The first business model presented by Chase and Danielson was based on the assumption that the potential users would be required to become members and pay a $25 nonrefundable application fee, a $300 fully refundable security deposit and a $300 annual subscription fee. Moreover, members would be charged for driving time at $1.50 per hour and $ 0.40 per mile. However after many rounds of discussions it was discovered that many potential customers found $300 annual fee very high, so Chase decided to lower the annual fee to $75 per year and increased the hourly charge from $1.50 per hour to between $4.50 and $7.00 per hour. According to the data Zipcar had projected to charge $0.40 per mile but as per its data they could only charge $0.14 per mile which shows us that it is less by $0.26 per mile.
Zipcar’s projected annual return on investment (before tax) was 19.77% but according the actual data it was not able to meet its projected revenue and other costs. Most of the assumptions made by Chase turned out to be inaccurate so she was enforced to reorganize her business model. After reorganizing her business model the data showed much improvement and by mid October of 2000, the number of members enlisted had increased to 250 from 14 members in June 2000. Restructuring the business model helped Zipcar to improve in all fields in short period of time.
The business models adopted by Chase for Zipcar are as following:
According the business model adopted by Zipcar, it concentrated on four main segments in urban areas and they are: residents who do not own cars, residents who own cars, college and university students and business and government agencies. The first customer segment that Zipcar targeted was the residents who do not own cars and had to depend on public transportation. These residents could reach the desired destination through car sharing when the scheduled route of the public transportation was may not be nearby the desired destination. The second segment targeted on residents who owned cars but had to face high cost of expense for maintain the owned cars. The third segment focused on university students who are above 21 years and had to travel long distance to reach the college. The last segment targeted the business and government agencies that had to provide their employees with transportation service in the urban areas.
Chase’s business model offer it’s convincing “wheels when you want them” value proposition. Zipcar offers car sharing service and offers on demand vehicle and provides timesaving service in the urban areas and to its customers. The cost of owning a car in urban areas is very high so Zipcar provides its customer with the value of on demand vehicle at their service when they need them.
Zipcar uses various channels that are necessary to attain and keep hold of the customers and communicate value proposition precisely. During the early stages Chase and Danielson expected that 30 to 40 percent of their marketing impact would be driven by word of mouth, another 25 percent by free media coverage and the rest through grass root marketing efforts. Zipcar used websites for reservations where members could choose the type of vehicle and period they wanted them.
After restructuring the business model, Chase and Danielson were able to see various improvements in their data. During the early stages they had only 14 members but by mid October of 2000 the number had increased to almost 250. Customer relationship is one of the important factors to Zipcar’s success. Zipcar provided various facilities to its members such as to not worrying about the parking space in over populated cities to retain its customers.
Meeting the customer expectation has direct connection to the revenue of the company. At the beginning the business model was based on $300 annual fee to its members. But many potential customers found that very high so the business model had to be restructured and the annual fee was decreased to $75. These changes showed huge improvements in the revenue of Zipcar through customer satisfaction.
Key resources are the resources by which the Zipcar business model works and cars the understandable first resources needed to improve the business. At the beginning Chase believed that 12 cars were enough to operate the business. But later due to increase in customer demand she had to increase the number of cars to 19. Chase believed that these resources had to be widely distributed to the targeted areas for more success
Sales and marketing are the key activities of the business model developed by Chase for the company to be successful. Chase created a logo of Zipcar specifying that it should convey simplicity, cleanliness, a professional look with a hint of “green.” This logo was used on the website, stationery, promotional materials and on the cars themselves. She was consistent in her efforts to present the same image in all her marketing materials. The first Zipcar was a green Volkswagen Beetle chosen to convey the green image the company had chosen.
Zipcar was able to create many relationships and partnerships with several manufactures, lifestyle brands, retailers and parking authorities. After its success Zipcar had to buy more cars and they were able to buy cars from various companies at discounted prices. Zipcar also partnered with various lifestyle brands for marketing purpose. The cost of parking space was very high in urban areas. Zipcar created relationships with various parking authorities to lower the cost of parking space for the cars of the Zipcar.
The cost structure of Zipcar defines all the cost sustained by the business model of the company. Vehicle costs are directly associated with fleet operation costs such as lease expense, depreciation, parking, fuel, insurance, gain or loss on disposal of vehicles, accidents, repairs and maintenance as well as employee-related costs. (http://dspace.unive.it/bitstream/handle/10579/2037/816968-1163873.pdf?sequence=2).