Car Rental IndustryStephanie Jaw

Daniel Lyon

Hermela Nadew

Samantha Tierney

Agenda

Introduction

Industry Structure: Background

Advertising Strategies

Investment Recommendations

Introduction Industry Ad Strategy Recommendation

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

Introduction Industry Ad Strategy Recommendation

Introduction Industry Ad Strategy Recommendation

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

Introduction Industry Ad Strategy Recommendation

Competition

• 4 Firm Concentration Ratio: 80.4

• HHI: 2168

38%

19%

18%

5%

20%

Market Share Enterprise HoldingsInc.

Hertz GlobalHoldings Inc.

Avis Budget GroupInc.

Dollar ThriftyAutomotive Group

Other

Introduction Industry Ad Strategy Recommendation

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.

Introduction Industry Ad Strategy Recommendation

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

Introduction Industry Ad Strategy Recommendation

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

Introduction Industry Ad Strategy Recommendation

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?

Business

Leisure

Introduction Industry Ad Strategy Recommendation

Employees

• Labor in industry is mainly face-to face-consumer contact– Outsource maintenance and other labor intensive

jobs

Introduction Industry Ad Strategy Recommendation

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

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

Brand Equity

• Not in the top 100 brands

• Small industry

• Not frequently consumed

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Advertising Strategies

Dollars Spent on Advertising

Introduction Industry Ad Strategy Recommendation

Target Market

• Age 35-50

• 70% Male

• 30% Female

• Yearly Income: $40,000+

• Urban and Suburban

• Has Children

Introduction Industry Ad Strategy Recommendation

• Owns National, Alamo, and Enterprise

• Largest market share (38%)

• Spent $78.9 Million on TV advertising in 2011

• Not publicly traded

Introduction Industry Ad Strategy Recommendation

• “Drive Happy”

• 1% of Enterprises Ad Budget ($.82 Million)

• Muppets

• Primarily advertise on:

– Suspense/Mystery

– Slice of Life

– Feature Film

Introduction Industry Ad Strategy Recommendation

• “Go like a pro.”

• 30% of Enterprise advertising budget ($23.8 Million)

• Primarily advertise on:

– Professional Football

– Golf

– News

Introduction Industry Ad Strategy Recommendation

• “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

Introduction Industry Ad Strategy Recommendation

• “We Try Harder”

• Uses 74% of Avis-Budget advertising budget ($14.5 Million)

• Advertise almost exclusively on Golf (98%)

Introduction Industry Ad Strategy Recommendation

• 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

0

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Number of Ads by Day of Week

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Avis

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Top Daypart by Number of Ads

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Top Daypart by Expenditure

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Prime Late Fringe SaturdayAfternoon

Late News SundayAfternoon

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Enterprise Rent-A-Car

Introduction Industry Ad Strategy Recommendation

Total Ads by Month

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Introduction Industry Ad Strategy Recommendation

Ads by Month

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Enterprise Rent-A-Car National Car Rental Budget Hertz

Introduction Industry Ad Strategy Recommendation

Number of Avis Ads

05

101520253035404550

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Introduction Industry Ad Strategy Recommendation

Types of Ads

• Primarily Persuasive

• Some informative with Price

• Few Promotions

Introduction Industry Ad Strategy Recommendation

Case Study: vs.

• How Avis’ motto became “We Try Harder”

Analysis and Recommendations

Introduction Industry Ad Strategy Recommendation

InvestmentsAvis 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

Introduction Industry Ad Strategy Recommendation

Introduction Industry Ad Strategy Recommendation

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?