Consumer Value Management - Olympic Rent-A-Car Case Study

Msc Marketing,

Priyanka Kamble,

17321418,

Consumer Value Management,

BU7212,

Individual Assignment- I,

Date: 23rd January 2019.

Olympic Rent-A-Car Case Study

1.What are the strengths and weaknesses of the current Medalist program for Olympic and its customers?

Olympic

(a) Strengths

1.) Members from the Medalist program only account to 8% rentals but contribute of the 21% to the total revenue generated.

2.) The loyalty program can help Olympic gain customer insights, which can help them with future marketing and managerial decisions.

(b) Weakness

1.) Even though their loyalty program is a success depending on the total revenue it generates, but it is still not that popular even among the Olympic customer base (not a part of the Medalist Program.

2.) Customers who are a part of Olympic’s Medalist program are also a part of other company’s’ loyalty programs.

Customer 

(a) Strength

1.) There is no joining fee to be a member of the loyalty program.

2.) Since Olympic is the most valuable and economical car rental, they can achieve their rewards at a much lower cost in comparison to other brands.

3.) Customers can also trade these points with airlines for frequent flyer programs and other rewards such as car upgrades.

4.) The increase in reward points and perks was directly proportional to the amount the customer spent.

(b)Weakness

1.) There is no customization of the loyalty program.

2.) Medalist loyalty program does not offer ‘no blackouts’ as free rental days.

2.What are the current (2012) cost of the Medalist program, absolute and in % of 2012 revenue?

According to the financial analyst Seth Bergman the medalist program in 2012 had 1.45% of total rental days as free rental days. Following is the calculation:

[pic 1]

The total cost incurred by Olympic on providing free rental days is $35,629,552 in absolute which constitutes to 2.31% of the total revenue generated ($1,540,000,000) in 2012 and 11.01% of the total revenue generated by the Medalist loyalty program ($323,400,000) in 2012.

3. What would be the cost of matching Enterprise and moving towards a dollars-based reward program?

If Olympic changes it’s loyalty program according to Enterprise (switching to dollars equivalent to points) they will incur the following cost

According to Seth Bergman’s forecast, this change will increase the percentage of free rental day’s redemptions, as more of the customers will earn rewards faster. He estimated the growth to be between 1.65% to 1.95% of total rental days.  I have considered a mean of the two values i.e., 1,80% for the calculations.

                     [pic 2]

The total cost incurred by Olympic if they adopt the Enterprise Loyalty program strategy is $37,471,168 in absolute which constitutes to 2.43% of the total revenue generated ($1,540,000,000) in 2012 and 11.58% of the total revenue generated by the Medalist loyalty program ($323,400,000) in 2012.

Seth also points out that for Olympic will have to offset this increase in free rental days by increase in revenue in order for Medalist program to continue generating the same percent revenue and avoid losses. Olympic will have to aim to increase their revenue by 5.1 percent in the next year i.e., $1,618,540,000 in order to continue the same growth rate.

4. What would be the consequences of removing blackout dates?

Based on the information and background provided, Olympic will face negative consequences of removing blackouts.

Blackouts are generally public holidays, through this we can assume that business travelers will not be utilizing the car rental services for corporate purposes but will be utilized by people traveling for leisure.

Most of their leisure members from the loyalty program generate a higher profit margin. Blackouts beings holidays and also with the concept of long weekends being very popular in USA, more number of people would want to travel for leisure. If during this period, Olympic fails to provide this profit generating customer base with the service, they could leave their customers disappointed.

Also, Olympic’s fleet size is merely 108,000 units and their operating profits are not very desirable. With these two variables having a nominal value, it will be difficult for Olympic to pull off such a demand during blackouts leading to disappointed customers.

All these factors indicate that, if Olympic does observe a no blackout scheme then there are higher chances of disappointing their loyal customers hence leading to losses.

5. What should Olympic do? Stop the program? Continue as is? Or match the new Enterprise rules?