Zipcar Analysis: Business Model & Venture Capitalists
While Zipcar may attract individuals renting cars in the U.S. its focus is shared car ownership in and around large urban environments. At the time Zipcar entered the U.S. market there was very little competition. While rental car companies and car manufacturers posed a threat to Zipcar’s success, focusing in the Boston area avoided direct competition with the two existing car-sharing organizations on the West coast. Through uses of technology Zipcar is creating an opportunity to decrease costs and time required by the consumer. With its innovative business model bolstered by technology Zipcar could prove disruptive to rental car companies as it begins to enter urban markets.
Business Model Shift December ’99 to May ’00
In the months leading up to December 1999 and through May 2000, Zipcar’s Business Model price structure experienced changes. Considering what components to charge to cover COGS (cost of goods sold) and overhead, while also aligning prices with alternatives (such as renting a car) was no simple solution. The first plan mirrored pricing structures developed in Europe, where Zipcar gathered the majority of its original research data. Robin Chase developed the first plan to have customers become members with initial payments of $625 ($325 of which was application fee and security deposit) and additional payments of $1.50 per hour and $0.40 per mile. By May 2000 after further research and consumer feedback Chase changed to a tiered pricing model. The membership fee decreased from $300 to $75 (totaling to $400 with application fee and security deposit). This $225 decrease was due to consumer research regarding resistance to membership at the higher price point. In addition hourly charges increased from $1.50 per hour to $4.50 - $7.50 an hour with a max daily rate of $44.
The Business Model’s pricing strategy change was necessary to not only intrigue the target consumer base to...