MBA5330 – Strategic Marketing Management
Student-Rent-A-Car
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Project Report
Student-Rent-A-Car
MBA5330 – Strategic Marketing Management
Student-Rent-A-Car
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1. Executive Summary:
This report is a marketing plan for a start-up business in car rental industry focusing on a specific
segment in the market. The report starts with a through situational analysis which covers current
business environment in Canada. Then, in order to develop marketing strategy, we tried to get
information from our target markets that are students form University of Ottawa. We designed a
questionnaire form to be distributed between students. The main aspect behind that, was finding
patterns of usage, demographic, target market and customer needs.
Due to different restrictions, we could not distribute these questionnaires between students and
consequently we tried to make some assumptions. Based on those assumptions, we set our start
point and the amount on investment to start with. As the nature of this business does not depend
on variable costs, our key to success would be the excessive average number of rented cars per
day fueled by advertisements and prominent differentiation.
The last part of the plan refers to implementation and control. It is mainly about resources
including required budgets and scheduling. Meanwhile, we have prepared a contingency plan
after evaluating most important risks potentially affecting the business
2. Introduction
The rental car industry began in 1908 when Ford introduced the economical Model T. Several
years later, in 1916, Joe Saunders supposedly became the first person who started a car rental
business with lending out his Model T to a salesman who did need a car for a date with a local
girl.
In September of 1918, 22-year-ol Walter L. Jacobs opened a car rental business. He began with
about a dozen Model T Fords while he was to take care of repairing the cars. By 1923, his
business was annually generating $1 million. John Hertz the owner of Yellow Coach
Manufacturing Company acquired Jacobs' successful business. Several years later, in 1926,
General Motors bought out Hertz's Company. The car-rental business became known as the
Hertz Driv-Ur-Self System.
In earliest years, rental car companies sometimes became associated with criminal activity,
specifically during Prohibition. For instance, cars were used by bootleggers, bank robbers and
prostitutes. This problem was fixed in 1933 when the 18th Amendment repealed. It was when the
industry regained a respectable reputation, and the business started to grow.
After World War II, when airline industry started to rapidly grow, the car rental industry also
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grew. Hertz, developing "fly-drive" car rental service by opening franchises at some airports in
USA, took one of the most important steps in this rapid growth.
Another company, Avis, focused almost all of its operations on airports. Avis aggressively
advertised services through the airlines themselves. Since 1960s, when price wars and the
success of small businesses decreased prices, the industry has been extremely competitive.
3. Situation Analysis
3.1. Market Summery
3.1.1.
Product, Price, Place and Promotion Analysis
Product Analysis:
As we are a start up company we describe current existing products provided by leading car
rental companies.
Product Attributes: In general all car rental companies offering following products and services:
 Rental cars in different classes
 Economy/Subcompact
 SUV Standard
 Compact
 Mini VAN
 Mid-size/Intermediate
 VAN
 Full-size/Standard
 Specialty Cars (Premium/Luxury/Convertible/Sport Luxury)
 SUV Mid-size
 Pick-up and drop-off service:
 Car rental companies, in order to accommodate their customers, provide pick-up and
drop-off services.
 On-road service:
 Road assistance is one of the core services for leading car rentals.
 Insurance including:
 Collision Damage Waiver — CDW covers the cost of damages to the rental car if
the vehicle is involved in an accident.
 Personal Accident Insurance — PAI covers medical and ambulance bills for the
rental car driver and passengers.
 Supplemental Liability Protection — SLP covers the cost of damages to a third
party.
 Personal Effects Protection — PEP covers personal items in the rental car.
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 Online reservation
 Today, online reservation is a standard service for leading car rental companies
which makes people to make reservation without spending any extra time for this
purpose. These companies by using web services use their resources more efficient
among different locations.
Pricing:
Pricing is different among car rentals and depends on the class of service provided to targeted
market. It also depends on the location, car class, and finally on days of week. Most of rental
companies provide weekend specials and other promotional pricing techniques. Sometimes they
offer discount coupons on their advertisings and customer can benefit from those discounts. They
charge their customers on a daily basis with unlimited kilometers. Here are some comparisons
among leading car rentals in compact car class for Ottawa area.
Exhibit 1 – Pricing policy of Rental Car Companies
Rental Car Company
Dollar Rent A Car
Thrifty
Enterprise
Alamo
Budget
National
Hertz
Avis
Compact
Daily Rate CAD 23.98
Daily Rate CAD 23.98
Daily Rate CAD 27.99
Daily Rate CAD 42.90
Daily Rate CAD 43.99
Daily Rate CAD 47.90
Daily Rate CAD 47.90
Daily Rate CAD 49.99
PRICES ARE SUBJECT TO CHANGE WITHOUT ADVANCE NOTICE.
THESE PRICES ARE PRINTED AT THE TIME OF PREPARING THE REPORT.
Distribution:
Customers can book their reservations online or by phone or going directly to the location.
Advance online reservations, however, would cost less to the customers. In terms of walk in
renting, there are different approaches: some companies accept walk in renting while some
others do not. Customer either comes to location to pick up the car or ask to be picked up if it is
part of the company’s policy. Also when they return the rental car, they can return it to the car
rental location and asked to be dropped off at any place they want in their neighborhood.
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Generally customers are supposed to return the car at the location of rental car; however, some
companies agree to have their car at a different location which is convenient for the customer. In
this case the company would charge the customer for this extra service.
At the time of reservation, customers can ask for any required insurance, and or any extra
facilities provided by car rental companies, like infant seat, child safety seat or similar facilities.
Promotion:
IT has brought new approach to car rentals for market promotion. Internet has become an ideal
Direct-to-Customer medium which both sides benefit from it. Customers get faster and cheaper
services and on the other side the service provider spends less for marketing and sales
promotions.
There are two types of sales for leading car rentals:
 Indirect (Online Intermediaries):
For example here are some of popular online intermediaries which by providing the whole
package for a travel to customers lower the cost to customers.
 http://www.bnm.com/
 http://travel.yahoo.com/
 http://www.travelocity.com/
 http://www.easyjet.com/
 http://www.orbitz.com/
 http://www.expedia.com/
 Direct (Car Rental Company)
Online sale through their website is increasingly growing. Also car rental companies use
discount coupons for their regular customers or to public through their ads in magazines,
travel agents and hotels and airports ads.
Exhibit 2 – Online Share in Main Travel Segments (% of all booking revenue)
Industry
Airlines
Car Rental
Hospitality
Vacations and Cruises
Source: (PhoCusWright, eMarketer)
2001
14%
15%
5%
3%
2002
18%
20%
10%
4%
2003
22%
25%
13%
8%
While few car rental companies disclose information, this market has been identified as a
highly competitive market. Online travel agencies are increasing their market share due to
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the fact that they are able to offer price comparisons and packaging of car rental with air,
hotel and vacation packages. As far as the online world of car rental goes, companies will
enjoy more direct sales than in the offline world, where their direct sales share is only
40%. (PhoCusWright)
Exhibit 3 – Online Car Rental Sales
1999
2000
2001
2002
2003
Car Rental Company Websites
60%
57%
58%
57%
56%
Online Agencies
40%
43%
42%
43%
44%
Source: [http://www.phocuswright.com/]
Because of lower operating costs and smaller overhead, agencies can and do pass on their
savings to consumers. Now with the growing popularity of Internet travel, independent car
rental agencies have an equal opportunity to reach the renting public, letting them know
that lower cost rentals with superior service are possible.
In brief, car rental companies position themselves in different categories based on class of
services provided. Quality of rental cars, chosen targeted market (business customers rather than
neighborhood), supplementary services such as picking up and dropping off customers at their
home or office and ease of reservation and transparency of pricing are of great importance in
terms of positioning.
3.1.2.
Target Market
From the very beginning, companies involved in car rental business, have focused on business
customers who could potentially afford to rent a car. By proliferation in this business, however,
rental car companies realized that neighborhood would be much more important and profitable
than business customers. Statistics also shows that percentage of neighborhood sale is growing
year after year. Around 50% of respondents of a survey (Poll of the American Driver), conducted
in 2005, say that they are more likely to rent an automobile for personal use if there is a rental
car location near their neighborhood; a very big increase of 20% in comparison with figures from
1995. The rental car industry is meeting this trend via a solid expansion into neighborhoods.
3.1.3.
Market Demography
Geographically, leading car rental companies target North Americans who are over 25 and have
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a valid full driving license. Business customers for taking business trips and individual
(neighborhood) customers for taking trip or doing daily activities while need a temporary car.
3.1.4.
Market Trend
Since North America has a unique environment in this industry we can use market trend in US
car rentals to model Canadian Car rental industry. As we can see in following exhibits revenue
has a growth although the prices decreased due to proliferation among last 5 years. It shows after
2001 (Sep 11) entertainment and traveling went down and after that it started to grow.
Exhibit 4 - Revenue Levels Rose in 2005
Revenue (Billion Dollars)
20
15
10
5
0
1995 1997 1999 2001 2003 2005
3.1.5.
Market Needs
Generally customers are looking for:
 Lower Cost: Specifically individual customers are looking for less cost and prices. As
prices go down sale goes up and this business is very sensitive to price.
 Better Quality: customers will enjoy brand new, good quality and safe rental cars. They
also need a transparent pricing specially when shopping online.
 Superior Services: Availability, accessibility, on time delivery, pick-up and drop-off
and on-road services are the most important issues to customers.
Based on a survey following are the most wanted expectations from car rental companies:
What do people really need these days?
 Book ahead; it will cost more if you are a "walk up" without a reservation
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 Online reservation; this reservation has better rates than phone reservations
 Transparency of Costs; they only reserve when total pricing is shown. They need to
know the detailed and itemized cost to be able to compare rates among competitors
 Clarity of Insurance and coverage; confirmation that the collision and liability
insurance meets needs
3.1.6.
Market Growth
Car rental industry must be seen as a part of bigger industry known as Travel and Tourism
specifically when we are looking at future and its growth. Generally travel Industry is supported
by economic growth and strong consumer confidence.
Great performance of the Canadian economy had positively impacted the tourism industry over
the five years to 2004; mainly due to record low unemployment and a high level of consumer
confidence inspiring growth in leisure expenditure. After a period of recession, it was mitigated
the serious impacts of some critical issues, like September 11th and SARS in 2003. It was, in fact,
in 2004 when tourism demand picked up and the travel market showed signs of recovery.
This business can be surveyed from another point of view. According to studies, Canadians are
now taking shorter but more frequent trips and outings 1. This trend directly benefits the domestic
market in terms of spending and volume. Under these circumstances, competition among short
haul and discount transportation operators has significantly increased. In addition, weekend
getaway packages offered by tour operators, hotels and car rental agencies, apparently in an
effort to increase sales from the decline of 2003, have supported the rise in tourism demand
across all sectors.
At the same time, increasing demand for holiday alternatives to traditional packages provides
opportunities for growth in specialty packages. It is why that tour operators and travel agents can
get together and offer an increasing variety of specialty packages for travelers, including trips to
cultural and historical sites, exotic adventure tours and spa and wellness destinations.
Even though a future growth is likely to happen for all three main sectors of Canada's tourism
market including incoming, outgoing and domestic, the growth is probably to slope toward an
uneven balance of payments, with the Canadian travel and tourism accounts showing an
increasing deficit to 2009. This basically indicates the urgency sound and broad reaching
1
More Canadians travel in-country as the statistics show a steady growth in domestic market. In fact, domestic
tourism had growth of just over 1% and an increase of 20% in value over the period of 1999-2004.
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strategies for bringing more visitors to Canada.
3.2. SWOT Analysis
SWOT is abbreviation for "Strengths, Weaknesses, Opportunities and Threats". It is also known
as TOWS analysis. This analysis comes with monitoring the market environment internally and
externally. In fact, it is a strategic planning tool which is used for understanding a business's
strengths, weaknesses, opportunities and threats we may face. Consequently, it helps us to get a
sustainable niche in the market.
The thing which introduces SWOT as a powerful tool in strategy development and particularly
marketing strategy development is that, with a little effort, it helps us discover opportunities that
we could get them with using our strengths and also by understanding the weaknesses of the
business, help us manage and eliminate threats.
Furthermore, by looking at ourselves and our rivals, we could start to build a strategy that helps
us distinguish ourselves from the competitors, so that our chance to be successful in business will
be increased.
Strengths
1- Lower lease cost for automobiles
2- Lower labor cost
3- Closer relation with the target customers
Opportunities
1- Focusing on the segment ignored by
other companies
2- High level of support by universities
3- Desirable public image
Weaknesses
1- Higher share of fixed cost in total
cost
2- Expensive insurance cost
3- Lack of brand awareness
Threats
1- Strong competitors
2- Potential restrictions by Ministry of
Transportation
3- Dealing with high risk drivers
 Strengths: In this case we could split our strengths points in to the two main groups.
The first group of strength points of our business goes back to the costs. Using universities
facilities helps our company to have cheaper tariffs than normal. The second groups is
having the chance of close relationship with the target market because of the business
location and using students as the company humane resource.
 Weaknesses: Generally, the main business weakness goes back to the insurance cost
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which is because of nature of our business, is higher than normal tariffs. The business also
is very risky as a result of the costs characteristic which are normally is in the group of Fix
Costs. This attributes make expense for the company any time, In the case of renting the
cars or not.
 Opportunities: The main business opportunities refer to the support of universities,
government, and also society because of bringing a specific service for youth. The society
of Canada is a youth oriented society and for the Canada government also this group of
people and their needs are very important and critical.
 Treats: The business most important treat is about the existence of famous names in the
market. Those great names might anytime decide to come to our market segment and put
the company under pressure. Our company is a new company and at the start point she will
not have the capability of sticking in the competitive situation.
3.3. Competition
There is numerous numbers of companies in the car rental business in Ottawa. The great names
like Hertz, Enterprise, Avis, and etc have 3 or more branches in the Ottawa and urban. However,
those big names only have about 63% of the car rental market. The remaining 37% is filled by
local car rental agencies. Here is the general view of some of our great competitors in
geographical domain of our industry.
Hertz Car Rental
The world's leading vehicle renting organization is represented in the United States and more
than 150 foreign countries. Hertz activities, is conducted from approximately 3,100 locations in
the United States and from approximately 4,600 international locations.
It has many partners such as VIA Rail Canada, Air France, American Airlines, Delta Airlines,
Gulf air, and American Express Hertz has different car collection; for instance, Hertz Green
Collection, Hertz Prestige Collection, and Fun Collection which help Hertz to offer a wide
variety of current-model cars on a short-term rental.
Avis Car& Truck Rental
Avis Rent A Car System, Inc. and its subsidiaries operate the world's second largest general-use
car rental business, providing business and leisure customers with a wide range of services at
more than 1,700 locations in the United States, Canada, Australia, New Zealand and the Latin
American/Caribbean region and 3050 location in Europe, the Middle East and Africa. Avis is
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usually recognized as the industry leader in applying new technologies and is one of the world's
top brands for customer loyalty.
Enterprise Rent-a-Car
The Enterprise Rent-a-Car company is one of the major rivals in this business. They have 6500
office in the U.S, Canada, the U.K., Ireland, and Germany. Their neighborhood network helps
them to have a location within 15 miles of 90 percent of the U.S. population. Their main
apprehension in this business is customer satisfaction; in fact, they want completely satisfied
customers. Their slogan is "Great Cars. Low Rates. Free Pick-Up!"
National Car Rental
National Car Rental is one of the largest rental car companies serving one of the most popular
domestic and international travel destinations by providing quality vehicles and service to
business, and leisure customers. It has over 3,000 locations throughout the United States,
Canada, Europe, Latin America, the Caribbean, Asian-Pacific, Africa and Australia.
Alamo Rent a Car
In its nearly 30 year history, the Alamo Rent a Car brand has continued to serve family and
leisure travelers with fun, friendly service and low-cost, high value vehicles. Alamo operates
through a network of more than 1200 locations throughout the United States, Canada, Europe,
Latin America and the Caribbean. Some of its partners are American airlines, U.S. airways,
Delta airlines, Walt Disney.
Thrifty Car Rental
Thrifty Car Rental is one of the largest car rental companies in the world and is a wholly owned
subsidiary of Dollar Thrifty Automotive Group, Inc. Thrifty operates more than 1,000 locations
in 64 countries. Safety is the most important things for them.
Budget
Another market rival which is trying to get a higher share in car rental market is Budget. Budget
makes corporate contributions that support important service initiatives throughout America's
communities. The company vision is; we will be a growth-oriented car rental company by
efficiently serving value-conscious customers for all of their car rental occasions and its mission
is; we will consistently deliver a quality product, friendly service and great value that make
customers confident that Budget is their best car rental choice.
Discount
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Discount Car & Truck Rentals is a privately owned company and the first Car and Truck Rental
Company in Canada to focus on the insurance replacement business. Its slogan is "Free
Customer Pick-up and Drop-off". The company vision is; Be the rental company of choice in the
markets we service and tits mission is; Do whatever it takes to deliver a superior rental
experience every time. There are also many local car and truck Rental companies in Canada
market and Ottawa market which we considered it as our start point. Normally those companies
do not have a big share in car rental business market and because of that we skip them.
3.4. Keys to Success
The keys to success are;
 Executing a comprehensive segmentation study.
 Targeting the group of people (segment) whom other car rental companies did not
consider them particularly.
 Using the approach of creating new ladder for the start point of business.
 Positive physiological effect of the company youth oriented policy (the Canada society is
a youth oriented society).
3.5. Critical Issues
Some critical issues for starting this business for our case are;
 Segment population seasonal change.
 Low utilization rate is a critical point to this industry.
 High risk of collision.
 Unwilling customers to buy insurance.
 Constantly monitoring customer satisfaction with current level of service as a critical
factor before implementing expanding plan.
4. Marketing Strategy
As mentioned earlier, a Marketing Plan is to include specific actions required to implement a
specific Marketing Strategy successfully. Marketing Strategy, mainly designed to achieve
Marketing Objectives, is supposed to serve as the keystone of Marketing Plan.
4.1. Mission
Even though the company, as the first step, is going to provide rental cars for students, it would
not ignore other opportunities. For instance, Student-Rent-A-Car, to have a clear image about its
future, would consider partnership with entertainment industry or even consider providing rental
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rooms for students.
Therefore, Student-Rent-A-Car Mission is “To provide economy and young travelers with
unrestricted and convenient transportation and other related services with an affordable price.”
We start up the company with this slogan: “Young? No Vehicle? We Are There.”
4.2. Marketing Objective
This section is supposed to provide required metrics to assess the success or failure of the
business from non-financial viewpoint. The Marketing Objectives, covering some aspects of the
business which are not covered by financial metrics, set the targets to be achieved across several
marketing decision areas. These targets, in different areas, are as follows:
 Target Market Objectives:
 Gain a 0.4% Served Market Share in the first year 1.
 Increase Served Market Share by 92% in the second year.
 Promotional Objectives:
 Develop brand awareness among the segment 2.
 Conduct various Sales Promotions in the second year.
 Channel Objectives:
 Consider Internet as the next Distribution Channel.
4.3. Financial Objective
The ultimate goal of the marketing plan, for many organizations, is its effect on financial
numbers and ratios. Financial Objectives of this start-up business are as follows:
 BEP
 Reach to the BEP in the first year.
 Sales
 Increase annual sales by 92% in the second year.
 Profit
 Increase annual profit by 147% in the second year 3.
4.4. Target Market
1
It is assuming that each customer would rent a car for one day per two months. We are basically supposed to gather
such a data through the questionnaire. We, however, assume this number as we couldn’t circulate the questionnaire.
2
It basically means that all students remember Student-Rent-A-Car when they think about car rental industry.
Since fixed costs are a large proportion of total costs in this business, the contribution margin is very high. It
basically justifies why this start-up company could expect such a huge increase in terms of annual profit.
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In car rental business, there are several different segments as follows: Businesses,
Businesspersons, and Neighborhoods. Car rental companies have mainly focused on one
segment. For instance, Enterprise Rent a Car serves all middle-class customers in neighborhood
while Avis, covering airports, serves businesspersons.
In this context, Demographic Segmentation, there would a segment not separately served by
these companies. This segment, Students, can also be divided into sub-segments.
Segment - Students:
Ottawa is known as a city with many young students. As the statistics says, there are 33,576 and
23,106 students enrolled at the University of Ottawa and Carleton University1. This interesting
market for investment, which is apparently price-sensitive, can be divided into a couple of subsegments. They are as follows:
 Sub Segment 1- Students, Under 25, and Not-Fully-Licensed: According to statistics,
around 20% of students are under the age of 25. A reasonable number of these students are
not fully licensed; other companies, due to the fact that this population includes high risk
drivers, do not serve them.
These students need a car to go shopping at weekends, to go on a short trip with friends
around the city or a business trip to another city.
 Sub Segment 2 - Students, Over 25, and Not-Fully-Licensed: There are many students
who are older than 25 but not full-licensed. Like the other segment, they may need a car to
go shopping at weekends, on a short trip with friends around the city or a business trip to
another city. Other companies, as mentioned earlier, overcharge them due to the fact that
they do not have a G Driving License. Student-Rent-A-Car would serve them at a lower
price.
 Sub Segment 3 - Students, Under 25, Fully-Licensed: There are many students who are
younger than 25 and fully-licensed. Other big players of the market, considering them as
high-risk drivers, over-charge them Student-Rent-A-Car would serve them at a lower price.
In brief, even though Student-Rent-A-Car, trying to make a new market, would focus on those
segments, it would not ignore other students whom other companies serve. The company, with a
low price due to less operating expenses, is able to come up with cheap and convenient services
for other students.
1
Year 2005-2006
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4.5. Positioning
Since this idea is mainly based on identifying a niche market, Student-Rent-A-Car, to position its
offering, would have to maneuver over its advantages. The company would have to take the
approach named “Away from a Competitor” and focus on the segment which is being
overlooked by larger competitors. For achieve this goal, following issues can be considered.
Student-Rent-A-Car offers a unique rental service for students who have a G2 Driving License;
Sub-Segment 1 and 2. Not only does it serve those under the age of 25 whom other companies
do not serve but also it considers those older than 25 whom other companies over-charge. In
brief, the business is mainly established to remove any barriers in terms of serving prospects.
Exhibit 5 – Positioning Map
Positioning Map For The Target
Market
Availability
Student
-RentA-Car
High
Enterprise Rent a
Car
Hertz
Budget
Price
High
Avis
Natonal
Discount
Alamo
Thrifty
Low
Dollar
Rent A
Car
Low
The second important issue, as the position map 1 also shows, is price. The company, offering a
low price, would differentiate itself in the market. Meanwhile, Student-Rent-A-Car services are
1
Availability, in the positioning map, refers to the fact that other rental companies would have some restrictions to
rent a car to a person who is not fully licensed or is under the age of 25.
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convenient. Students would deal with students as offices are located on campuses and students,
hired by the company, would serve clients who are students.
The last but not the least, the company is going to serve a service named Car Pool. If students are
going to travel to another city with as least cost as possible, Student-Rent-A-Car can find another
person and assign a car to them.
4.6. Strategies – Marketing Mix
In order to achieve those marketing objectives mentioned earlier, the company would have to
have a strategy which basically includes different elements. The elements, the various parts of
the marketing mix, are to balance the company’s effort in terms of gaining a reasonable marker
share. This section is supposed to address 4 Ps of Marketing:
Product:
Product, Customer Needs in 4 C’s of Customer, is all about defining the characteristics of the
product or service in order to meet the customers' needs. Student-Rent-A-Car would offer
following services to its customers:
 Rental Cars: The Company would offer economy/subcompact cars for rent. As the
policy of the company is based on price, Student-Rent-A-Car would sacrifice variety and
luxury to offer its service at a lower price.
 Insurance: The Company also sells insurance. As young people are mentioned as highrisk drivers, those customers who are under 25 and not fully-licensed must buy a Collision
Damage Waiver (CDW) which covers the cost of damages to the rental car if the vehicle is
involved in an accident. This insurance, however, is not mandatory for others: those under
25 but fully-licensed and those over 25.
 On-Road service: This service will be offered to customers through annual contract
with CAA. The cost of this service has been brought as part of Insurance cost.
 Car Pool: The other free service offered by Student-Rent-A-Car is car pool in term of
assigning a car to two or three customers to let them share the cost. The Company would
have to match those customers willing to use this service.
Price:
Price, Cost in 4 C’s of Customer, is about deciding on a pricing strategy. There are different
pricing strategies including Premium Pricing, Value Pricing, Cost/plus Pricing, Competitive
Pricing, and Penetration Pricing. Each strategy is useful for a specific market condition.
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Since the main goal of this start-up company is to gain a market share and make a profit, a
Cost/Plus Pricing is recommended as there are some competitors in the market.
The pricing strategy, described by product and mainly based on BEP Analysis and a reasonable
mark-up, would determine following prices for offerings.
 Rental Cars: The basic price is calculated per day of usage regardless kilometers of
driving. The basic is going to be $22.00 per day.
 Insurance: As purchasing a basic insurance is mandatory for customers under 25; the
company also sells insurance to those who do not have any. The price of this offering is at a
low price of $22.00.
Place:
Place, also known as Distribution Channel, is the mechanism through which goods or services
are offered to the consumer. Place, becoming Convenience in 4 C’s of Customer, is where the
service is delivered.
As the target market mainly includes students, campuses, at the first glance, seem to be the most
appropriate idea to conveniently distribute the service. Having office at the heart of target market
(campus) rather than too many offices all over the city, the company would be able to not only
decrease required budget assigned to this issue but make distribution easier and more convenient.
Internet is also a good idea which can be considered later, when the company has established a
reasonable business.
Promotion:
Promotion, as one of communication methods in 4 C’s of customer, embraces four major
approaches of advertising, sales promotion, public relations and personal selling. Student-rent-ACar, however, will use advertising as its main approach.
 Place Advertising: Student-Rent-A-Car would place placards on campuses and around
the city, specifically all over downtown where many students live.
 Media Advertising: The Company would also use Print Ads and Radio Ads. In other
words, the company would run a campaign on CHUO FM 89.1 and The Mighty 93.1 –
CKCU which are broadcasted at University of Ottawa and Carleton University
respectively. The company would also consider local newspapers as another method of
advertising.
Another approach in this area is sales promotion. Student-Rent-A-Car would offer:
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 Discount Coupons: It would be offered to the customers who rent a car frequently. This
promotion, defined as one free for five cars rented, would be restricted to a certain amount
of budget. Basically, this promotion would be available as long as the assigned budget is
available.
The other approach in this area is Public Relations. Student-Rent-A-Car would offer:
 Sponsorships: Since the company mainly focuses on students, sponsoring sport teams
of universities would be a very good idea in terms of developing brand awareness.
Therefore, the company would try to sponsor Gee Gees at the University of Ottawa.
4.7. Marketing Research
In general marketing research is collecting and organizing data about the market that is currently
buying the product(s) or service(s) the company will sell. Usually, following areas are to be
considered: patterns in terms of usage, demographics, market segment, target markets, needs,
buying decisions and the competition. In particular, we also tried to design a questionnaire
covering following areas: patterns of usage, demographic, target market and customer needs.
For preliminary surveys, an online survey was to be conducted. The questionnaire, including 10
multiple choice questions shown in Appendix 1, was to provide required information about
prospects. We were supposed to circulate this online questionnaire, to be found at
http://www.surveymonkey.com/s.asp?u=473782774747, among both universities of the city. We,
however, could not achieve this goal since it would be a case of conflict of interest, several
professors of the university denied to circulate the questionnaire among their students.
5.
Financial
We try to start our first location by 5 cars and one employee, while the utility rate for renting
these cars is considered around 60%. Since most of university students are young and are
considered as high risk drivers, it is mandatory for more than 85% of them to buy insurance.
There are two different approaches to set the price: mark-up price strategy and perceived-value.
Mark-up Pricing
Variable cost per rented car per day = $3.57
Fixed cost = $76,254
Fixed cost per car per day =$32.42
Expected rental cars per day =7
Unit cost = Variable cost + Fixed cost/unit sale ====> Unit cost = $3.57+$32.42=$35.99
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By expected 4% profit considered for this business, we should expect,
Mark up price = Unit cost / (1- desired return on sale) ====> Mark up price = $35.99/(1-0.20)
Mark up price = $44.99
This price has to be divided into insurance and rent. Since the lowest price in the market is
around $23, the price economically makes senses. Meanwhile, in such a business that fixed costs
have a higher portion of total cost; it is logical to increase the quantity to meet the expected profit
with this mark-up price approach.
Perceived value pricing
Based on our assumptions from students, most of them are willing to pay the average market
price to rent the car from us. Our strength is the location and ability to rent the cars to the
students under 25 year-old, whose population in university is close to 7500 students.
For scaling the Perceived value in a graph way, we should consider the following questions,
 At what point on the scale do you consider the product to be cheap?
 This question does not considered in this business that much as long as we have our
new cars. The only important fact is not to be considered to start a price war with
competitors.
 At what point on the scale do you consider the product to be expensive?
 Majority of customers are not willing to pay higher than average market price which
is around $22 to $30. Our only advantage is selling more mandatory insurance to our
customer segments that are less than 25 year-old.
 At what point on the scale do you consider the product to be too expensive and beyond
considering buying?
 Any price above $29 for this class of car is considered too expensive.
 At what point in the scale do you consider the product to be too cheap and you question
its quality or usefulness?
 Any price less $20 for this class of car is considered too cheap.
So, the conclusion for this pricing approach is considered as follows;
PMC =$20
PME =$29
RAP =$9
OPP =$22
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MBA5330 – Strategic Marketing Management
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Exhibit 6 – Perceived Value Scaling
% Perception of Respondents
Perceived Value Scaling
Not Cheap
Not Expensive
Too Cheap
Too Expensive
PMC
Low Price
OPP
PME
RAP
High Price
5.1. Break Even Analysis
To make the results clearer, they can be graphed.
 To do this, we draw the total cost curve (TC in the diagram) which shows the total cost
associated with each possible level of output (TC=Variable Costs + fixed Costs)
 The fixed cost curve (FC) which shows the costs that do not vary with output level
 Finally the various total revenue lines (R1, R2, and R3) which show the total amount of
revenue received at different rental prices varied from 20 to 30$
The break even points (A, B, and C) are the points of intersection between the total cost curve
(TC) and a total revenue curve ($20, $24, or $30). The break even point at each rented number of
cars can be read off the horizontal axis and the break even price at sales price can be read off the
vertical axis.
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Exhibit 7 – BEP Analysis
Break Even Point Analysis
$180,000.00
$160,000.00
$140,000.00
$ Sales/Cost
$120,000.00
$100,000.00
$80,000.00
$60,000.00
$40,000.00
$20,000.00
$1
2
3
4
5
6
7
8
9
Rented Cars per Day (Out of 9 Cars)
Total Cost
$20 Rental Rate
$24 Rental Rate
$30 Rental Rate
Break-Even Analysis can be used in the evaluation of the cost-effectiveness of a new expenditure
for a sales-revenue based business. The cost can be evaluated in terms of revenues needed to
break even on the investment, or more specifically, to determine how much of an increase in
sales revenues (rent price). We consider 3 situations,
 Rental price of $20 with 85% of selling change to sell insurance of $22 to customers
 Rental price of $24 with 85% of selling change to sell insurance of $22 to customers
 Rental price of $30 with 85% of selling change to sell insurance of $22 to customers
As the graph clearly shows, the break even point moves between renting 5 to 6 cars a day
depends on the price we want to charge our customers.
5.2. Sales Forecast
Our company starts with one location at university of Ottawa and hire one employee with 5
rental cars and the marketing plan is:
 We would launch the first location in November 2007 with 5 cars available.
 We would add 4 more cars to this location by June 2009
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MBA5330 – Strategic Marketing Management
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 In July 2009, after through financial analysis, we would launch the second location in
Carlton University making a total capacity of 10 cars.
 By February 2010, total capacity would be 14 cars for two centers.
By investing in advertising and offering good services, we would have to try to maximize the
number of rented cars per day. Considering $22 for renting car and the same price for insurance,
the sales forecast would be as follows:
Exhibit 8 – Sale Forecast
Sales Forcast
$16,000.00
$14,000.00
$12,000.00
$ Sales
$10,000.00
$8,000.00
$6,000.00
$4,000.00
$2,000.00
20
07
20 / 1
07 1 1
20 / 1
08 2 - 05
-0
1
/
20 0
08 1 - 05 3
-0
1
20 / 0
08 2 - 05 3
1
-0
20 / 0
08 3 - 05 3
1
0
20 / 0
08 4 - 06 3
1
/
0
20 0
08 5 - 06 4
1
0
20 / 0
08 6 - 06 4
1
/
0
20 0
08 7 - 06 4
1
0
20 / 0
08 8 - 06 4
20 / 0 1 - - 04
08 9 - 06
20 / 1 1 - - 04
08 0 - 08
1
-0
20 / 1
08 1 - 08 6
-0
1
20 / 1
09 2 - 08 6
20 / 0 1 - - 06
09 1 - 08
1
-0
20 / 0
09 2 - 09 6
20 / 0 1 - - 07
09 3 - 09
20 / 0 1 - - 07
09 4 - 09
1
-0
20 / 0
09 5 - 09 7
-0
1
/
20 0
09 6 - 09 7
20 / 0 1 - - 07
09 7 - 09
20 / 0 2 - - 07
09 8 - 10
20 / 0 2 - - 09
09 9 - 10
2
-0
20 / 1
09 0 - 12 9
2
1
20 / 1
09 1 - 12 0
2
/
1
20 1
10 2 - 14 0
2
-1
20 / 0
10 1 - 14 2
/0 2- -1
2
1 2
-2 4- 1 12
4
-1
2
$-
Month - No of Loc - No of Owned Cars - No of Rented Cars
5.3. Expense Forecast
The major shift in the expense forecast would happen when Student-Rent-A-Car would launch
the second center. Opening another center, we would have to increase the number of cars and
employees available. Keeping this fact that the price would be the same as $22, the expense
forecast would be as follows:
$
20
07
20 / 11
07
-1
20 / 12 - 0
08
-1 50
20 / 01 - 0 3
08
-1 50
20 / 02 - 0 3
08
-1 50
20 / 03 - 0 3
08
-1 50
20 / 04 - 0 3
08
-1 60
20 / 05 - 0 4
08
-1 60
20 / 06 - 0 4
08
-1 60
20 / 07 - 0 4
08
-1 60
20 / 08 - 0 4
08
-1 60
20 / 09 - 0 4
08
-1 60
20 / 10 - 0 4
08
-1 80
20 / 11 - 0 6
08
-1 80
20 / 12 - 0 6
09
-1 80
20 / 01 - 0 6
09
-1 80
20 / 02 - 0 6
09
-1 90
20 / 03 - 0 7
09
-1 90
20 / 04 - 0 7
09
-1 90
20 / 05 - 0 7
09
-1 90
20 / 06 - 0 7
09
-1 90
20 / 07 - 0 7
09
-2 90
20 / 08 - 1 7
09
-2 00
20 / 09 - 1 9
09
-2 00
20 / 10 - 1 9
09
-2 21
20 / 11 - 1 0
09
-2 21
20 / 12 - 1 0
10
-2 41
20 / 01 - 1 2
10
-2 4/0
- 1 12
2
-2 4- 1 12
4
-1
2
20
07
20 / 1
07 1 1
20 / 1
08 2 - 05
-0
1
/
20 0
08 1 - 05 3
-0
1
20 / 0
08 2 - 05 3
1
-0
20 / 0
08 3 - 05 3
-0
1
20 / 0
08 4 - 06 3
-0
20 / 0 1 08 5 - 06 4
1
-0
20 / 0
08 6 - 06 4
-0
20 / 0 1 08 7 - 06 4
1
-0
20 / 0
08 8 - 06 4
-0
20 / 0 1 08 9 - 06 4
-0
1
20 / 1
08 0 - 08 4
1
-0
20 / 1
08 1 - 08 6
-0
1
20 / 1
09 2 - 08 6
-0
20 / 0 1 09 1 - 08 6
1
-0
/
20 0
09 2 - 09 6
-0
20 / 0 1 09 3 - 09 7
-0
1
/
20 0
09 4 - 09 7
1
-0
20 / 0
09 5 - 09 7
-0
1
/
20 0
09 6 - 09 7
-0
20 / 0 1 09 7 - 09 7
2
-0
/
20 0
09 8 - 10 7
-0
2
20 / 0
09 9 - 10 9
2
-0
20 / 1
09 0 - 12 9
-1
2
20 / 1
09 1 - 12 0
-1
20 / 1 2 10 2 - 14 0
2
-1
20 / 0
10 1 - 14 2
/0 2- -1
2
1 2
-2 4- 1 12
4
-1
2
$ Expense
MBA5330 – Strategic Marketing Management
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21
______________________________________________________________________________
Exhibit 9 – Expenses Forecast
Expense Forcast
$16,000.00
$14,000.00
$12,000.00
$10,000.00
$8,000.00
$6,000.00
$4,000.00
$2,000.00
$-
Month - No of Loc - No of Owned Cars - No of Rented Cars
Exhibit 10 – A Comparison between Sales and Expenses Forecast
Sales Compare to Total Cost
$16,000.00
$14,000.00
$12,000.00
$10,000.00
$8,000.00
$6,000.00
$4,000.00
$2,000.00
$-
Month - No of Loc - No of Owned Cars - No of Rented Cars
Expenses $
Sales $
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6. Controls
6.1. Implementation
At this phase we need to demonstrate tactical and implementation issues of our marketing plan.
By end of this phase we have answered some questions like How do we make decision which
media (magazines or newspapers or …) in which to advertise? What is the difference based on
the effectiveness of each solution?
Media/Advertising Plan is a plan to answer these types of questions and can actually become a
distinctive and more detailed document.
Once we defined media/advertising plan we need to schedule and budget for advertising and
marketing plan as whole.
Media/Advertising Plan
Considering our market segment and targeted customers we have decided to conduct to
advertising campaign in two specified locations based on feed back on the first phase (open up
the first location at University of Ottawa). We will use Ottawa newspapers, university’s gazettes,
and University of Ottawa student’s associations as main media and also taking advantage of
possible sponsorships.
Scheduling
The main milestones are depicted in the following chart. We have planned the project in such a
way that market research will be conducted in Sep 2007 which all students are available and also
the next campaign will be conducted for new school year started in Sep 2008. The third
advertising campaign for the second location (Carleton University) has been planned for Sep
2009.
Exhibit 11 – Time Schedule for Implementing Marketing Plan
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Budgeting
Based on Advertising/Media Plan and also targeted milestones for campaigns, we have following
budget for marketing plan. Although we have considered $2700.00 for annual marketing budget,
we will conduct all three campaigns by using part of the bank loan.
Exhibit 12 – Required Budget for Implementing Marketing Plan
6.2. Marketing Organization
Since marketing organization is very important for rental car business enterprise, we have
considered following organizational structure for future growth. However for the time being Mr.
John Smith will be responsible for all marketing activities and campaigns.
As a start up company, Mr. Smith is in charge of organizing various events and activities aimed
at promoting the business and keeping up with the marketing objectives. He is also responsible
for partnership agreements.
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MBA5330 – Strategic Marketing Management
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______________________________________________________________________________
Exhibit 13 – Required Budget for Implementing Marketing Plan
CEO
VP of Sales & Marketing
Market Research Mgr
Marketing Mgr. Ottawa
Marketer – Ottawa University
Marketer - University of Carlton
6.3. Contingency Planning
One of the most important critical issues and threats to this business, as we have mentioned
before, is facing high percentage of unutilized rental cars due to lack of demand or in general or
in seasonal manner. For this purpose, we have considered a virtual partnership with other local
car rentals in neighborhood to use unutilized fleets.
Another potential risk is if student’s federations of universities start to negotiate to reduce group
rates for their membership with one of the car rental firms. For this particular situation we plan to
make close relationship with those federations through public relations and sponsorship of their
events.
7.
Conclusion
Although there are potential risks involved in this project, however we do not see any threat from
leading car rental to focus on this niche market as they have not done that before. They are not
interested in risky market as students and young people.
Nature of the business implies an ample amount of fixed cost and a small portion of variable cost
which makes a considerable contribution margin. This means that any small increase in sales can
contribute in profit significantly.
MBA5330 – Strategic Marketing Management
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25
______________________________________________________________________________
8. Bibliography
1. Philip Kotler, Peggy Cunningham, and Kevin Lane Keller; Marketing Management;
Pearson Education Canada; Toronto; February 2006.
2. Auto Rental News: http://www.fleet-central.com/arn/
3. Car Rental Express: http://www.carrentalexpress.com/
4. Hospitality Net:
http://www.hospitalitynet.org/news/4015182.search?query=how+car+rentals+promote+their
+sale
5. The Auto Channel: http://www.theautochannel.com/news/2005/05/18/090459.html
6. http://www.knowthis.com/
7. http://www.fleet-central.com/arn/00stat3.cfm
8. http://www.paloalto.com.
9. http://www.netmba.com/strategy/swot.
10. Hertz Car Rental Website, http://www.hertz.ca.
11. Avis Car& Truck Rental Website, http://www.avis.com.
12. Enterprise Rent-a-Car Website, http://www.enterprise.com.
13. National Car Rental Website, http://www.nationalcar.ca.
14. Alamo Rent a Car Website. http://www.alamo.ca.
15. Thrifty Car Rental Website, http://www.thrifty.com.
16. Budget Company Website http://www.budget.com.
17. Discount Company Website http://www.discountcar.com.
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9. Appendix 1 - Questionnaire
1. Have you relocated to Ottawa to study?
Yes
No
2. Which group do you belong to?
Under 21 holding a G2 Driving License
Between 21 and 25 holding a G2 Driving License
Between 21 and 25 holding a G Driving License
Over 25 holding a G2 Driving License
Over 25 holding a G Driving License
None of them
3. How often in a month do you rent a car?
0
1
2
3
More than 3
4. When do you prefer to rent a car?
Weekdays
Weekends
5. Do you need to buy an insurance to rent a car?
Yes
No
6. Are you willing to buy a full-coverage insurance to rent a car? (At a price more
than market price)
Yes
No
7. Are you willing to pay more than market price due to the fact that other
companies do not serve you? (Answer this question if you are under 25 and hold a
G2 Driving License)
Yes
No
Not Related
8. Do you like to share the car? (Car Pool)
Yes
No
9. Are you willing to rent a car in Summer?
Yes
No
10. How do you value the service?
Cheaper
Expensive Too Expensive
$20.00
$21.00
$22.00
$23.00
$24.00
$25.00
$26.00
$27.00
$28.00
$29.00
Too Cheap
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10. Appendix 2 – Financial Calculations
Variables
Number of Vehicles (Hyundai Accent Sedan GL 4-Door Auto)
Number of Employee
Number of Locations
Number of rented Cars in a day
Rent Price per day
Office monthly rental price
Lease payment for each car $
Insurance price per day
Car Maintenance cost per month
Car Maintenance for non warranty items per month
University parking rent
Lisence Plate and Stickers
Insurance Rate per month
Ministry of Transportation fee per car per year
City of Ottawa fee
Free Parking Space rent
Advertising budget per month
Salary rate per hour
$9.00
$1.00
$1.00
$7.00
$22.00
$800.00
$200.00
$22.00
$50.00
$50.00
$50.00
$100.00
$100.00
$50.00
$100.00
$0.00
$200.00
$8.00
Revenues
Income $
Insurance Sales
Car Rentals
Total Revenue
Revenue per car per day
Total Cost
$43,982.40
$51,744.00
$95,726.40
$40.70
$84,654.00
Variable Costs
Cost$
Car Maintenance costs for Non-Warranty Items
Car Maintenance for Warranty Items
Total Variable Cost
Variable Costs per car per day
$4,200.00
$4,200.00
$8,400.00
$3.57
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Fixed Cost
Cost$
Salaries, wages and benefits
Advertising and Marketing
General and administrative (2)
Materials, services and supplies (1)
Office lease rent
Ground lease rent
Amortization
Car Lease payment
Car Insurance
Ministry of transportation fee
City of Ottawa fee
License plate and plate stickers
Total Fixed Cost
Fixed cost per car per day
$21,504.00
$2,400.00
$500.00
$1,000.00
$9,600.00
$5,400.00
$2,000.00
$21,600.00
$10,800.00
$450.00
$100.00
$900.00
$76,254.00
$32.42
Contribution Margin (CM)
$
Revenue per car per day
Variable Costs per car per day
Fixed Costs (TC)
Profit (Loss)
BEP per Year
BEP per Day
$40.70
$3.57
$76,254.00
$11,072.40
$2,053.78
$6.11