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
• 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
Introduction
Industry
Ad Strategy
Recommendation
Industry: Background
Introduction
Industry
Ad Strategy
Recommendation
Four Major Players
1.
2.
3.
4.
Enterprise Holdings Inc. (38%)
Hertz Global Holdings Inc. (18.9%)
Avis Budget Group Inc. (18.5%)
Dollar Thrifty Automotive Group (5%)
Introduction
Industry
Ad Strategy
Recommendation
Competition
• 4 Firm Concentration Ratio: 80.4
• HHI: 2168
Market Share
Enterprise Holdings
Inc.
Hertz Global
Holdings Inc.
Avis Budget Group
Inc.
Dollar Thrifty
Automotive Group
Other
20%
38%
5%
18%
19%
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
Introduction
Industry
Ad Strategy
Recommendation
Who uses services?
Leisure
Business
Employees
• Labor in industry is mainly face-to faceconsumer 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
Introduction
Industry
Ad Strategy
Recommendation
Fleet Acquisition
• Manufacturers
•Buy
•Lease
Supply Chain
Remarket Fleet
Distribution
•Relationship / Partnership Marketing
•Online
•On-Site Location: Airport, hotel, neighborhood
Insurance
•Outside Insurance
•Self-Insured
Resale •Used car sales
•Sell back to manufacturer
Brand Equity
• Not in the top 100 brands
• Small industry
• Not frequently consumed
Introduction
Industry
Ad Strategy
Recommendation
Advertising Strategies
Dollars Spent on Advertising
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
Introduction
Industry
Ad Strategy
Recommendation
•
•
•
•
Owns Budget and Avis
Has 18% of market share
Spent $19.8 Million on TV Advertising
1.81% Ad to Sales Ratio
Introduction
Industry
Ad Strategy
Recommendation
• “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
Introduction
Industry
Ad Strategy
Recommendation
Commercials: Enterprise Holdings
National Commercial
Introduction
Industry
Alamo Commercial
Ad Strategy
Recommendation
Number of Ads (Hundreds)
Total Ads by Day
50
45
40
35
30
25
20
15
10
5
0
SUN
Introduction
MON
TUE
Industry
WED
THU
Ad Strategy
FRI
SAT
Recommendation
Number of Ads by Day of Week
Number of Ads
120
Avis
100
80
Weekends
60
40
20
0
SUN MON TUE WED THU FRI
SAT
Number of Ads
(Hundreds)
Enterprise Rent-A-Car
18
16
14
12
10
8
6
4
2
0
Weekdays
SUN MON TUE WED THU
Introduction
FRI
Industry
SAT
Ad Strategy
Recommendation
Top Daypart by Number of Ads
Enterprise Rent-A-Car
60
2000
50
Number of Ads
Number of Ads
Avis
40
30
20
10
0
Sunday Saturday Sunday
Afternoon Afternoon Early
Fringe 1
Introduction
Prime
Afternoon
Daytime 2
Industry
1500
1000
500
0
Prime
Overnight Afternoon Early
Daytime 2 Fringe 2
Ad Strategy
Late
Fringe
Recommendation
Top Daypart by Expenditure
Expenditure (Millions of Dollars)
Enterprise Rent-A-Car
40
35
30
25
20
15
10
5
0
Prime
Introduction
Late Fringe
Industry
Saturday
Afternoon
Late News
Ad Strategy
Sunday
Afternoon
Recommendation
Number of Ads (Hundreds)
Total Ads by Month
45
40
35
30
25
20
15
10
5
0
Introduction
Industry
Ad Strategy
Recommendation
Ads by Month
Number of Ads (Hundreds)
Enterprise Rent-A-Car
National Car Rental
Budget
Hertz
16
14
12
10
8
6
4
2
0
Introduction
Industry
Ad Strategy
Recommendation
Number of Ads
Number of Avis Ads
50
45
40
35
30
25
20
15
10
5
0
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”
Introduction
Industry
Ad Strategy
Recommendation
Analysis and Recommendations
Investments
Avis Budget Group
Volatile
markets
Hertz Holdings
Introduction
Industry
Ad Strategy
Recommendation
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
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
Introduction
Industry
Ad Strategy
Recommendation
Questions?