Post on 07-Jan-2016
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Car Rental IndustryStephanie Jaw
Daniel LyonHermela Nadew
Samantha Tierney
Agenda Introduction
Industry Structure: Background
Advertising Strategies
Investment Recommendations
Why Car Rentals?
• In 2010, $20.55 Billion Market in the US• Selling the same product: where is the
differentiation?– Price– Customer Service– Convenience
• Mix between credence and experience good• Not a product you keep – not an investment
Industry: Background
1. Enterprise Holdings Inc. (38%)2. Hertz Global Holdings Inc. (18.9%)3. Avis Budget Group Inc. (18.5%)4. Dollar Thrifty Automotive Group (5%)
Four Major Players
Competition
• 4 Firm Concentration Ratio: 80.4• HHI: 2168
What service does the industry produce?
• Service of renting and leasing passenger cars for a short period of time (daily, weekly, monthly)
• Various rental deals to accommodate the consumers needs– Millage rates, time rates, etc.
Basic Technology
• Technologies within the automobiles• Online reservation systems and self service kiosks
– Direct link to consumer base– Saves cost of acquiring bookings
• Back office technologies – Centralized fleet acquisitions, rental rates and other
business logistics
How is it distributed?
• Cars are bought from automobile manufactures (Ford, General Motors, etc.)– Ex. Hertz acquired 31% of their US market vehicles
from Ford
• Use “pools” through independent rental facilities to insure vehicle availability
Financing of Production Costs
• Vehicle acquisition and depreciation are the largest costs
• Vehicle financing programs • Sell older models back to manufacturers to
gain back some of the cost • Tariffs on imported cars effect the cars in a
company’s fleet
Who uses services?
Business
Leisure
Employees
• Labor in industry is mainly face-to face- consumer contact– Outsource maintenance and other labor intensive
jobs
Industry Structure
• Barrier to entry and exit: Medium– Capital
• Capital intensity: High– $1.22 spent on capital for ever $1.00 spent on
wages
• Government regulation: Medium– Federal, state, and local laws– Large petroleum containers– Additional state taxes - Washington
Fleet Acquisition
Remarket Fleet
Distribution
Insurance
Resale
• Manufacturers•Buy•Lease
•Relationship / Partnership Marketing•Online•On-Site Location: Airport, hotel, neighborhood
•Outside Insurance•Self-Insured
•Used car sales•Sell back to manufacturer
Supply Chain
Brand Equity
• Not in the top 100 brands• Small industry• Not frequently consumed
Advertising Strategies
Dollars Spent on Advertising
Target Market
• Age 35-50• 70% Male• 30% Female• Yearly Income: $40,000+• Urban and Suburban• Has Children
• Owns National, Alamo, and Enterprise• Largest market share (38%)• Spent $78.9 Million on TV advertising in 2011• Not publicly traded
• “Drive Happy”• 1% of Enterprises Ad Budget ($.82 Million)• Muppets• Primarily advertise on:
– Suspense/Mystery– Slice of Life– Feature Film
• “Go like a pro.”• 30% of Enterprise advertising budget ($23.8
Million)• Primarily advertise on:
– Professional Football– Golf– News
• “We’ll pick you up”• 68.8% of Enterprise Ad Budget ($54.3 Million)• Customer Service• Primarily advertise on:
– College Basketball– Situational Comedy– Slice of Life
• Owns Budget and Avis• Has 18% of market share• Spent $19.8 Million on TV Advertising• 1.81% Ad to Sales Ratio
• “Go budget”• 26% of Avis-Budget’s advertising budget ($5
million)• Advertises Price and uses Celebrity (Wendie
Malick)• Primarily advertise on:
– Situation Comedy– Feature Film
• “We Try Harder”• Uses 74% of Avis-Budget advertising budget
($14.5 Million)• Advertise almost exclusively on Golf (98%)
• No other brands• Have 19% of market share• Spend $16.1 Million on TV advertising in 2011• 1.76% Ad to Sales Ratio• Primarily advertise on:
– Drama/Adventure– Slice of Life
Commercials: Enterprise Holdings
National Commercial Alamo Commercial
Total Ads by Day
Number of Ads by Day of Week
Num
ber
of A
dsN
umbe
r of
Ads
(H
undr
eds)
Weekends
Weekdays
Top Daypart by Number of Ads
Top Daypart by Expenditure
Total Ads by Month
Ads by Month
Number of Avis Ads
Types of Ads
• Primarily Persuasive• Some informative with Price• Few Promotions
Case Study: vs.
• How Avis’ motto became “We Try Harder”
Analysis and Recommendations
InvestmentsAvis Budget Group
Hertz Holdings
Volatile markets
Investment
• Tied to the success of airline and car industry – Financial troubles negatively effect car rentals
Recommendation: due to financial instability, we would advise to NOT invest in the
car rental industry
Advertising Strategy
• More interactive advertising efforts – Commercials, Facebook, Twitter – Ex. Enterprise and NCAA campaign
• Start combatively advertising fleet prices – If price is mentioned, consumer assume it’s a
bargain
Questions?