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?