Saturday, March 17, 2012

Why I like Zipcar better than Enterprise

Last week, a customer engagement took me to northern New Jersey. I took Amtrak's (almost) high speed Acela train to Newark, NJ and then got a Zipcar to drive to my final destination. To reserve the car, I went to the website and picked a model based on features, real-time availability and price. On arrival, I went to the Zipcar lot, found my car, put a smartcard on the windshield and drove away.

This is so completely different than renting from the classical car rental agencies. You can reserve a car online and it may look cheap, but the 'rental price' is only part of the story. Quasi-insurances like LDW, CDW, SLI, PAI, PEC (whatever they mean) or additional devices like GPS or EZ-Pass can easily double the daily cost of the car. If you have to talk to an agent when you pick up your car, you'll have to defend your wallet while at the counter. All you want is your car, but they want to sell you as many unneeded and overpriced services and/or upgrades as they can. And let's not forget, whichever fueling option you choose, you'll get ripped off. Either you buy gas you don't use (prefueling) or you pay egregious rates for them to fill it up afterwards. It's a horrible experience. The purpose of rental car company is to separate you from your money -- and making a car available is what they do for the privilege.

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Today, Enterprise rent-a-car is the #1 car rental company. It was the case study that launched Fred Reichheld's Ultimate Question and Net Promoter Scores. It led Steve Denning to identify Customer Delight as the ultimate goal of every company.

Oddly, Steve never included Enterprise in his case studies, saying, "I've not been delighted." Now I understand why.

While researching a case study based on Zipcar's reaction to my suggestion, I stumbled on this article about Enterprise: 9 Confessions From A Former Enterprise Rental Salesman. Despite their emphasis on customer satisfaction, Enterprise's fundamental business model is about extracting money from their customers.

I was really shocked to learn that Enterprise rent-a-car works this way too. How could the company which launched the Net Promoter Score be so disrespectful of its customers?

What is the difference between Enterprise and Zipcar? Enterprise has a transactional relationship with its customers while Zipcar has a continuing relationship with its customers.

If your focus is purely on the transaction, then 'there is no tomorrow.' So you extract as much money from your customer as you can. If your focus is on the relationship, you treat your customer with a different respect -- and your customers also treat you with a different respect!

How does this play out at Zipcar? I join for a small annual fee. For a similar annual fee, I can purchase an insurance waiver, so liability and collision damage are covered. I may commit to a certain monthly usage. If I do, I get lower rates and/or more flexibility in meeting my usage commitment. They expect that I leave the car clean and with at least 1/4 tank of gas (which gets paid on their company credit card). Some cars have E-Z passes built-in, for which there is no extra charge nor do they apply a service charge to any tolls paid on my behalf.

I have been using Zipcar now for 2 months and have had no unpleasant surprises nor I have ever felt that I have to defend my wallet against Zipcar. The only thing that wasn't so great was getting from Newark Station to the nearest Zipcar was not so great. It's not that close to the station and in a pretty run down section of town. Walking there made me at bit nervous.

What should Enterprise do? They are probably tempted to ignore Zippcar - it's car sharing, not car rental right? It's a classic disruptive innovation. Not really a threat at the moment.

But Enterprise has a bigger problem. Their system is corrupt. They claim customer satisfaction is most important. This is a lie, because what they really want to do is bring in money. Since there is a conflict between what the company says it wants and what it really wants its sales agents to do,  the real priorities eventually win out. Yes, the branches get good numbers, but can you trust the numbers?

What should Zipcar do? Their response to my suggestion to put a BMW near my home seemed really out of character (even though they said yes very quickly after I tweeted it), but their business model is sound. Stay true to your values!

Zipcar should become more attractive for their members' business and vacation travel needs. For instance, they could partner with airport hotels and parking facilities so that travelers can get easy access (shuttles) to Zipcars at airport and Acela locations. How about Zipcars at your favorite beach hotel? Their model of constructive, long-term, constructive customer relationships could be really disruptive to the rental car business in a few years...

What should you do for your business? Which of these models is more sustainable? Which one would you like your business to resemble? How would your company be different if it looked like Zipcar and less like Enterprise?

P.S. If your business does not resemble the one you want it to be, you might check out our Innovative Workshops on Radical Management over the next few months...