Zipcar Case Study

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