Zip Car

Executive summary

Zipcar provides a car-sharing service that members pay annual fees and usage fees and they use Zipcar service independently. Recently, late returning of cars has been a major problem of Zipcar operation. Through situational analysis, it was identified that Zipcar must find a way in its operation to influence customer behaviour and the company should develop strategies which can encourage its customer’s on-time return behaviour.

Three major factors of the car-sharing service industry; customer convenience, vehicle availability, managing operation process were used as criteria to evaluate alternatives along with cost effectiveness and company’s long term sustainability. Although Zipcar has already adopted few implantations such as late return penalty and repeatedly asking customers to return car on time through their website, it seems not easy to motivate people to give efforts to participate.

After generating few alternatives, those alternatives were evaluated according to the criteria. Alternative 3, Gold card membership plan was chosen to be the best option as a recommendation. This option gives incentives as well as recognition to customers who have been participating in on-time return practice. The recommendation will be more effective than the program Zipcar currently employing since Zipcar’s current program relies on an instrumental means , on the other hand, the recommendation implies normative means which will encourage customers to make their effort to return vehicles on time.

The recommendation does not imply high financial risk as it needs minor expenditure for producing gold-colored cards. However, Zipcar will have to review its fleet availability for a back-up plan in case of late return. In the long run, the company can expect long term financial commitment through loyal customer relationship.

I. Problem/Issue Statement

Zipcar provides a car-sharing service that members pay annual fees and usage fees and they use Zipcar service independently. Zipcar business has been growing continuously; Zipcar recently merged with Flexcar and becomes a leading car-sharing provider while enhancing its experience in the market and providing more convenient access to customers.

However, late return of cars has been a major problem for Zipcar as it not only gives operational difficulties to the company but also suffering other customers. Although Zipcar has charged penalties if a customer return his/her car late without approved extension, customer behaviour has not been changed much. Instead, the penalty program increased customers’ complaint against those extra charges.

This problematic situation happens because Zipcar cannot effectively manage its customers’ unexpected late return. Customers need to understand why returning their cars on schedule are important and they must consider how their late returning could obscure other customer’s schedule. Therefore, Zipcar must find a way from its operation to influence customers’ behaviour by helping them understand customers’ responsibilities, and the company should develop strategies which can encourage its customers’ on-time behaviour.

II. Situational analysis

In the car-sharing service industry, there are three major factors companies must consider in order to sustain their business. First of all, customer convenience is important, that is, the company should provide services that satisfy customers’ expectation. Second of all, vehicle availability must be ensured when a customer make a reservation and comes to pick up a car. When a service does not guarantee vehicle availability, customers become suspicious on reliability of the company; this could seriously harm the entire business. Lastly, managing operation process is crucial. However, in car-sharing services, customers are involved significantly in the whole operation system because they find the car and return the car by themselves. Therefore, it is essential for the car-sharing service provider to manage customer behavior. (Appendix 1)

Car-sharing services market has grown exponentially, and during this period, Zipcar began its national plan which introduces the service to a host of new cities. (Appendix 2) According to the research, typical characteristics of the users for the service are middle-income range and between the ages of 21-55 while majority of users are in the 21-39 range. They live in households with no more than one car and exercise more than the general population; they walk, bike, or use transit system when they commute to work. Also, those users have relatively high level of education. (Appendix 3)

Zipcar has been also targeting young generation through partnership with universities. This partnership allows students to get cars at their convenience after school. Moreover, students can get favorable price from Zipcar as universities support Zipcar business for trade-off. Therefore, the partnership has encouraged younger people to use Zipcar services. Furthermore, Zipcar does not charge higher fees to members younger than 25, unlike other car rental companies. As Zipcar charges the same low rate to everyone, it attracts younger people as opposed to the rental companies that charges extra dollars to those between 21 and 25. Moreover, car-sharing network advocates sharing a car in cities. They often use quotes from William Clay Ford Jr. (CEO, Ford Motor Company Ltd.) “If you live in a city, you don't need to own a car.” The phrase helps Zipcar business as the company also targets people who live in major cities. Zipcar has allocated more vehicles in the area with larger population.

Zipcar becomes a market leader in the car-sharing market with many strength points as it offers competitive price compared to rental services. Its on-line reservation provides convenience to customers and the company has its own parking spot so customers rarely get confused with finding a car. Moreover, Zipcar applies high technology to their services such as GPS and AT&T wireless network. Zipcar uses GPS-based mobile that allows members to view and reserve Zipcar’s worldwide fleet of vehicles based on their current location. The system was developed in partnership with uLocate. Furthermore, Zipcar uses AT&T’s wireless data network to serve customers timely and cost effectively. (Appendix 4)

However, Zipcar is still facing challenges that the company cannot improve late returning behaviour. Nevertheless, it is obvious that the market is growing with 1,500 new customers on average per month,