Car Rental Industry Stephanie Jaw Daniel Lyon Hermela 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
Four Major Players 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%)
Competition 4 Firm Concentration Ratio: 80.4 HHI: 2168 Market Share Enterprise Holdings Inc. 5% 20% 38% Hertz Global Holdings Inc. Avis Budget Group Inc. 18% 19% Dollar Thrifty Automotive Group Other
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? Leisure Business
Employees Labor in industry is mainly face-to faceconsumer 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 Manufacturers Buy Lease Supply Chain Distribution Insurance Resale Relationship / Partnership Marketing Online On-Site Location: Airport, hotel, neighborhood Outside Insurance Self-Insured Used car sales Sell back to manufacturer
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
Number of Ads (Hundreds) Total Ads by Day 50 45 40 35 30 25 20 15 10 5 0 SUN MON TUE WED THU FRI SAT
Number of Ads (Hundreds) Number of Ads Number of Ads by Day of Week 120 100 80 60 40 20 0 18 16 14 12 10 8 6 4 2 0 Avis SUN MON TUE WED THU FRI SAT Enterprise Rent-A-Car SUN MON TUE WED THU FRI SAT Weekends Weekdays
Number of Ads Number of Ads Top Daypart by Number of Ads Avis Enterprise Rent-A-Car 60 2000 50 40 1500 30 20 1000 10 0 Sunday Saturday Afternoon Afternoon Sunday Early Fringe 1 Prime Afternoon Daytime 2 500 0 Prime Overnight Afternoon Daytime 2 Early Fringe 2 Late Fringe
Expenditure (Millions of Dollars) Top Daypart by Expenditure Enterprise Rent-A-Car 40 35 30 25 20 15 10 5 0 Prime Late Fringe Saturday Afternoon Late News Sunday Afternoon
Total Ads by Month 40 35 30 25 20 15 10 5 0 Number of Ads (Hundreds)45
Number of Ads (Hundreds) Ads by Month Enterprise Rent-A-Car National Car Rental Budget Hertz 16 14 12 10 8 6 4 2 0
Number of Ads Number of Avis Ads 50 45 40 35 30 25 20 15 10 5 0
Types of Ads Primarily Persuasive Some informative with Price Few Promotions
Case Study: vs. How Avis motto became We Try Harder
Analysis and Recommendations
Investments Avis 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?