L l
[2010]
Julia Crofts, Andrew Haas, Julio Rios, Hyeon
Seong Jeong

Executive Summary ................................................................................................................................. 4
Situation Analysis .................................................................................................................................... 5
Environmental Analysis........................................................................................................................ 5
Economy .......................................................................................................................................... 5
Politics ............................................................................................................................................. 5
Media .............................................................................................................................................. 5
Transportation Infrastructure .......................................................................................................... 6
Capital City ...................................................................................................................................... 6
Company Analysis ................................................................................................................................ 6
Strengths ......................................................................................................................................... 6
Weaknesses ..................................................................................................................................... 8
Customer Analysis ............................................................................................................................... 9
Potential Market Segments .............................................................................................................. 9
Competitor Analysis........................................................................................................................... 12
Car Ownership ............................................................................................................................... 13
Hertz ............................................................................................................................................. 13 eHi’s FastCar .................................................................................................................................. 14
Public Transportation..................................................................................................................... 14
Channel Analysis ................................................................................................................................ 14
Form of Market Entry .................................................................................................................... 14
Zipcar’s Partner ............................................................................................................................. 15
Marketing Strategy Plan ........................................................................................................................ 16
Statement of Marketing Objectives ................................................................................................... 16
Statement and Justification of Marketing Strategy ............................................................................. 17
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Target Market Selection ................................................................................................................. 18
Product Decisions .............................................................................................................................. 19
Zipcar Description .......................................................................................................................... 19
Pricing Decisions ................................................................................................................................ 20
Distribution ....................................................................................................................................... 20
Promotion ......................................................................................................................................... 21
Tactical Plan ...................................................................................................................................... 22
Appendix ........................................................................................................................................... 23
Bibliography ...................................................................................................................................... 26
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The enclosed report is an international marketing plan for the entry of Zipcar into Beijing, China. Zipcar’s concept of car sharing is simple, inexpensive, and convenient. The company has showed innovation in devising an easyaccess, rental car service for frequent use. The concept brings value to customers by saving them money on car ownership expenses, allowing them to reduce their carbon footprint, and promoting healthy living. Zipcar’s success in the United States, Canada and the United Kingdom suggest that the model works in various cultural settings.
During the 2008 Beijing Olympics, Beijing’s traffic congestion and pollution problems were presented to the world.
Stories were featured about the challenges caused by the city’s poor air quality and appalling traffic. Meanwhile, the already massive Chinese market is growing and becoming increasingly wealthy. The convergence of these two trends, among others, signifies a unique business opportunity for Zipcar’s car sharing model. Admittedly, the difficulty of entering China as a foreign firm and the prospect of stiff competition will make this a challenging endeavor.
For this reason, it is essential that Zipcar come prepared with a sound business strategy and marketing plan that takes some of these threats into account. Zipcar will rely on a joint venture with BYD Auto, benefiting from synergies, local knowledge, and the relationships of an established Chinese firm. Young professionals will serve as
Zipcar’s primary target market, followed by university students, and young families. Product offerings will be tailored slightly to specifically address the needs of the Chinese customer and pricing will be based on survey data about the customer’s willingness and ability to pay (See Appendix, Graph 1.1). The company will deliver a consistent message using trendy, low-cost strategies, focusing on the benefits offered to the consumer through the use of Zipcar’s services.
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The external environment of Beijing, China is very dynamic. Thus, it is imperative to identify opportunities and threats facing Zipcar that are unique to the Chinese market. Due to the government’s stimulus package and returns in expenditure on property development, the actual GDP in China was 8.7% which was above the aim of
GDP growth, 8% (The Economist Intelligence Unit – Country Forecast). This indicates a strong economic climate and future growth potential. From 1981 to 2007 the Chinese economy grew an average of 10% a year. This growth created a significant increase in jobs, wages, and living standards. Coupled with anticipated growth in agricultural supply, consumer prices will remain steady so that inflation will be limited to a modest 3.5% in 2010 and 3.2% in
2011 (The Economist Intelligence Unit – Country Forecast). Even though China is pressured by other countries to appreciate their currency, it is not likely that the Chinese government will do so. As a result, the value of Chinese
Yuan should stay constant for the foreseeable future (The Economist Intelligence Unit – Country Forecast).
The Chinese government is committed to developing “its harmonious society” and stimulating economic growth.
The government is dedicated to increase spending on education, health, and social welfare. The Chinese
Communist Party (CCP) will maintain its political dominance. It does not appear that the government will alter its political party system. However, as the violence in Xinjiang province in 2009 and widespread insurgency in the
Tibetan-dominated region in 2008 showed, the political system in China remains somewhat unstable (The
Economist Intelligence Unit – Country Forecast). In the next two years, the government will struggle with possible problems relating to unemployment (The Economist Intelligence Unit – Country Forecast). Recent articles in the press have highlighted Chinese protectionism with respect to business. Barriers to entry are enacted for foreign firms and beneficial treatment is given to Chinese companies.
The censorship of the media should also be considered because it is a necessary channel for Zipcar to increase its awareness and market share through advertising. Currently, China has a wide array of media: Television, Radio,
Newspaper, Magazines. There were 1,938 newspapers, 9,468 magazines, 287 television stations and 263 radio
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stations in circulation in 2007 (The Economist Intelligence Unit – Country Profile). However, the government monitors what is published especially on sensitive issues like policy, economy, and social uprisings. Each media sector is monopolized by the state with only a few private companies existing. CCP controls the Chinese Central
Television, the most powerful television network (The Economist Intelligence Unit – Country Profile).
As the government has developed infrastructure over the course of the past two decades, logistics have improved significantly. Overall, the infrastructure of the major cities in China is improving and will be better as the national road network is continually being extended and railways expanded. (The Economist Intelligence Unit – Country
Profile). In 2007, the highway system had 53,900 km of expressways and the government plans to extend 900,000 km of rural roads (The Economist Intelligence Unit – Country Profile). These improvements will make driving increasingly attractive and public transportation inadequate to meet demand. According to The Economist
Intelligence Unit, there were 32 million passenger vehicles in 2007 compared to 12 million in 2002. The railway network in China covers 78,000 km, the third most extensive in the world and will be extended to 120,000 km by
2020 (The Economist Intelligence Unit- Country Profile). Due to the large and growing population, the railway network is congested and crowded most of the time.
In Beijing there are an estimated 2.82 million cars on the road with over 1,000 more cars added each day (Xinhua).
Air pollution from car emissions, not enough parking spaces, and traffic congestion are top concerns of residents.
The Beijing municipal government recently decided to raise the vehicle tax by 2.5% and increase parking fees by
20% to ameliorate some of these problems (Jiangwei).
As a company, Zipcar is characterized by a number of strengths which will facilitate global expansion into Beijing,
China. First, it is a robust and promising company that has experienced impressive growth. In 2009, the company reported sales of $120 million, a figure which is expected to grow to 1 billion in the next decade. Further,
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approximately 7,500 new members join each month and an initial public offering is planned for 2010. Zipcar is currently the global leader in car-sharing. Recent figures cited the company as offering vehicles in 64 American cities in addition to services in London, England, Toronto and Vancover. The company has identified parties with mutual interests in car-sharing to develop strong, mutually beneficial business arrangements. It has paired up with city governments struggling with traffic congestion, colleges and universities with parking issues, in addition to other like-minded companies. Ikea and Zipcar are a great example of this type of synergistic corporate partnership; both cater to the trendy and cost-sensitive urban individual. Zipcar facilitates transport to and from store locations outside the city center, and Ikea brings greater visibility to Zipcar.
A second strength of the company is the ability to offer a striking value proposition. Zipcar offers a streamlined rental car service for individuals, businesses, and universities. They can be booked through the web, or via mobile phones and are picked up and dropped off in local neighborhoods. The process is convenient and saves customers money. On average, Zipcar clients or “Zipsters” save $500 a month compared to car owners (Champy). One analyst, sums up the value proposition succinctly, “Zipcar saw the benefits of car-sharing for urban Americans and provided an economical solution to such problems as the high cost of ownership, aggravation of traffic congestion, and danger of environmental damage” (Champy). Plans are straightforward, flexible, and inexpensive. Customers can opt for a $55 annual fee or a plan with no commitment. Hourly rates are under $10, and there is also a daily option. Customers do not have to worry about insurance, maintenance, depreciation, parking fees, etc. Further, the automobiles are equipped with the newest technology, including Satellite radio and a voice-mail system to report problems. Customers have the choice of 25 different car models, including Minis, Hybrids and BMWs.
Zipcar’s market segmentation takes into account that different customers have different needs. The firm serves individuals, the corporate world, and college students. Around 8,500 companies subscribe to Zipcar’s services, including Lockheed Martin, Gap and Nike. The car-sharing service is also represented at 120 colleges and universities (Brafman 25). Similarly, Zipcar is already aware of the importance of adapting to local tastes and expectations. For example, in the U.S. Zipcar realized that consumers would not be willing to walk as far as
Europeans to get their cars, placing them no more than 15 minutes away as a result (Champy). In Portland and
Seattle cars are equipped with bike racks and are allowed entry into national parks free of charge (Kunur). In
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Boston, Zipcars have transponders to deal with the frequent tolls. This ability to be flexible and respond to the needs of different markets will serve the company well in China.
Zipcar has adopted innovative marketing tactics to effectively target potential customers, all while remaining cognizant of trends that could positively impact business. In 2009 Zipcar appeared in Fortune 500 Magazine as the
“Best New Idea”. According to the article, “the idea of sharing a car is the natural extension of a hip, financially smart, and environmentally conscious urban lifestyle” (Keegan). Zipcar effectively capitalized on the wave of environmental consciousness and health awareness, utilizing this in its marketing by focusing on the cost, environment, and health benefits. The company is said to market on the “hyper-local level” since they are looking for new customers within 15 minutes walking distance of a given car location. They achieve this through the demographic study of neighborhoods, guerilla marketing through targeted marketing collateral (brochures, posters, handouts), partnerships with local businesses, and individual marketing efforts (Champy). In Washington
D.C., an innovative advertisement consisted of a couch on the street with the logo, “you need a Zipcar for this”.
Another market-wide example was the “Low Car Diet” campaign. Car owners in Zipcar cities across the U.S. were asked to give up their vehicles for a month and blog about the experience; free bikes were given to select participants. The results spoke volumes about the benefits of joining Zipcar. New Zipsters saved up to 67% on automotive expenses and lost weight. This knack for innovation gives Zipcar excellent brand identification and will certainly give the company an advantage in China.
Notwithstanding Zipcar’s success, the company’s international experience thus far is limited. Outside the U.S.,
Zipcar only operates in England and Canada. It is therefore difficult to gauge the company’s ability to perform in a non-Anglo-saxon, foreign environment. China would be an unfamiliar business environment, representing a considerable challenge in the form of considerable cultural, economic, and language barriers.
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Despite Zipcar’s ten years of experience in the business, more entrants are beginning to enter the car-sharing space. Bigger players such as Hertz have some advantages that are difficult to match. Larger, traditional rental car companies benefit from economies of scale and synergies between their other businesses. Volume discounts on cars, large customer service centers, and the capacity for extensive investment are some specific advantages. One source mentions that if Hertz wanted to start a price war with Zipcar it could absorb losses and squeeze the smaller player (Keegan).
Four potential market segments have been identified: university students, young professionals, young families, and the local business community. These groups are open to trying new ideas because they are youthful and educated.
All of the groups are more likely than others to use the internet and mobile phones, enabling them to easily access
Zipcar’s services. Another promising trend is that, according to Euromonitor, “consumption of green and environmental products is on the rise amongst educated people [in China]. Global issues such as sustainability and global warming are very much factors in the spending choices of Chinese consumers (Euromonitor: Lifestyles).”
This will become more deeply ingrained as education and information availability spread in China. Zipcar stands to benefit from this trend through its marketing as an eco-friendly alternative to car ownership. Admittedly, in the study 26% of those polled indicated that they felt public transportation was convenient, so naturally this would compete with Zipcar for short-trips (See Appendix, Table 1.1). In the survey, only 10% of respondents reported regular use of the Internet or mobile phones and only 21% claimed the ability to drive. These are negative factors that might inhibit demand for Zipcar, however, trends indicate that these practices necessary to use Zipcar are rising.
The selected segments have a certain commonality in terms of price sensitivity and their acceptance of innovations, which is why they have been targeted. A survey conducted on the market potential for car sharing in
Beijing identified what locals like and dislike about car ownership. The results revealed that many appreciated the
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travel convenience, comfort, and mobility of a car. Meanwhile, reticence to buy a car stemmed from the high cost of purchase/ownership, environmental disadvantages, and parking problems. This indicates that because Zipcar provides the advantages of car ownership, while mitigating the disadvantages, it will have powerful persuasion potential for targeted groups that meet certain conditions. It is worth noting that only 11% of Chinese polled thought status was an important factor in owning a car. This is promising for Zipcar. University students, young professionals and young families have been targeted precisely because they are price sensitive and Zipcar offers an attractive low-cost alternative to car ownership that is more convenient than other options.
The total number of students in higher education in China as of 2007 was approximated at 100 million. The entire student population was said to have encountered a 30% increase toward 2010, decreasing again to 100 million by
2015 for little net change. In Beijing alone there are over 70 colleges and universities. Data from the 2000 Census counts 75,000 regularly enrolled four-year college students and 23,000 graduate students in colleges and universities in Beijing ("Status of Population and Family Planning Programme by Province"). Therefore a reasonable estimate for the current Beijing student population is 98,000 (reflecting the minimal net change in the countrywide statistics). If 25% of this population is interested in car sharing, demand or interest in car sharing can be estimated at 24,500. This educated population has experienced the opening of borders and is aware of foreign goods and trends. This segment is competitive and cosmopolitan and marketing ought to take this into account.
This group is an amalgamation of individuals throughout their 20s. This segment for China as a whole was projected to grow in 2007 by about 10% until the year 2015 and is forecasted to rise from 190 million to 210 million in 2015. By 2015 there should be 5 million more males than females in this group. Information specific to
Beijing for this group could not be found. As a result, estimates have been generated based on the fact that 1.18% of the Chinese population lives in Beijing. By taking the total number of Chinese in their 20s and multiplying this by
1.18%, one can approximate the population of individuals in their 20s in Beijing. Of this amount 25% are estimated to be likely car sharing candidates, based on the Beijing Car Sharing Survey (Shaheen and Martin). Additionally, we assume that education is a good indication of income since in most societies there tends to be a high correlation between the two. Given that 30% of Beijing’s population has completed college/university or higher, it will be assumed that they are wealthy enough to afford Zipcar (“Statistical Communiques”)( See Appendix, Table 1.2). The result is a conservative 167,711 estimated demand from young professionals. This figure is said to be
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“conservative” because the 25% of Beijing locals expressing a high interest in car sharing is likely to be a skewed sample, already over-representative of the higher income bracket. In this way, estimates may have been overly cautious.
Young professionals are excited by high-tech products, which are said to be highly marketable. Small cars, in particular, are mentioned in market surveys as attractive to them. They are, again, looking for the comfort and convenience of car ownership but do not have the income to purchase. They have a greater awareness of environmental issues than their older counterparts. For the young professionals, Zipcar offers a reliable way to get to work and other engagements at a fraction of the cost. These individuals regularly use consumer technical devices such as mobile phones, pdas and laptops. They are beginning to settle down with a partner later in their
20s. The young professionals share some characteristics with students, except that they have greater disposable income and represent the second highest income group.
This group tends to be in their late 20s to mid-30s. This segment will decline by 20% between 2007 and 2015.
Figures estimate 238 million in 2007, 226 million in 2010 and 184 million by 2015. Using the same assumptions outlined in the previous section, demand from this group can be estimated at 210, 080. For detailed figures, see the table on estimates for each segment.
Those in their 30s are the highest wage earners and the main group for consumption in general. Their buying habits are more difficult to predict than other groups, however, marriage and children shape their spending habits.
They are also focused on health and well-being. Many are looking to buy cars. Other relevant outlets for spending include: “Entertainment, socializing, vacation and leisure activities” (Euromonitor: Segments). They are interested in products that will support their family life whether it is by saving time, money or making their lives more comfortable.
In the long-term (3-5 years), the Zipcar in China venture will seek to establish ties with the Beijing business community, and subsequently make deals with large corporations to provide car sharing accounts for employees.
This can only be achieved once Zipcar has a strong foundation in China. The business segment has very high margin potential and will be an important source of revenue for Zipcar. Zipcar’s services will provide clean and cost-
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effective car pooling options. Company cars can be procured through Zipcar for business use. Corporations will benefit from the corporate social responsibility aspect (environmental and reduction of traffic congestion benefits) of a car sharing partnership.
Population Breakdown/Projected Demand Year 1
Students
Pop. in Beijing (1.18% 98,000
China)
Interest in Car Sharing 24,500
(25%)
Upper Income/Higher 24,500
Education (30%)
Total Estimated Demand 24,500
Projected Demand Years 1-3
Year 1
Students
Young Professionals
Young Families
Total
24,500
167, 711
210,080
402,291
Young Professionals
2, 236,153
559,038
167,711
167,711
Year 2*
29,500
175,711
215,080
420,291
Young Families
2,801,076
700, 269
210,080
210,080
Year 3*
34,500
183,711
220,080
438,291
* Based on US estimates of 1,500 new members each month. 1,500 members * 12 months= 18,000; Young
Professionals (primary market): 8,000 new members/ year, Students and Young Families: 5,000/ year (secondary markets)
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Zipcar is a car sharing program for individuals, businesses, and universities, thus it is different from a traditional car rental company. In this respect, Zipcar doesn’t compete directly with the large number of rental companies, but rather with car ownership. A few rental car companies, however, have considered entering the car sharing market or have already entered it elsewhere if not in China. Zipcar’s Chief Executive expects car sharing competition to grow, based on his company’s success. Also, increasing car ownership and a well-diversified public transportation system in Beijing may pose a threat to Zipcar.
According to a consumer expenditure on transport report in China, the percentage of car purchases in 2007 was
44.3% compared to 5.9% in 1995. As world trade between countries has increased in China, vehicles have decreased in cost. Government subsidies make cars even more accessible. Thus, car ownership in China has become a more realistic option for middle income classes (Transport). Also, according to CNN, there will be 55 million privately owned cars in China by 2010 compared to 22 million in 2009. This figure is forecasted to increase further (CNN). The advantages of car ownership are the pride of ownership and increased flexibility. However, to most young professionals whom Zipcar targets, high down payments, maintenance costs, increasing gas prices, high parking fees, and insurance costs make car sharing and public transportation attractive options.
Traditionally, Hertz has been the largest rental company in the world with 3,500 locations in the US and 7,500 worldwide (Hertz). According to Clean Fleet Report, Hertz has launched its sharing program in London, New York city, and Paris. Hertz is planning to expand its program into additional cities in 2009 (Addison). Even though Hertz has not yet come into China, it will threaten Zipcar’s market share whenever it launches its program there. Hertz’s car sharing program provides the same service as Zipcar, as well as extra services such as roadside assistance, maintenance, and cleaning. In addition, Hertz equips its clients with hands-free audio kits, which connect clients to representatives for communication to solve problems while driving (Addison). Once they consider the potential benefits in Chinese markets, Hertz may be tempted to enter the country. Hertz could be a fierce competitor for
Zipcar. U-Haul International Inc., Avis, and Enterprise Rent-A-Car are additional companies, which are also considering launching car sharing.
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eHi Car Service Company is China’s main car service distributor for “self drive service and chauffeur drive service”
(eHi). The company has received a number of prestigious awards. Unfortunately as of January 2010, eHi entered the market for car sharing in Beijing. Their initial fleet is small, limited to 100 cars, but they plan to have 1,000 cars by the end of 2010. The cost of services is 40 Chinese Yuan per hour, about equivalent to a 30-minute taxi ride. For
320 Chinese Yuan customers can get the car for a day. Insurance is included, but fuel is not, and a down payment of 3,000 Chinese Yuan is required. eHi will likely benefit from established relationships with local government, and maybe even financial support, as a domestic firm. Zipcar will have to closely observe eHi’s progress and learn from its competitor’s mistakes, using this information to its advantage. Zipcar must make its offerings more attractive to compete with FastCar. The U.S. firm must also devise an entry strategy that will build and capitalize on its own relationships with the Chinese and their government in a way that will level the playing field. Zipcar was actually the model that eHi followed in launching its concept.
Buses and subways are the basic form of public transportation in Beijing. Due to the city’s large population, the numbers of buses, subways and the public transportation network have increased yearly to meet public demand.
Nonetheless, the public transportation system continues to be overcrowded (transport). As Beijing’s traffic congestion is severe, using public transportation is efficient compared to cars ( Xinhua ).
Public transportation is more efficient and environmentally friendly. However, public transport is much less flexible when compared to automotive transport. Interestingly, in the survey conducted by Shaheen and Martin on car sharing in Beijing 74% of respondents reported using public transportation and still had a high interest in car sharing (See Appendix,
Graph 1.2).
Zipcar will enter Beijing through a joint venture with BYD Auto. Zipcar will have the majority stake and assume control because this is more likely to result in success. This decision to pursue a joint venture has been reached through careful analysis with awareness of the obstacles of doing business in China. Zipcar’s experience marketing in the U.S. has attested to the importance of market knowledge on a hyper-local level. A partnership with a
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Chinese firm will be necessary to gain access to this type of local knowledge in the initial stages. For Zipcar to be successful, good government relations are imperative. The Chinese government has a history of creating obstacles to firms that it does not favor. Good government relations are even more important for a company like Zipcar, where arrangements must be made with the Beijing government to obtain city parking for the vehicles. According to Doing Business in China , the government views favorably ventures that: 1) help the growing Chinese economy 2) encourage the development of Chinese culture, and 3) represent the needs of the local people. Zipcar’s ability to improve air quality, reduce traffic congestion, and streamline parking within the city of Beijing increases the likelihood that the government will support Zipcar.
BYD Auto is a Chinese battery, mobile phone, and electric car company owned by Wang Chuan-Fu, who is renowned for entrepreneurship and innovation. BYD Auto became involved in automobile manufacturing in 2003 by buying out a Chinese state-owned enterprise. The company’s F3 sedan quickly became China’s bestselling car in its class, surpassing foreign cars like the Volkswagen Jetta and the Toyota Corolla. BYD also sells a plug-in electric car with a backup gasoline engine. This model goes farther on a charge and costs less than similar automobiles produced by competitors. BYD Auto currently has eight factories in China (Gunther).
BYD Auto has been selected because they will be able to provide environmentally-friendly vehicles that are popular among Chinese. They have technical expertise as a player in the automotive industry and access to local facilities. Procuring cars from within China makes more sense for Zipcar because of the high import tax associated with foreign vehicles. With a manufacturing plant in Beijing, their facilities and location are well-placed to take advantage of market opportunities. BYD also has established relationships with firms in the supply chain, customers, and the government, called guanxi , which shape how things get done in China. Lastly, BYD Auto has an interest in expanding its operations and developing a market in the U.S. A passage in Doing Business in China illustrates the significance of this to the relationship:
Some of the most successful joint ventures of recent years have been structured along a two-way network, with a foreign firm allowed to use the domestic partner’s distribution network to sell into China, while the domestic firm gains access to foreign networks. These kinds of ventures are increasingly common in the car industry, as China’s car-makers grow in sophistication and begin to seek export markets. ( Ambler, Witzel, and Xi 142)
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There are three sustainable marketing objectives for Zipcar: a consistent message, continuous understanding of the consumer through market research, and exceptional customer service. The message will consistently preach affordability, environmentalism, and ease of use. This message will be displayed in all aspects of the company. It is especially important to showcase this message in two areas. The first place the consumer interacts with the company is through the website or cell phone application, so it is extremely important that these are designed to deliver a consistent message so that the consumer can fully understand the business. Second, it is essential that
Zipcar’s advertising and promotional strategies consistently preach this message. The promotional and advertising strategies for Zipcar will frame the service as affordable, environmentally friendly, and a way to facilitate their daily activities. Since consumers might not be aware of car sharing because of the idea’s novelty, it is important to be consistent with the Zipcar message. Zipcar’s innovation gave way to the car sharing concept. From the start, consumers must equate car sharing with Zipcar rather than with competitors such as eHi that have borrowed the idea. To measure the degree to which marketing objectives are being met, research through focus groups and surveys will be conducted every 4 months during the first year and every six months during the second year. The research will be designed to gauge the communication of Zipcar’s message.
Zipcar’s second objective is to continuously understand the Chinese market. Marketing research is essential to the success of Zipcar. The initial research gathered has indicated a strong potential for success in China, but research should not stop there. It is more important to conduct research in the first few months, to gauge the customer’s interests, likes, and dislikes so that Zipcar can fully adapt to the market’s needs. Furthermore, it is important to constantly conduct research in the long term to gauge trends and changing needs in the market. All of the research has a significant impact on the marketing message, advertising and promotion, product mix, and relationship with the customer.
The next objective is to establish exceptional customer service. Once again, because car sharing is relatively new to China, it is important that interaction between Zipcar and the customer be impeccable to properly communicate the Zipcar message. To achieve this objective, any interaction the customer has with Zipcar must be easy, helpful, and informative. This should be most evident in the company website, where all of the information and arrangements can be obtained in a quick and user-friendly manner. Also, customer support should just be a phone call or an instant message away to answer any of the customer’s questions or problems. Furthermore, Zipcar must
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establish relationships with the local communities in Beijing to promote the Zipcar message through hyper-local relationships and to demonstrate the needs being fulfilled. To measure this objective, online surveys will be used to measure the level of customer satisfaction.
In addition, Zipcar will be able to diversify its business in the future. In two to four years, Zipcar will have conducted the necessary research to branch into business and university markets. There is a large potential in these segments and this is seen in the success of the US market. Growth in different segments is essential to success and necessary to differentiate Zipcar from the competition. Furthermore, we will expand into other cities in the future. Cities like Shanghai, Guangzhou, and Shenzhen have high potential for expansion because of their similar market needs.
There are also several objectives important to Zipcar that must be achieved relating to market share, sales, and growth. In year one we expect to obtain 5% of the potential demand/total market share (20,114), and it will grow exponentially to 20% in year two (84,058) and 50% in year three (219,145). The rapid growth is justified by the targeted advertising and promotional strategies, the historical success in the US market, and expansion into businesses and universities. Our sales objectives based on the expectation for Zipcar’s share of the car sharing market are listed below:
Year 1 Year 2 Year 3
Price Sales Price Sales Price Sales
$ 6.00 $506,886.66 $ 8.00 $2,824,355.52 $ 8.00 $ 7,363,288.80
$ 60.00 $362,061.90 $ 80.00 $2,017,396.80 $ 80.00 $ 5,259,492.00
Total Sales $868,948.56 Total Sales $4,841,752.32 Total Sales $12,622,780.80
Zipcar expects that hourly users will drive on average six hours per week. Furthermore, 70% of the consumers will prefer to use an hourly rate and 30% will prefer to use a daily rate. Sales start off slow in year one but grow rapidly in years two and three.
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The primary target market for Zipcar will be young professionals. This target market includes both males and females between 22 and 30 years of age. This is a fast growing segment in China and is forecasted to rise by about
10% between now and 2015, which is promising for Zipcar. Several other characteristics justify the selection of this group as the target market. Winning over the young professionals will help Zipcar to more easily establish corporate relationships in the long-term. When Zipcar is ready to build corporate relationships, they will already have proponents for their services within the targeted organizations. The young professionals also have the second highest disposable income and tend to be more open to expenditures on leisure and recreation. They have fewer constraints on spending because they have a steady income and don’t have family constraints. They are said to be more accepting of a “spending more, saving less” mentality (Euromonitor Chinese Lifestyle). Young professionals are the trendsetting demographic. They have a significant impact on what is accepted and valued by the rest of the population, from students to the middle aged. Young professionals are on the cutting edge of technology with cell phones, the internet, and computers. This will allow this group to easily access Zipcar’s services through the web and mobile phones and appreciate its efficiency. This segment appreciates innovation. In addition, young professionals are very environmentally aware and are constantly seeking new ways to protect the environment and live a more sustainable life (Euromonitor Chinese Lifestlye). They are less reliant on automobiles and are willing to take public transit, bicycle, or walk. The young professionals are actually seeking the convenience of owning a car without necessarily having the income to purchase one. Moreover, they are less concerned with cars as a status symbol (Shaheen and Martin 15). This group is very active and likes products that support their lifestyle.
They are constantly busy with work, but also exercise and enjoy having a good time. Zipcar can help streamline their day, allowing them to run errands, go to the grocery store, pick up friends around town, go on a date, get to the gym or simply drive.
University Students are part of the secondary target market for Zipcar. There are approximately 100 million students in Beijing, they are single and range in age from 18-22 years (Euromonitor Segments). Students are not big spenders in the short-term, and their disposable income is much lower than that of business professionals.
Nevertheless, Zipcar is still considered affordable to this group and establishing brand loyalty with them in the long-run is a worthwhile endeavor. Zipcar has an enormous appeal for students. Many university students in
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Beijing have learned how to drive and enjoy the benefits of freedom and mobility. The high cost of car ownership, however, makes cars relatively inaccessible. Students would appreciate access to a car for social activities like dates or day trips with their friends. Zipcar could also be used for carrying large items or moving in or out of a family home or student residence. The environmental appeal of Zipcar is another selling point to this younger generation, who take pride in saving the environment. They also take notice of the trends set by young professionals.
Young families are typically comprised of a mother and father between the ages of 25 and 35, with a young child that is under the age of 13. Although they are high wage earners, it is estimated that proportionally less of their income is discretionary in view of family financial obligations. They are also less likely to change their current transportation habits because of their status in life. One or both of the parents are well educated and have established careers. They have a steady income, but their buying habits are more difficult to predict. However, marriage and children strongly influence their spending habits. Young families may need extra space for young children or the ability to shop at stores further from their house or outside the urban city center. They enjoy short excursions for the day as well as longer leisure trips (Euromonitor Segments). While they are looking to buy a car, they are very price conscious. Zipcar will allow the parents a convenient way to run errands, take their children to practice, and have a night out. Young families will benefit from the flexibility of Zipcar, without the associated financial obligations.
Zipcar in China will provide the same basic service of car sharing as in other markets (see company analysis), but will adapt to meet the needs of the Chinese consumers. Its offerings are a streamlined car rental services for individuals to be located initially in Beijing. Cars will be available to rent by the hour or up to an entire day. Cars can be booked through the website and mobile phones. The cars are then picked up and dropped off in local neighborhoods.
Drivers must apply online and are usually approved within 24 hours. Drivers must be at least 21 years of age and have a driver’s license. Next, a Zipcard is issued to the approved driver and it works as a card key through RFID technology to open and close the rented car. Furthermore, gas and insurance will be included in the original price.
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There are several necessary adaptations to fully meet the needs of the Chinese consumers. First, the type of cars available to rent will be different. In China, there will be a green emphasis, hybrids, electric cars and vehicles that are more suitable for the Chinese environment will make up Zipcar’s fleet. These vehicles will be made in China by
Zipcar’s joint venture partner. Thus, hefty import taxes will be avoided and the appeasement of the Chinese government is ensured because of the benefit to business, society, an people. Through the joint venture, Zipcar will offer only two cars: a hybrid and a sedan. These cars will have accessories like bike racks, GPS technology,
MP3 players, and sufficient trunk space for the business professional. All of these accessories are meant to fill the needs of the technologically advanced professional, who is living a busy life. Furthermore, there will be a different mileage limitation. In the US, users can drive up to 180 miles a day. In China, the majority of drivers travel less than 50 kilometer per day (roughly 30 miles). Demand to drive long distances is significantly less, so the limitation will be adjusted accordingly. The limit in China of 75 miles a day will achieve this, while still giving the driver the flexibility and freedom for longer trips.
Based on our three year growth estimate, we expect to require approximately 3,600 cars over three years to service the Beijing population. These cars will consist of BYD auto’s sedan and hybrid models. We will align the procurement of our fleet with our estimated growth model. Initially in year one, we are charging 41 Chinese Yuan, based on what Chinese customers are willing to pay (Shaheen 13). This is the equivalent of $6 per hour. The cost of renting a Zipcar for an entire day will be approximately 409.5 yuan or $60. In year two, we plan on raising these prices to the equivalent of $8 and $80 respectively in order to help stimulate revenue and meet increased anticipated demand. These costs include a full tank of gas, and liability insurance of up to $300,000.
Zipcar does not need a typical distribution system because of the unique nature of their business. They don’t have a store front or traditional retail establishment; instead they market their service online. This allows for a cost saving business approach that bypasses many of the traditional business distribution models. The one area in which Zipcar will use distribution is to locate their vehicles in specific areas.
Zipcar has traditionally targeted residential neighborhoods with large populations of young working individuals.
However, in China we would like to broaden Zipcar’s hyper-local distribution and focus on three main areas: residential neighborhoods, workplace/ schools, and rail transit stations (Shaheen 13).
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In order for Zipcar to work successfully, the company needs to secure parking places in which the customer can pick up and drop off the vehicle. This is a key element in the Zipcar model. Parking spaces need to be procured in areas that are convenient to the maximum number of potential customers. The current real estate market has inflated real estate prices to a premium; it is therefore a more cost effective option to lease parking spots. As of
March 2010, the average price for parking per square meter in Beijing is RMB 4,517.2 (China Country Report).
Distribution will begin in several key neighborhoods inside the 5 th
ring road or the original city. The Cao Yang,
Chong Wen, and Dong Cheng districts are all heavily populated areas that provide great intitial Zipcar launching points.
China is one of the most competitive advertising centers in the world. Every single space available in every public forum is used for advertising. Thus it is imperative that Zipcar take a unique approach to advertising in China. An inherent advantage of the Zipcar venture is that the company will be able to benefit from promotion through the
Zip parking spots themselves (See Appendix, Images). Currently, Zipcar has a unique parking marker that allows
“zipsters” to easily identify the spot. This is one way in which Zipcar can advertise and market its product at a low cost. Another promotion medium is the Zipcar themselves. The green and black Z emblem placed on all cars is a great advertising mechanism and an effective way to increase brand strength without additional cost. Zipcar’s
“Wheel’s when you want them” slogan should communicate the message just as effectively if translated into
Mandarin and clearly and concisely expresses the value of the product. It can be expressed in Mandarin as well as
English in promotional. In China the company phone number and website will also be placed on the cars to further the advertising potential. An additional way to increase company awareness is through the Chinese government.
China is making concerted efforts to reduce its pollution levels and Zipcar is a company directly aligned with this strategy. Further, several key articles in popular Chinese publications can do wonders for brand and company recognition. In the U.S. numerous periodicals have featured articles portraying Zipcar as an innovative company, thus generating positive publicity. This could also be applied in China.
Zipcar is a service company. As a result, the marketing objectives will be reinforced through superior customer experiences. These will be achieved through great interactions with Zipcar representatives, decreased customers costs related to vehicles, a positive net impact on the environment, and basic convenience. Zipcar will rely on word of mouth and unorthodox media advertising outlets to spread company awareness. This is largely an untapped market in China, so initial competitive advertising should be kept to a minimum.
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We are planning to launch Zipcar in the middle of 2011. The lead up to this launch will include the acquisition of our vehicle fleet through our joint venture partner. This will take approximately eight months and focus largely on passenger sedans (Shaheen and Martin). The lead-up will also include the procurement of parking spaces in several prominent Beijing neighborhoods, and corporate integration with our Chinese business partner, in addition to the hiring and training of a local sales force. We expect the acquisition of parking places to take approximately twelve months. Government lobbying will be a part of this process. We hope to generate momentum within the government for Zipcar by pitching the various advantages of car sharing for Beijing and eventually other cities within China. This momentum will allow us to procure parking places more quickly and, possibly, at a discounted rate. The lead-up will also include some preliminary online advertising through popular Chinese websites like
Baidu and company articles in major Chinese publications. We expect this advertising campaign to begin in the next three months and to continue until launch in mid 2011.
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Shaheen, Susan A., and Elliott Martin. Assessing Early Market Potential for Car Sharing in China: A Case Study of Beijing.
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I. Total Employed Persons
Postgraduates and above
University Graduates
College Graduates
Senior High School Graduates
Junior High School Graduates and below
Employed Persons (10,000)
27311.5
358.6
3106.0
4796.1
8610.5
10440.3
Proportion (%)
100.0
1.3
11.4
17.6
31.5
38.2
"Communiqué on Major Data of Economic Census (No.1)." Statistical Communiques. National Bureau of the Statistics of China
Shaheen, Susan A., and Elliott Martin. Assessing Early Market Potential for Car Sharing in China: A Case Study of Beijing.
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Pictured: Zipcar logo and promotional parking spots
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