipcar would like to see revenues go up at least 10% from the previous year since the company would become more experienced with the Emergency Zipcar and since more members would have joined and loved their experiences with Zipcar in general. Figure 2 (Jayson 2012) down below shows the general trend of revenues for Zipcar over the past few years and Zipcar would be expected to have revenues well over $300 million. The issues that can come from this proposal is by making people aware that this Emergency Zipcar is a new option that they can use if something were to happen to their first Zipcar. Emails and other notificiations could be sent out so that the members know but as for the non-members, advertisements on television or in the newspaper could help promote this new feature so that more people can see Zipcar is becoming more reliable to use on a daily basis. Also figuring out where to position these Emergency Zipcars could be an issue at first, however, in-depth research would have to be performed to figure out where the best places these cars could be positioned would be and then figure out how t

Figure 2

As it was stated earlier, the first step in the marketing strategy would be to research the best placement for these Emergency Zipcars so that most of the members in the cities can quickly get to them. If the current research team needs more people, then human resources would have to hire more people with the research background so that they can go out and plot where their members generally start from. Then, based off of this information, Zipcar can plot a few general locations on a map and determine how far a general walk would be for most of the members to make sure it is fairly close. The number of parking spaces Zipcar would reserve would depend upon how many each city could afford to give up so that it is not an inconvience for other types of transportation.

At this point, once the company knows how many extra parking spaces are available to use, Zipcar can purchase more vehicles to use. In order to cut back on costs, used cars would be preferred since new cars drop in value anywhere from $7,000 to $11,000 as soon as they are taken off the lot. These cars would be the top priority for Zipcar and they must be watched carefully and taken care of on a daily basis. The maintenance crew would have to make sure they check these cars at the end of the day to make sure they have a full gas tank, plenty of oil, no damage done to them, have no trash inside of them, and that they are returned to the proper parking spots. The operating prices for these Emergency Zipcars would be the same as the normal Zipcars to make sure that the workers and the cars themselves are getting paid off.

Once all the research is completed, the budget would have to be comprised for these added on Zipcars and everything else that needs to make sure these cars have everything they need to be the best secondary option for people. This budget would be put together by researching how much the typical cars are that Zipcar purchases and multiply that number by the number of cars they would be wanting to purchase. Then, the other added in costs would consist of labor for maintanence of the Emergency Zipcars, additional parts, reserved parking costs, and fuel/oil. Once all of this is added in, the total cost would have to be looked at and compared to any reserves that the company has on hand. Zipcar would have to take into consideration the increase of revenue from new members and any fines that would be applied to other users since each time someone has to use an Emergency Zipcar, that means the original Zipcar had some sort of issue with it and the previous user would be fined. After all of this is taken into consideration, Zipcar can make the decision whether or not they can go through with this plan. If everything goes through the executives, then the plan will be put into action. After one and two years, reviews will be conducted to make sure that the company is on track to make enough revenue that they estimated they would.

Controls

Zipcar will have to closely monitor how much more money they are using for labor of the maintanence crew and to make sure they are only buying the necessary parts for these Emergency Zipcars. The company will not want to spend unnecessary money when they are on a tight budget. If they can limit the amount of time the maintanence crew is allowed to work on these cars and only buy the necessary parts, then Zipcar can make sure they will stay within their budget each year. They will also want to monitor the number of added members to make sure that people are taking interest into Zipcar more since they have added this new feature to the company. This will mean the revenue will continue to increase and that the predicted behavior of the general population is doing what they expected. As the new Emergency Zipcars go as planned, the company will want to do follow ups with its members to make sure that they are happy with the new feature of Zipcar. If they are not, then another plan of action will have to be considered.

Conclusion

In conclusion, Zipcar is a great company and has a lot of potential to improve in the near future. As long as Zipcar continues to grow as a company and make the necessary changes along the way, then it should be around for a while. The company has to make sure though that it does not forget about its customers and make sure they are giving them what they want by listening to what they think about their performance. Some companies that get too large tend to forget about their customers and what they think should be done with the company. If Zipcar keeps giving their members what they want and keep up with technology, Zipcar’s profits should continue to increase which means they will be able to do even more than they ever thought of.

Sources

Armstrong, G., Kotler, P. (2015). Marketing, An Introduction-Twelfth Edition. (pgs. 535-537)

Danzig, S. (2014, June 12). The Problems with Zipcar. Retrieved from

Sdanzig.quora.com/The-problems-with-Zipcar

Jayson, S. (2012, February 27). Does Zipcar Measure Up? Retrieved from

http://www.dailyfinance.com/2012/02/27/does-zipcar-measure-up/

Lving in Washington DC. (2015). Zipcar. Retrieved from

living-in-washingtondc.com/zipcar.php

Maxfield, J. (2011, October 7). An Up-and-Coming Company Poised for Dramatic Growth.

Retrieved from http://www.fool.com/investing/general/2011/10/07/an-up-and-coming-company-poised-for-dramatic-growt.aspx