Tuesday, May 29, 2012

Zipcar Goes to College

Zipcar Goes To College

Recently, Zipcar (ZIP) has been looking to trim its losses in light of a market slide since its IPO last year by attempting to rejuvenate various aspects of its strategy. An article from MSN Money details this renewed strategic focus in “Zipcar’s College Strategy Taps Target Market”. The article discusses both the importance of the “Millennials” to Zipcar’s strategy and the tactics Zipcar is using to implement its strategy.

Millennials are described as a young customer market between the ages of 18 and 34. Zipcar found through its research that these customers are “increasingly adoptive to collaborative consumption” and value Zipcar’s business model regarding car rental versus ownership. They also make up more than half of Zipcar’s current customer base and contributed to Zipcar’s phenomenal rebound in user membership and revenue over the last year. Therefore, Zipcar is employing its strategy towards the Millennials on college campuses so that it can capture increased usage both during and after their college years.

Zipcar hopes to capitalize on its first mover advantage in the car-sharing space and focuses its strategy around this market through various strategic tactics. For example, Zipcar has recently developed an increasing presence on college campuses, invested in the Peer-to-Peer car sharing company Wheelz, contracted a strategic partnership with Ford, and grew its social media foundation by launching the “Reserve a Zipcar” Facebook application. Zipcar is utilizing these tactics to grow this target user base that values car renting over car owning.

Porter’s Five Forces model would determine that Zipcar is adequately addressing the threat of new entrants by this increase in R&D expenditures. Barriers to entry are being created by Zipcar’s rapid investments and this aspect should minimize companies threating to enter into Zipcar’s space. However, the major question that should be asked is whether or not Zipcar has the long term ability to limit the threat of substitutes (owning versus renting). Time will only tell if Zipcar’s strategic focus can grow the Millennials base and continue to reach them once they are out in the workforce. Zipcar should expand its focus into delivering added value to car renting versus car owning in order to extend the Millennials’ relationship into the future.

The Five Competitive Forces that Shape Strategy, by Michael Porter

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