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Copy of ZIPCAR Case Study


Nay Tun Thein

on 2 May 2013

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Transcript of Copy of ZIPCAR Case Study

STRENGTHS Patented Technology
Low Cost Marketing Tactics
Well educated founders
Relationship with Ford
Environmentally Conscious
Pioneer Advantage
Established network WEAKNESSES OPPORTUNITIES THREATS New market for a convenient alternative to owning a vehicle
Untapped market in U.S.
Capacity to gain a notable market share
Fast growing market
Advertisement potential
Low cost, low commitment decision for consumers
Market penetration of similar businesses quickly growing in Europe Rising fuel costs
Parking costs higher than anticipated
Car manufacturers may potentially tap into our market
Parking spaces may be difficult to locate
Potential competition of other car-sharing businesses
Value in Use unknown
Danielson leaving the partnership completely CENTRAL ISSUE: How can ZipCar restructure its Economic Model in order to be more profitable? Market Segmentation Group Segment 4 Segment 3 Segment 2 Segment 1 Member Member Member (cc) photo by theaucitron on Flickr Segment 5 Poor Economic Model
Financial Instability
Start-up Costs immense
Hiring a big-company guy for a start-up
Premature Launch
Inability to leverage current resources
High Attrition Rate Strategic Alternative 4: Strategic Alternative 2: Strategic Alternative 3: Strategic Alternative 1:
High Volume/Medium Margin/High Revenue Drivers

Purchase 25 additional vehicles to increase usage [$110,000]
Target multiple segments using five different criteria
Purchase the additional parking spaces required
Offer vehicle add-ons [i.e. GPS] to stimulate revenue
Restructure pricing to reflect added volume Volumes: Operating Leverage: Margins: Revenue Drivers: Recommended Strategy: Strategy #4 Action Plan:
Increase Volume
Increase Margins
Multiple Revenue Drivers Create additional revenue drivers
Expand current revenue drivers
Customize pricing scheme
Operations Model
Budget and Timetable for Implementation
Tracking and Control Revenue Drivers Sell Parking spaces for advertising [$105.00/parking space]
Optional Garmin Nuvi GPS [$107.00/unit] in designated cars
Optional Britax car seats [$149.95/unit] in designated cars
XM Satellite Radio co-op [cross-promotion]
Collaboration with local hotels [leverage parking costs]
Bike racks on cars [$125.00/car] Pricing Tactics: Application fee is increased slightly ($5.00).
Attracts more users by dramatically lowering annual costs
Instead, the revenue is collected predominantly through increased usage rates
This creates an influx of constant cash flow Based on a 4-tier reward system ZipGOLD [Reached 1000 Miles]

Discount usage rate of $0.10/mile [$1.00 to $0.90]
Annual fee lowered to $25.00
Hourly Rate: $7.00
ZipBLACK [Reached 2,500 miles]

Discounted usage rate of $0.12/mile [$0.90 to $0.78]
Annual fee lowered to $22.00
Hourly Rate: $6.50 ZipPLATINUM [5,000 miles]

Discounted usage rate of $0.18/mile [$0.78 to $0.60]
Annual fee lowered to $20.00
Hourly Rate: $5.75 Fast online/telephone reservations
Convenient locations
Interested investors Neither have owned a company before
Danielson - full time? Urban locations allow large concentrations of potential customers
Urban areas more receptive
Potential merger with car manufacturers, i.e. Ford Competitors with an already established customer-base
Securing vehicle safety
High insurance costs Revenue Drivers: Low Operating Leverage: High Volumes: Low Margins: Low ZipCar Current Economic Model High Medium High High Doyle Norris
Justin Walmer
Cory Brewer
Alex Campbell Further Develop Black Box Technology which allows us to track member usage and bill accordingly
Research and develop theft control for our amenities using the proximity reader technology
Acquire J.B. Straubel (CTO of Tesla Motors)
Utilize J.B. to further engineer "green" transportation initiatives and additional software systems The ZipCard proximity reader allows ultimate ease and accessability for the customer Market Segmentation ZipBikes (High Volume/Low Operating Leverage) Extending ZipCars original idea, including booking online and a ZipBike card
Racks instead of parking spots
Target College Students
Build the racks close to campus, dorms and parks
Build 20 bike racks [each rack can hold 10 bikes = 200 possible holding spots]
Rental for one day $1.50
Rental for one week $7.50
Purchase 100 bikes at a one time payment of $5500.00 High Volumes [increase capacity] Purchase an additional 65 cars [$216,666.67/year for 3 years]
Purchase an additional 250 parking spaces [$150,000.00/year]
Place the parking spots at convenient locations [malls, grocery stores etc]
Shotgun approach High Revenue Drivers Include GPS units in 75% of cars
Include Baby Car Seats in 50%
XM Radios in 100% of cars
Sell parking spaces for advertising
Wrap poles in advertisments
Bumper Stickers "my other car is a ZipCar"
Hotel partnerships Strategic Alternative #1 [Status Quo]

Appeals to daily renters
Stays under price umbrella established by traditional renting companies
Lower membership fee
Marketing expenses staying close to budget

Using several more cars than needed for existing members
Success in Europe does not equal success in America Strategic Alternative #3 [Semi-Aggressive]

Large amounts of usage rates
Increased brand awareness
Potential for a larger market share [other cities]
High up front cost [operating leverage]
Parking locations not guaranteed
High risk PROS AND CONS Strategic Alternative #4 [Aggressive]

Balanced Approach
Growing at a Manageable Rate
Customer Retention Properties
Increased Fixed Costs
Risky to Add Revenue Drivers
Unproven Boston Market
Implementation of New Operations Uncertain Strategic Alternative # 2 [Penetration]

Increased Usage Rates
Potential for Higher Margins
Buy in Bulk at Discounted Rates

Low Margins of Profit
High Start-up Cost
Higher Risk of Unmanageable Growth
Market Response Unclear I. Status Quo
Maintain Current Economic Model Keep Capacity
Operate at Low Margins
No Additional Revenue Drivers II. Penetration
Increase Volume Grow Capacity
Market Multiple Segments III. Semi-Aggressive
Increase Volume/Increase Margins Bundle Products
Target Multiple Segments
Introduce Tiered Pricing Structure
Introduce revenue drivers IV. Aggressive
Increase Volume/Increase Margins/Multiple Revenue Drivers Bundle Products
Target Multiple Segments
Offered Reward Pricing
Leverage Resources/Relationships
Bundle Services Continuum of Strategies Research and Development ACTION PLAN
Product Mix (Revenue Drivers)
Product Positioning MarketSegmentationTargeting
Other Pricing Tactic
3-Tiered Reward Level based on usage rates
Promotional MixPersonal Selling with B2BAdvertising Space•
Management Team
Financing Product Mix Market Segmentation Revenue Drivers
Selling Advertising Space
Providing Optional Amenities to ZipCar
Collaboration with local Hotels Product Positioning "Convenient Mobility When You Need It The Most." Our
Economic Model Target Market Original Pricing Model
Application fee: $25
Usage rate: $0.40/mile
Annual fee: $75
Hourly rate: $5.50 ZipELITE [>15,000 miles]

Discounted usage rate by $0.10/mile [0.60 to 0.50]
Hourly Rate: $5.50 New Pricing Model [0-999 Miles]:
Application Fee: $30.00
Usage Rate: $1.00/mile (Average of 22 miles)
Annual fee: $50
Hourly Rate: $7.50 Chase and
Danielson MKTG Director Operations
Manager CFO Consultant
[Chase] Sales Interns Sales
Intern Maintenance Detailers Contracted
Painter ZipGOLD ZipBLACK ZipPLATINUM ZipELITE Selling Model Create
Awareness Create
Preference Close
Sale Build
Sponsored Events National Hitchhiker Day
Local concert at BostonCollege Guerrila Tactics Stickers in public transport areas
Create a buzz through local media outlets like Boston Radio. Promote our belief in a greener future
Promote Sustainability
Attend local fairs in the Boston area Retention Proof Show how much using public transport would cost compared to ZipCard Deals Offer a one time free trial
Fill out a survey saying why they did not like Database Call customers tell them of near by free spaces to park their ZipCars
Monthly newsletters Prices Four tier reward scheme ZipELITE
User has travelled over 15,000 miles
Discounted usage rate by $0.10/mile [0.60 to 0.50]
Hourly Rate: $5.50 ZipPLATINUM
User has travelled over 5,000 miles
Discounted usage rate of $0.18/mile [$0.78 to $0.60]
Annual fee lowered to $20.00
Hourly Rate: $5.75
Reached at 2,500 miles
Discounted usage rate of $0.12/mile [$0.90 to $0.78]
Annual fee lowered to $22.00
Hourly Rate: $6.50 ZipGOLD
Attained when user reaches first 1,000 miles
Discount usage rate of $0.10/mile [$1.00 to $0.90]
Annual fee remains at $30.00
Hourly Rate: $7.00 Entry-Level Original Pricing Model
Annual fee: $50
Application fee: $30
Usage rate: $1.00/mile
Hourly rate: $7.50 Operations Up-Keep with equipment
Car Maintenance
Plexiglass Box upkeep
Data Management (Black Box Technology)
Relationship construction with (Ford, City of Boston) Head Body Body Body Body Body Body Body Body Body Body Body Body CTO
[J.B. Straubel] Intern Intern Percent of Income Amount of usage Philanthropy
Community Involvement
Sponsored community events to create brand awareness
Seek out additional employees
Calculate necessary human resources
Contact personnel and negotiate salaries
Partnership with Onstar for Customer service (Tradeoff)
If a car is late, we charge a usage fee of $40.00/hr.
Customer Service Programs Personnel Day-to-Day Business Development Time Line
Completely untapped Market Niche
Viable Concept
Ease of Use Salaries: Chase/Danielson: 10% Net Income of 1st year
Operations Manager: $55,000
Maintenance Crew: $35,000 [2]
Internships: Unpaid [2]
CMO [PR, Avertising Mgmt., Marketing: $60,000
Marketing Part-Time Associate: $15,000
Internships: Unpaid [2]
J.B. Straubel [CTO/Consultant]: Contract Equity
Contract Painters/Detailers/Maintenance: Offset by Advertising Revenues
Full transcript