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Integrated Marketing Plan for Car2go Blazer Consulting Summer 2011
Executive Summary Vancouver is the first Canadian city where car2go is offering its services and will serve as a basis for future expansion in Canada. Initial reception of car2go Vancouver has been positive and the company’s unique and innovative free-floating system, which allows for one-way rentals, gives car2go a competitive advantage relative to the competitor’s traditional system. However, car2go cannot compete in terms of operating scope and competitor’s existing footholds in the market. car2go Vancouver must continue to innovate to maintain its position in the market. This plan aims to provide a SWOT analysis and a PEST analysis of car2go Vancouver, to analyze the internal and external factors which influence car2go Vancouver’s differentiation strategy for penetrating the Vancouver market, to establish the short-term objectives of car2go Vancouver and to provide recommendations as well as the associated timeline of implementation for car2go Vancouver to retain a differentiated positioning relative to its competitors within a period of one year. Our recommendations are as follows: ●
Expand operating area to Burnaby, North Vancouver and the YVR Airport
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Develop a partnership with regional public transit Translink
The recommendations in this plan should effectively address the major issues currently facing car2go Vancouver in order to generate greater profits, increase the market share, differentiate car2go service from competitors and remain competitive in the Vancouver car sharing market. 2
Table of Contents
Environmental Analysis ............................................................................................................................ 4 i. SWOT Analysis .................................................................................................................................. 4 ii. PEST Analysis ................................................................................................................................... 5 iii. Segmentation .................................................................................................................................... 5 iv. Positioning Map ................................................................................................................................ 5 Opportunities and assumptions .............................................................................................................. 7 i. Assessment ........................................................................................................................................ 7 ii. Opportunities and assumptions ...................................................................................................... 7 Objectives .................................................................................................................................................. 8 Marketing Strategy .................................................................................................................................... 8 i. Market Target .................................................................................................................................... 8 ii. Market Positioning ............................................................................................................................ 9 Marketing Mix .......................................................................................................................................... 10 i. Product .............................................................................................................................................. 10 ii. Price .................................................................................................................................................. 10 iii. Place (Distribution) ......................................................................................................................... 11 iv. Promotion ........................................................................................................................................ 12 Implementation and Evaluation ............................................................................................................ 14 i. Action Plan ........................................................................................................................................ 14 ii. Task Schedule ................................................................................................................................. 15 Evaluation and control ............................................................................................................................ 16 Contingency Plan .................................................................................................................................... 17 References ............................................................................................................................................... 19 Appendix .................................................................................................................................................. 19
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Environmental Analysis i. SWOT Analysis
We’ve identified the following strengths, weaknesses, opportunities and threats for car2go Vancouver. In terms of strengths, car2go offers an eco-friendly service that focuses on sustainability and mobility. The free-floating system is unique to the market and highly flexible relative to other car sharing companies in the Greater Vancouver area. As a subsidiary of Daimler AG, the parent company provides the fleet of smart for twos car2go uses in its operations as well as technical support for the vehicles. In terms of weaknesses, the smart for twos employed by car2go are limited in space, however, restrictions on pets on board have been revised. It is also the only type of vehicle available to the customers. The flat rate charged for using our service is also relatively higher than the competitions and the current operating area is limited to mainly the downtown area. In terms of opportunities, currently we have support from the city of Vancouver. car2go’s car sharing service adheres to their green objectives and policies. As well, traffic congestion remains a problem in this area with travel expenditure continuing to rise. In terms of threats, car2go faces two competitors in the Vancouver market: Modo the car co-op, a Vancouver-based not-for-profit company, and Zipcar, the market leader. Both of them offer a larger variety of vehicles including trucks, vans and hybrids. In 4
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addition, Zipcar has specifically targeted UBC with their university-oriented program. As our free-floating system cannot be protected legally, it is possible for our competitors to copy this system. As well, despite the smart fortwo having the lowest carbon emissions in Canada, the vehicle still runs on gasoline and may not be perceived by the consumer base as being green. ii. PEST Analysis
Political policies in Vancouver are focused on reducing its global impact and this offers a great opportunity for our service. Economy-wise, Canada as a whole is recovering from the recession. This in turn will result in greater expenditure in areas like leisure outside the home and travel. For the socio-cultural environment, many consumers are growing increasingly environmentally conscious especially within the younger generation. Our free-floating system is at present a unique technology. Further improvements on our choice of vehicle, such to a hybrid or electric vehicle, are also possible. iii. Segmentation
Our target customers are people within the 19-35 age group who can legally drive, do not own their own vehicle or want the commitment of owning a vehicle, needs to travel from time to time, has moderate middle-class income and are environmentally conscious. Public transportation should be the current affordable transport method our target segment is using. iv. Positioning Map 5 Â Â
This is how car2go is currently positioned relative to its competitors. (Appendix A)
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Opportunity Identification, Assessment and Assumptions i. Assessment
car2go’s free floating system is a brand new to the Vancouver market although the system can be copied by other competitors. However, it will require large investment on capital and time for implementation which provides a barrier to entry. The relatively high flat rate is disadvantageous but given the nature of the free-floating system which aims at one way trip, this allows customers to end their rentals earlier and cut down costs significantly. The variety of vehicles offered cannot be increased by the type of vehicle (such as employing electric vehicles or hybrids) is possible. ii. Opportunities and assumptions
With traffic congestion steadily increasing in Vancouver in the past five years, car2go’s car sharing will be a viable and attractive travel alternative that reduces the number of personally owned vehicles on the road. We assume that the city of Vancouver will continue to offer their support to car2go Vancouver for providing a green service and will assist car2go in expanding across the Greater Vancouver area. As a relatively new market, car2go Vancouver is in the position to capture a sizable portion of market share.
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Objectives There are four main marketing objectives: 1. Increase brand awareness and promote environmentally-conscious image: We aim to position car2go Vancouver as an eco-friendly service in adherence to the city of Vancouver’s ‘greenest city’ objectives and to promote car2go to our relevant consumer base. 2. Increase the market share by 10.15%: With only two competitors in the local market, we aim for car2go to increase the number of vehicles in operation and capture more market share. (Appendix B) 3. Increase the number of member registrations to 10,000: We aim to increase initial registrations of 2000 members to 10,000 members by the end of the year according to car2go Austin’s performance adjusted for population. (Appendix C) 4. Increase the profit by 55.56% in one year. We aim to increase the profit of car2go by 55.56% in one year by increasing both the number of membership and number of vehicles. (Appendix F)
Marketing Strategy
i. Market Target car2go Vancouver will target people aged between 19 and 35, mainly university students, women with middle-class income who need transportation for groceries, 8
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picking up their children or other errands and leisure activities and middle-aged people who have just entered full-time employment and has not enough capital to invest in a personally-owned vehicle. Car sharing services like car2go are best implemented in mature cities making Vancouver an ideal market. A secondary market target in the future would be people who fly frequently and require one-way transport to the airport. ii. Market Positioning
We will position car2go Vancouver at a higher level of eco-friendliness and flexibility in order to differentiate the service from competitors in the short-run through expansion of its operating area and promoting reduction in car ownership by partnering with Translink and providing a transport alternative. (Appendix D)
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Marketing Mix i. Product
car2go Vancouver aims to provide 24/7 access to its service to its target consumers. To achieve this, car2go will develop and improve its official smartphone applications and take advantage of telecommunication technology to provide easy and flexible selfserved service. ii. Price
Objectives: Given the low application fee and absence of annual fees, car2go Vancouver’s flat rate should cover costs while also being affordable. Strategies: 1. Keep current prices and adjust for affordability: Although the flat rate is relatively high, its one-way car rental service is convenient and saves customer the cost of returning the vehicle after rental and leaving the vehicle to idle during rental. In addition, customers are charged at a per-minute rate based on actual use instead of an hourly or per half-hour rate making the service affordable for customers who only need to use it for short periods of time. From price quality inference, the higher rate can be perceived as quality and reducing the price will hurt car2go’s high quality image. Prices should cover costs and pay off the high investment in its free-floating system and large
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expenses in initial advertising. Moreover, car2go will not increase price to retain current customers who are price-sensitive. Future changes in price: car2go Vancouver will aim to keep its flat rate affordable in relations to gasoline prices, inflation and other cost drivers. An increase in the one-time application fee is a feasible short-term alternative. iii. Place (Distribution)
Objectives: car2go Vancouver will expand its operating area into surrounding cities and strive to complement local public transit to increase availability and convenience and achieve maximum exposure to the target market. Strategies: 1. Expand operating area: car2go Vancouver will first expand into Burnaby and North Vancouver. Our oneway car rental service will be attractive to customers who frequently travel abroad and therefore, car2go will eventually expand to include YVR airport. Expanding into the UBC campus will put our company in direct competition with our competitor Zipcar but given its proximity and the potential market, we will expand to this area in the future. 2. Partnership with Translink: car2go will provide car2go vehicles and establish operating area at or near skytrain and bus stations under Translink, Metro Vancouver’s main public transportation provider. As a crown corporation, car2go Vancouver will have the 11
city of Vancouver’s support in this partnership for lowering emissions through travel alternatives. This also upholds car2go’s mission to complement local public transportation. iv. Promotion Objectives: We aim to increase awareness of car2go in Vancouver by 40%, to communicate features and values of our service to target customers and increase membership to 10,000 within one year. Strategies: 1. Advertise with Translink: Our target consumers include users of public transportation, advertising with Translink will effectively expose our service to the relevant market. A partnership with Translink can reduce advertising costs. 2. Online and mobile advertising: car2go will increase spending on Internet advertising as our target market include university students who spend a lot of time on the Internet. According to Bloomberg business week (2011), Canadians spend more time on online activities relative to other countries and people increasingly turn to Internet for pleasure and entertainment. Young people are more reliant on online sources today (Media Usage Study, 2009). Facebook advertisement can be controlled to target young consumers and other consumers in our target segment and the website itself provides tools to monitor and manage the effectiveness of the
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advertising. With the rapid adoption of smartphones and development of smartphone applications, mobile advertising is useful for communicating up-todate information (Erica Swallow, 2010). car2go Vancouver will use mobile advertising to target current customers about new developments and special offers via their smartphone application. 3. Sponsor community events: As the fastest growing marketing method, sponsorship helps firms to reach ultimate customers and raise creditability to spread competitive advantages (Susan Friedman, n.d.). For car2go, large events such as concerts, festivals and fireworks, which create high demand for transportation, are excellent opportunities to communicate its service to potential customers and to increase brand awareness and image. At these events, setting up a booth to promote car2go services will spread brand awareness with a customer-oriented individual level approach. Future changes in promotion: In the short run, car2go Vancouver will aim to attract target customers and raise awareness. In the long run, we will focus on brand image and customer retention.
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Implementation and Evaluation i. Action Plan 1. Expansion of Operating Area: The target customers of car2go are highly educated, middle class income individuals in their earlier career life and from the demographic distribution, there are three primary potential markets selected: Burnaby, North Vancouver and the YVR Airport. The city of Burnaby includes Simon Fraser University and adheres the best to our criteria, therefore, car2go Vancouver will first expand its operating area to Burnaby and generate capital for further expansion. As an area populated with young middle-class families who earn relatively high incomes, we will target young mothers and, as well, people who need transport to downtown for work in the city and district of North Vancouver. In addition, North Vancouverites have expressed interest in car2go to expand their service across the inlet. Finally, we will expand to the YVR Airport, targeting frequent fliers. As this area is the farthest from current operating area, it will incur the highest expansion and maintenance costs thus we will implement it last when we have enough capital generated from the other areas. (Appendix E) 2. Partnership with Translink: Currently, Translink supports car sharing as an affordable travel alternative (Translink, 2011). Both Translink and car2go can benefit in the long-run by cooperating and providing discount incentives to increase ridership and promote the use of alternative transport. It costs $140 to over $5000 CAD every four 14
weeks to advertise on transit in Vancouver depending on the products (Larmar Transit Advertising Company, 2010). With a mutually beneficial partnership, these costs can be reduced. However, negotiation about further endeavours between the two parties may take until the third quarter. If the partnership is successful, discount deals with Translink and other cooperative programs can be introduced to the public by early April 2012. ii. Task Schedule The following table shows the timeline for each stage of implementation car2go Vancouver will take from July 2011 to June 2012.
First Quarter
Expand Operating Areas
Second Quarter
Third Quarter
Fourth Quarter
Burnaby (SFU) North Vancouver Airport
Partnership with Translink
Advertise on Transit Negotiate partnership with Translink Introduce discount deals with Translink
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Evaluation and control
The number of member registrations and percentage increase in profit is used to evaluate the performance of car2go business. 1. Number of registered members: Approximately 2,000 Vancouverites have registered in two months preceding car2go’s official launch in June 2011. Our goal is to achieve 10,000 memberships and increase profits by 55% by July 2012 (Appendix F). The following table estimates car2go Vancouver’s financial report in accordance to these objectives.
car2go Canada Ltd. – Vancouver Estimated Income Statement (in thousands) Revenue Operating Cost Income before tax
2011
2012
$817.03
$1,270.93
639.92
995.47
$177.11
$275.46
2. Number of transactions per vehicle: Together with expanding the operating area, the number of vehicles employed will increase. Analyzing the number of transactions per vehicle will show how revenues are matching up against costs. We plan to implement 125 vehicles in total by the end of the fourth quarter. With this measurement, we can evaluate whether to increase the number of vehicles or reduce the number to reduce costs.
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3. Customer Retention: The performance of car2go Vancouver is reliant on customer loyalty. By calculating the usage per member, we could estimate the percentage of loyal customers. By calculating the number of opt-outs per quarter, we can assess the retention rate.
Contingency Plan
car2go Vancouver faces the following risks: 1. Delays in expansion: While car2go has the support of the city of Vancouver, negotiations with other cities, districts and municipalities may delay or even prevent expansion. Implementation Negotiation expertise should be hired to ensure smooth negotiations. Despite possible delays in one area, car2go must follow the time table given and begin negotiations with the indicated areas at their respective times to avoid idle time. 2. Failure to partner with Translink: The partnership may not be establish due to disagreement or unwillingness from either party. While Translink supports car sharing, they may be unwilling to partner with a single car sharing company but prefer to encourage their riders to use any of all available services. Implementation car2go will position itself as effective, affordable and environmental friendly to match 17 Â Â
with the values of public transportation and increase market share. Based on vision, value congruence and scope of car2go Vancouver’s operations, our appeal for a partnership will increase. In the event that the partnership fails regardless, car2go will at present forgo discount deals with Translink but will continue to target Translink stations for its designated parking spots as well as advertise on Translink to reach our target market.
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References
Autos.ca. (2011, June). Car2go rentals arrive in Vancouver. Retrieved from: http://www.autos.ca/general-news/car2go-rentals-arrive-in-vancouver car2go. (n.d.). Retrieved from http://www.car2go.com/vancouver/en/ Friedman, S. (n.d.).Sponsorship: A Key to powerful marketing. Retrieved from: http://marketing.about.com/od/eventandseminarmarketing/a/sponsorship.htm Halbuer, A.G. (2010, September). Car2go hits 10,000 members in Austin. Retrieved from http://www.statesman.com/business/car2go-hits-10-000-members-in-austin941209.html Kiladze, T. (2011, March). Canada’s online ad market is no small pond. The Globe and Mail. Retrieved from http://www.theglobeandmail.com/globe-investor/investmentideas/streetwise/canadas-online-ad-market-is-no-small-pond/article1947211/ Larmar Transit Advertising. (n.d.). Product and Rates. Retrieved from http://www.vancouvertransitadvertising.com/dev/wordpress/products-and-rates/ Marketing Charts. (2009, September) Media Usage Study: Online and Radio Up, TV Still Most Credible. Retrieved from http://seekingalpha.com/article/163214-mediausage-study-online-and-radio-up-tv-still-most-credible Metro Vancouver. (n.d.). Census Demographic Bulletins. Retrieved from http://www.metrovancouver.org/ABOUT/STATISTICS/Pages/CensusBulletins.aspx 19
Modo. the car co-op. (n.d.). Retrieved from http://www.modo.coop/ Swallow, E. (2010, August).Top 5 Mobile Advertising Trends to Watch. Retrieved August, 2011, from http://mashable.com/2010/08/19/mobile-advertising-trends/ Translink. (n.d.). Carsharing. Retrieved from http://www.translink.ca/en/Driving/Carsharing.aspx Zipcar Reports 2011 second quarter results. (2011, August). Retrieved from http://ir.zipcar.com/releasedetail.cfm?ReleaseID=596536 Zipcar. (n.d.). Retrieved from http://www.zipcar.com/?redirect_p=0
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Appendix A Positioning Map Environmentally-friendliness is measured on number of eco-friendly vehicles, the relative ease to find these vehicles for each company and the extent to which a company promotes environmentally-friendless. Flexibility is measured on service restrictions and vehicle variety.
Appendix B Car sharing in Vancouver
Number of Vehicles 2011
Market Share Estimation
Modo
240
33.1%
Zip car
260
35.86%
car2go
225
31.03%
One of the goals of car2go to achieve in one year is to increase the number of vehicles to 350, which approximately increase the market share to 350/ (240+260+350) =41.18%.
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Appendix C Assumptions The number of member registrations in Austin are approximately 10,000 at the end of first year of operation when car2go first introduced to Austin. (Andreas Grosse Halbuer, 2010) There are currently over 300 cars available in Austin compared to 225 cars in Vancouver. We aim to expand operating area to Burnaby and North Vancouver in one year. Based on the estimated number of cars distributed in Vancouver, Burnaby and North Vancouver, the target number of vehicles in operation in the future will be 350 and the target registrations would ideally reach 10,000 within one year.
Appendix D Target positioning map
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Appendix E Target group demographic distribution (2006) Total
One-Family
High Educated
Age Group
Population
Household
Population
20-29
Average Household Income
Burnaby North
202,790
50,120
45,165
115,635 27,410
30,805 6.320
$63,453 $62,115
Vancouver City North
82,570
22,810
44,765
8,055
$101,318
174,475
44,175
100,050
23,475
$67,440
Vancouver District Richmond
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Appendix F Financial Report (Zip car, 2011) Zip car Inc. Key financial and operating metrics 2011
2010
Key Financial and Operating Metrics: Ending members
604,571
470,320
Ending vehicles
9,480
8,860
Usage revenue per vehicle per day
$ 65
$ 59
Total revenue per member per period
$ 103
$ 104
Cost per new account
$ 70
$ 66
Average monthly member retention
97.8%
97.9%
Adjusted EBITDA (in thousands)
$ 2,316
$ 323
Annual Report Zip car Inc. (in thousands)
2011
2010
Revenue
$ 34,424
$ 27,639
Income before tax
$ 7,461
$ 5,433
Established Markets:
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car2go Inc. Estimate Annual Financial Report July, 2011
July,2012
Gain in Membership
2,000
10,000
Ending Vehicles
225
350
Revenue (in thousands)
$817.03
$1270.93
Operating Cost
$639.92
$995.47
Income before tax
$177.08
$275.45
The revenue of car2go is based on the 2011 revenue of Zip car deducted by the portion of members. Estimate revenue= car2go vehicle number*(Zip car revenue/Zip car vehicle number).
The operating cost and income before tax of car2go is based on the profit of Zip car per investment. For example, estimate operating cost= car2go revenue*(Zip car income before tax/Zip car revenue) Profit of car2go increased by (275.45-177.08)/177.08*100%=55.56%.
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