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Car Rental Industry

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

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Car Rental Industry

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  1. Car Rental Industry Stephanie Jaw Daniel Lyon Hermela Nadew Samantha Tierney

  2. Agenda • Introduction • Industry Structure: Background • Advertising Strategies • Investment Recommendations

  3. 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

  4. Industry: Background

  5. Four Major Players • Enterprise Holdings Inc. (38%) • Hertz Global Holdings Inc. (18.9%) • Avis Budget Group Inc. (18.5%) • Dollar Thrifty Automotive Group (5%)

  6. Competition • 4 Firm Concentration Ratio: 80.4 • HHI: 2168

  7. 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.

  8. 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

  9. 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

  10. 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

  11. Who uses services? Leisure Business

  12. Employees • Labor in industry is mainly face-to face- consumer contact • Outsource maintenance and other labor intensive jobs

  13. 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

  14. Supply Chain 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

  15. Brand Equity • Not in the top 100 brands • Small industry • Not frequently consumed

  16. Advertising Strategies

  17. Dollars Spent on Advertising

  18. Target Market • Age 35-50 • 70% Male • 30% Female • Yearly Income: $40,000+ • Urban and Suburban • Has Children

  19. Owns National, Alamo, and Enterprise • Largest market share (38%) • Spent $78.9 Million on TV advertising in 2011 • Not publicly traded

  20. “Drive Happy” • 1% of Enterprises Ad Budget ($.82 Million) • Muppets • Primarily advertise on: • Suspense/Mystery • Slice of Life • Feature Film

  21. “Go like a pro.” • 30% of Enterprise advertising budget ($23.8 Million) • Primarily advertise on: • Professional Football • Golf • News

  22. “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

  23. Owns Budget and Avis • Has 18% of market share • Spent $19.8 Million on TV Advertising • 1.81% Ad to Sales Ratio

  24. “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

  25. “We Try Harder” • Uses 74% of Avis-Budget advertising budget ($14.5 Million) • Advertise almost exclusively on Golf (98%)

  26. 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

  27. Commercials: Enterprise Holdings National Commercial Alamo Commercial

  28. Total Ads by Day

  29. Number of Ads by Day of Week Number of Ads Weekends Weekdays Number of Ads (Hundreds)

  30. Top Daypart by Number of Ads

  31. Top Daypart by Expenditure

  32. Total Ads by Month

  33. Ads by Month

  34. Number of Avis Ads

  35. Types of Ads • Primarily Persuasive • Some informative with Price • Few Promotions

  36. Case Study: vs. • How Avis’ motto became “We Try Harder”

  37. Analysis and Recommendations

  38. Investments Avis Budget Group Volatile markets Hertz Holdings

  39. 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

  40. 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

  41. Questions?

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