car rental industry
DESCRIPTION
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 - PowerPoint PPT PresentationTRANSCRIPT
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Car Rental IndustryStephanie Jaw
Daniel LyonHermela Nadew
Samantha Tierney
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Agenda Introduction
Industry Structure: Background
Advertising Strategies
Investment Recommendations
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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
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Industry: Background
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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
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Competition
• 4 Firm Concentration Ratio: 80.4• HHI: 2168
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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.
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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
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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
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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
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Who uses services?
Business
Leisure
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Employees
• Labor in industry is mainly face-to face- consumer contact– Outsource maintenance and other labor intensive
jobs
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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
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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
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Brand Equity
• Not in the top 100 brands• Small industry• Not frequently consumed
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Advertising Strategies
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Dollars Spent on Advertising
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Target Market
• Age 35-50• 70% Male• 30% Female• Yearly Income: $40,000+• Urban and Suburban• Has Children
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• Owns National, Alamo, and Enterprise• Largest market share (38%)• Spent $78.9 Million on TV advertising in 2011• Not publicly traded
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• “Drive Happy”• 1% of Enterprises Ad Budget ($.82 Million)• Muppets• Primarily advertise on:
– Suspense/Mystery– Slice of Life– Feature Film
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• “Go like a pro.”• 30% of Enterprise advertising budget ($23.8
Million)• Primarily advertise on:
– Professional Football– Golf– News
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• “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
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• Owns Budget and Avis• Has 18% of market share• Spent $19.8 Million on TV Advertising• 1.81% Ad to Sales Ratio
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• “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
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• “We Try Harder”• Uses 74% of Avis-Budget advertising budget
($14.5 Million)• Advertise almost exclusively on Golf (98%)
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• 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
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Commercials: Enterprise Holdings
National Commercial Alamo Commercial
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Total Ads by Day
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Number of Ads by Day of Week
Num
ber
of A
dsN
umbe
r of
Ads
(H
undr
eds)
Weekends
Weekdays
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Top Daypart by Number of Ads
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Top Daypart by Expenditure
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Total Ads by Month
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Ads by Month
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Number of Avis Ads
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Types of Ads
• Primarily Persuasive• Some informative with Price• Few Promotions
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Case Study: vs.
• How Avis’ motto became “We Try Harder”
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Analysis and Recommendations
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InvestmentsAvis Budget Group
Hertz Holdings
Volatile markets
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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
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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
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Questions?