Zipcar Market Strategy Analysis

Introduction

Zipcar is one of the companies in the transportation industry. It is providing two types of products car sharing and fleet management software . The car-sharing product is serving many of its customers in the colleges or universities, who are students, staff, and faculty. It is the niche of the market segment into which company is focusing on providing convenient, cost-effective, and user-friendly technology in the services (Zipcar., n.d.). The customers can easily access the services by filling the application, then paying the small amount of annual fee of membership. After the application approval, the customer will have the zip card through which they can lock or unlock the car, and can enjoy the ride. Zipcar successfully owns the substantial market share in their target market that is more than 80% in North America market (King, 2013). The second product is FastFleet, which is software efficient in managing the operations of vehicle feet in scheduling the services appropriately. Many of the public and private organizations are using this product by paying the license fee to the Zipcar on a monthly basis (Hitt et al., 2013, p.437-448). This paper analyzes Zipcar’s marketing strategy, critical success factors the initial challenges faced while entering the industry, essential stakeholders, five forces impacting the above-average returns, and recommendations. The purpose of this discussion is doing case analysis in depth with the help of SWOT diagnosis and coming with an actual picture of describing various factors that are crucial for success of Zipcar’s marketing strategy as well as obstacles to overcome.

Marketing Strategy

With regards to benefit oriented positioning, this company has performed well in this sector. In their positioning strategy the most unique aspect is that the firm has been consistently undertaking evaluation as well as making changes to the parameters or advantage attributed to their positioning strategy (Osterwalder & Pigneur, 2010). Actually, a strategy has to be capable of presenting solely the benefit that is resourceful to the firm obtained from the potential buyer. According to Zipcar, their environmental friendly cars assisted them in improving and earn more points and attracted more customers. As the positioning strategy emphasizes on evaluating and changing the strategy regularly, based on the necessities of the niche which the firm is striving to get (Slywotzky & Weber, 2012). However, Zipcar shifted on focusing on the expansion of its perception of the likely gains that people may acquire through renting their cars. Nonetheless, the firm proceeded to vividly express the concept of typical car sharing person. As they did this, they identified that there were some reasons why someone would consider sharing a car or rather rent a car from Zipcar. Therefore, strategies that laid their emphasis on such pointers ended up to achieving some objectives such as the reduction of the hassles of having to own a car, reduced the hassles of seeking for the need resources to own a car, elimination of the responsibilities of sustaining a care as well as ensuring that having or using a car to be easy and affordable.

To attain this, the firm incorporated a swerve of proficient cervices. The firm allows people to be part of Zipcar rental network whereby they have to pay a $60 membership fee annually (“Zipcar,” n.d.). Additionally, car reservation is fast since people are capable of reserving a car within minutes or even reserve a car in advance. These has created convenience to the clients which has attracted more clients. In terms of cost, it is quite difficult for one to drive a car of choice for a cost of $7, mostly when it entails gas expenses, insurance as well as additional bonus in terms of free additional miles (“Zipcar,” n.d.). At the moment when the people are done, they may take the car back to Zipcar for cleaning and maintenance to be done. Such services as well as freebees have significantly minimized the hassles that an individual goes through to own a car. But with Zipcar intervening services a lot of people need no more to own a second or ever a third car.

Challenges in Undefined Market

            There were various issues that Zipcar was facing while entering into the transportation industry, which is explaining as follows (Hitt et al., 2013, p. 437-448). First, the most critical issue was to define the target customer and the market because public transport is already an alternative as one of the most prominent means of transportation. It was hard to identify whether a new product of start-up required in the market or not. Second, public transport was the need of the same demographics that Zipcar was following by cost-effective, and green thinking (“Zipcar,” n.d.). Third, Cities were highly promoting the public transportation and taking initiatives by providing bike racks on the buses to solve the problem of riders who live at the far distance from the bus stops (Warrillow, 2015) Fourth, taxis were another solution in the metropolitan cities for people who do not own cars, do grocery shopping, and live at a far distance from the bus stops. The starting taxi rates were ranging between $2.25-$3.10, then depending upon the traveling length, which is famous for short distances (“Zipcar,” n.d.). Taxis are not using the less cost-effective model as customers are getting charged the moment they enter the taxi and travel. The urban people are known as ‘Manhattan’ can be one of the target market based on the demographics, but again the challenge was their need for a personal vehicle was very limited that was once or twice a month.

Overcoming the Challenges of the new Business Model

            Zipcar managed to defeat the risks and certainties with the help of the trust of investors that was funding the company, business level strategy such as differentiation, and core competencies. It decided the target market in the metropolitan cities that is college students, staff, faculty in the selected colleges and universities who were environmentally conscious, which is the different category (Zipcar., n.d.). It decided the market segment by demographic and geographic segmentation. After choosing the target market, it was focusing on satisfying the specific needs of the customers such as cost-effective, saving parking and owing cost, secure, convenient, easy to use. Next, it was continuously focusing on the customer preferences and choices by building their customer relationship and encouraging communication via twitter, facebook (“Zipcar eyes European,” 2010). It is achieving this with the help of reach as one of the primary sources of the customer relationship. It was crucial as well because the core of the success of the business model is technology that was providing immediate assess to the customers. The company was actively taking the responsibility of delivering the user-friendly services, innovative solutions to the concerns of customers, which shows it is flexible in adopting changes rapidly. All of these factors helped the Zipcar to overcome the uncertainties of the new business model (Hitt et al., 2013, p.437-448).

Primary Stakeholders and Decision-Making

There is three level of stakeholders group, and every group plays a significant role in shaping the business strategy. It is so because the company cannot ignore the interests of any of the primary stakeholders, which are highly contributing to the firm growth in achieving above-average returns. They are the primary source for providing the resources and developing capabilities to meet core competencies (Hitt et al., 2013, p. 22) All the interests of shareholders had contributed a lot in making decisions and taking actions in many ways at Zipcar. First, the Zipcar decided to give priority to their customer by providing the convenient, and cost-effective product (King, 2013). Second, it decided to involve in active customer relationships to understand their concerns and add the amenities. Third, it chose to continuously focus on business expansion, customer satisfaction, and marketing to achieve above-average returns. Fourth, Zipcar is giving their employees vital importance by considering their valuable suggestions (King, 2013). Fifth, Zipcar decided to make their operations flexible to actively responding to the internal and external environment. In this way, it is covering the specific interests of its stakeholders in the decision-making.

Impact of Competitive Forces in Profits

 The implication of five forces is practical as the bargaining power of buyers is high; the threat of existing competition is medium, and substitutes are high. All these competitive forces are directly impacting the profitability of Zipcar due to some reasons. First, the customers are already having other alternatives of transportation such as public transport (Hitt et al., 2013, p. 437-448). Second, the existing traditional competitors with the concept of rental cars also want to tap the car-sharing market. Third, the customers have the buying power that means they want to take the cost-effective services (Osterwalder & Pigneur, 2010). It signifies although the company has reliable customer database they can switch to the competitors at any time if they are getting much lower prices. In this way, the close competitors and substitutes are affecting the profitability of the company.

Competitor Threats

Zipcar is facing the biggest competitor threats from the Enterprise Rent-A-Car Company and Hertz Global Holdings, Inc. Both the companies are entering the market segment of Zipcar with their numerous advantages. These companies have the benefit of long history, strong brand image, their capabilities to provide cost-effective services, hybrid vehicles, adding more gains in the product such as free membership fee, GPS, low hourly rates, and many more (Hitt et al., 2013, p.437-448).

Key Success Factors

The critical success factors of Zipcar are identifying by comparing the several components with its competitors, which are essential to understanding for the sustainable growth are shown as follows (Hitt et al., 2013, p.437-448). Zipcar should maintain its differentiation in providing services to the target audience by cost-effective prices, convenience, user-friendly technology ability to track and provide security services. The maintaining customer relationships will give an edge over the competition by understanding their specific needs and preferences (Osterwalder & Pigneur, 2010). Then, it should actively participate in delivering the innovative ways for efficient services. The continuous marketing efforts will help to build the brand image such as advertisements on bus stops, subway and will bring more members.

S.W.O.T Analysis

Strength

  • Customer satisfaction
  • Zipcar has captured the 80% of the US car sharing market
  • Charging affordable price to the customer, which includes gas and insurance
  • Low marketing cost through word of mouth, which is helpful in bringing the new customer
  • Establishing the brand image nationally through continuous marketing efforts that include advertisements on buses, bus stops, subway, sending teams for door-to-door marketing.
  • FastFleet is a reliable product as many of the government organizations are using by paying the monthly license fee
  • Intense development of network with several colleges and universities
  • It operates in 14 metropolitan areas, 230 colleges or universities in the US, Canada, and the UK
  • Efficient organization structure that allows effective communication of employees, customer ideas, and concerns at the different level of organization
  • Excellent customer service by training the employees to respond quickly to customer issues and provides innovative solutions. It increases reputation and reliability among the members
  • Highly educated and experienced management in leadership style, entrepreneurial skill, finance knowledge, and information technology that make the in-house technology possible
  • Employees and consumers suggestions are taken into consideration
  • High revenue growth from the well-established markets of Boston, NYC, Washington DC, and San Francisco and profit of $4.6 billion, which contributes to more than half revenues
  • The capital of $1.3 million raised from the 14 investors
  • Securing future memberships through partnerships with universities
  • College students, faculty, and staff as a target market in metropolitan cities
  • Global expansion through mergers and acquisitions of its competitors such as ‘Flexcar’ and ‘Streetcar’
  • Zipcar is using reach approach to build customer relationships via Facebook, Twitter as a marketing strategy to share promotion and increase the two-way communication between the customers and company.

Weakness

  • To make the active brand image as compared to the competitors known as Enterprise Rent A Car and Hertz Global Holdings
  • The continuous efforts are required to keep the price low to survive in the transportation industry
  • The difficulty of finding the affordable and convenient parking for its vehicle in public and private lots is an upcoming challenge
  • Lack of infrastructure for continuously maintaining the cost-effective business model as compared to its competitors
  • Lack of hybrid vehicles
  • The high cost of repairs, lease, parking, fuel, insurance, which lead to the 72% of consumption of revenues in 2011, and the cost per vehicle is $15,500
  • The financial loss of $65 million and no cash available to pay the debt
  • Heavily rely on discounts from the manufacturers or suppliers
  • Fail to achieve economies of scale
  • The car-sharing product is going to enter the maturity stage of product life cycle in the North America and Europe market.

Opportunity

  • Government encouragement for public transportation
  • Increase in consumer demand as an average cost of owning a vehicle continues to increase
  • Asia and Australia market has the potential market
  • Environmental benefits such as going green by reducing CO2 gas emissions
  • Student commitment towards environment
  • Innovation in the products and distributing channels

Threats

  • Continuous increase in gasoline price due to political dependence on foreign oil, and natural resource
  • Direct competitors
  • Shortages in supply because of downfall in the economy due to natural disaster
  • Increase in oil prices, parking prices due to scarcity
  • High uncertainty in customer preferences or choices because of various alternatives
  • A high crash rate of teenagers
  • The latest technology that makes the previous technology obsolete at a faster rate.

Recommendation

There are few recommendations that the firm should consider in order to improve its marketing strategy as well as attain its objectives. Zipcar should maintain its differentiation strategy in providing services to the target audience by cost-effective prices, convenience, user-friendly technology ability to track and provide security services. To further its success, it should continue with following the expansion at the national or global level, as there are other potential markets such as Asia, Australia. Second, it should try to come up with the hybrid vehicles to match the continuous need of low price by saving on gas expenses and encourage green environment. It should also utilize its customer feedback or database to find the innovative ways in the functions of its value chain for providing efficient services. It should take the full advantage of the fleet management to provide the maximum availability of its services to the customers. These all are the already existing resources in the Zipcar that can be utilized at the maximum level to distinguish it from the competitors and can help in achieving the above average-returns even in the fierce competition because of its competitive advantage.