Introduction
The marketing news story is all about the use of car-sharing, a revolutionary marketing idea undertaken by Zipcar to market its car rental business. The story gives a vivid account of Zipcar’s business strategy in the car hire business especially with the tapping of mobile professionals to share in his idea. Car sharing is a method of hiring cars where one rents a car for short durations mainly on hourly basis. This is mainly popular with people who seek to use cars occasionally and those who like using different cars other than theirs. Usually, one pays a fee that allows him access to a car which is mainly located in strategically accessible areas (Green Living Glossary, 2009, Para. 7). Car sharing integrates technology with cost-effectiveness to produce a unique service that promises to transform the car rental industry and social lifestyles.
Major success of the car-sharing strategy of marketing
Zipcar’s success in car sharing is evident from its robust financial performance having attained annual revenue of $130 million and a record growth of 30% annually. In addition, about 8,500 companies are reported to have registered for the service along with 120 colleges and universities which demonstrates the huge success with which the strategy has worked for Zipcar. Besides the car rentals, the company has diversified its product proposition to include marketing of hardware and software for tracking cars.
Benefits of car sharing
According to Keegan (2009, Para. 8), those who have abandoned their cars for Zipcar have been experiencing an average of $600 monthly savings. This is mainly due to the fuel efficiency of the cars which have very economical consumption rates. This has provided a suitable alternative especially during these periods when the world is experiencing sharp rises in oil prices. In addition, car sharers can reduce their vehicle traveling mileage by 44% which amounts to large savings.
Another benefit emanates from the fact that the vehicles are environmentally friendly. Studies carried out in Europe indicate that the use of car-sharing leads to a reduction of carbon dioxide emissions by 50% per user. This method of marketing resonates very well with customers amidst growing concerns over the environment. This is then likely to spur growth in demand for Zipcar upwards. The greening revolution will continue ensuring demand stays upward trend. The car tracking devices mounted on the vehicles also ensure a higher level of convenience to users in that it will be easy to trace vehicles to the specific positions. This method of promotion raises the level of confidence with the users who feel much safer when using the cars. This further helps to increase their demand in the market relative to other vehicles.
Car sharing has been known to cause a reduction in the number of vehicles on the road as people increasingly dispose of their vehicles or decide not to purchase new ones in favor of car sharing. According to the article, each shared vehicle drives 20 cars out of the road. Private ownership of cars exerts a cost on the environment. AAA estimates the cost on the environment to be at $8000 per user annually. This has a positive effect of easing the volume of traffic on the roads besides reducing the carbon emissions into the air which has a positive impact on the environment. For example, a car-sharing firm in Canada estimates its members could result in up to $13,000 tons cuts in carbon dioxide emissions by its 11,000 in Quebec. Environmental-conscious road users will thus prefer car-sharing to use their vehicles. Zipcar’s expansion plan managed to ride heavily on the environmental awareness campaign that was sweeping across the United States leading to a surge in membership to 120,000.
As a result of the marked success of the strategy, the vehicle manufacturers including Toyota and Ford are already looking into ways of working with Zipcar to test their vehicles which are specifically produced for the sharing market. This growing interest from such companies shows the kind of success the promotion has managed to inspire.
Differences between car sharing and traditional car rental
The main dividing line lies in the sense that the traditional rental agencies employ manual processes often involving a lot of bureaucracy in lending out their vehicles as opposed to car-sharing whose processes are automated. In the former, the processes are also centralized and require heavier paperwork with limited choice of work as opposed to car-sharing services which mainly rely on technology to run their services. On the other hand, Zipcar charges a basic annual membership fee of $50 while reservations are made online for available vehicles that are usually parked next door. Usage payments are usually done on daily or hourly basis and vary depending on the time of the day, the day, the city, and the make of the car.
Griffith the CEO has also used a variety of other strategies to boost the Zipcar business. These include among others the use of a mini cooper with frozen meatballs where people were to be made to guess the amount that was inside the vehicle. Another strategy was the use of a sledgehammer on an old SUV to denote the wastefulness of car ownership. The company entered into a joint program with local retailers to direct its marketing to adopt the local character of each particular neighborhood. He also stocked the company with a fleet of BMWs to enhance the product coverage to suit various needs of the market.
Challenges of the Zipcar business
The purchase and incorporation of BMWs in the line of business seemed to alienate some staff members and company members who are the major stakeholders of the company. This could have adverse effects on the business performance. Furthermore, the use of the beemers was seen to deliver mixed signals according to one of the members of the center for neighborhood technology. This looked like a departure from the company’s emphasis on the use of low fuel consumption and environmentally friendly cars.
Zipcar faces competition from nonprofit making car-sharing organizations that are funded by the taxpayers that have been expanding dramatically since the late 1990s. These purport to serve the public interest better by reducing traffic jams, cutting exhaust gas emissions, and serving the poorer population better. This poses a threat in reducing the competitiveness of Zipcar in the market which might impair its performance by reducing its market share.
Conclusion
The article analyzes the strides taken by the Zipcar Company to promote its business through the car-sharing strategy. Zipcar’s strategies have worked to its advantage as evidenced by the strong financial performance it has continued to post over time. By employing technology alongside embracing the environmentally friendly theme in its business the company seems to have struck the right chord with the market. These innovative strategies have given it higher leverage and a competitive advantage over its competitors.
Reference list
Green Living Glossary. 2009. Car-sharing, Inside Dummies.com. Web.
Keegan, Paul. 2009. Zipcar – The best new idea in business, Cable News Network. Web.