Chapter 3
What Could Be More Inspiring Than Convenience with Economy?

Waterfall commutes by train to downtown Boston from nearby Hopkinton, Massachusetts. But a lunch date in, say, Waltham, 10 miles away, forced him to take his car. “I’d have to fight traffic on the way in to my office in the city, park, get dinged for a full-day rate by the garage, head out to Waltham, head back to my office, get dinged again for the full-day rate, and then have to make my way home on the Pike (the Massachusetts Turnpike) during rush hour,” he recalls. “It was just maddening.” The company tried keeping a car downtown for its staff to use, but the cost of parking and a plague of dead batteries made that solution ineffective.

The sanity saver turned out to be the convenient and economical Zipcar, the leading car-sharing service in the world. These days, whenever Waterfall or his colleagues need a car, they simply go to www.zipcar.com to reserve one of hundreds of autos kept in the Boston area. Waterfall can get a car whenever he wants, 24/7, and he can choose from among 25 makes and models, ranging from a Mini Cooper to a BMW. Using a powerful data network, the reservation is transmitted to the chosen automobile’s onboard computer.

To pick up the car, Waterfall walks two blocks or less from his office to where it is parked in a permanently reserved space. He waves his personal Zipcard across the car’s windshield, alerting the computer that the authorized renter has arrived. The door unlocks, and he sees the ignition key dangling from the steering post. If a thief were to break in, the dangling key would be of no use because the car won’t start unless the computer has authenticated the driver.

Waterfall drives to his lunch meeting and back, parks the car in its customary spot, and returns to the office. He never has to worry about parking fees, maintenance, or car insurance. His monthly bill doesn’t even include an extra fee for the gasoline he uses—it’s included in the rate. If the tank needs filling, Waterfall uses the Zipcar credit card kept in the car’s glove compartment. Using a Zipcar, the company boasts, “is as easy as getting cash from an ATM.”

In a world increasingly beset by hassles, Zipcar’s quick, simple convenience for business and personal use is a road map for success. More and more people are willing to pay a premium for genuine ease of use, as the expanding car-sharing field attests. But Zipcar leads the field because it is engaging with customers by delivering convenience that actually saves them money. The 65 percent or more of Zipcar users who decide against buying a car in the first place, or who end up selling the cars they had, save an average of $500 a month compared to car owners—and they can still drive whenever and wherever they want.

Zipcar has more than a quarter million card-carrying members, or Zipsters, and 5,000 automobiles in 13 major urban markets, including Boston, Toronto, New York, Philadelphia, San Francisco, and Washington, DC. It also has a European foothold in London. Since its merger in 2007 with Flexcar, it towers over the other 30 U.S. competitors in the car-sharing field. Zipcar’s basic appeal is this: For an hourly charge of approximately $10, members can easily get a car when they need it without having to deal with the problems of automobile ownership. Zipcar, in effect, gives harried people more time to pursue their interests. As a Zipcar advertisement jokingly puts it, “350 hours a year having sex. 420 looking for parking. What’s wrong with this picture?”

Sharing car ownership works best for city dwellers who need a car for only a few hours and can put it back where they found it, making it available for other members to use. For a car-sharing company, the challenge is having enough, but not too many, cars in a given area. A company needs enough cars so that any member can find one at any time and without too much of a walk.

The car-sharing concept is at least two decades old in Europe. After seeing it in action in Berlin in 1999, Robin Chase, Zipcar’s founder and original chief executive, had the light-bulb moment that produced the company. However, the idea has been a hard sell in the United States because Americans identify so strongly and personally with their vehicles—even though most cars are driven only about an hour a day and sit idle the rest of the time, piling up parking fees, insurance payments, and maintenance bills.

However, rising costs are combining with growing environmental awareness to gradually persuade more Americans to share the benefits and the drawbacks of owning cars. These days, thanks to its high-tech systems, Zipcar can keep each of its cars on the road for several hours a day, and any member needing an automobile can find one within a ten-minute walk. Car-sharing companies are proliferating, and major rental companies—including Enterprise, Hertz, and U-Haul—began testing the concept.

Every Zipcar replaces 15–20 privately owned vehicles, so it’s no surprise that cities clogged with traffic and hard-pressed for parking space are delighted to cooperate with Zipcar and its rivals. Some cities even subsidize car sharing. The suburban cities of Alexandria and Arlington, Virginia, just outside Washington DC, offered a program to pay the membership fees for residents who want to join a car-sharing plan. Greenridge House, a senior citizens’ home in Maryland, reimburses residents for their use of Zipcar.

Shared cars are a natural solution for any large organization in densely populated areas where parking is hard to come by. Zipcar has partnerships with major corporations and with more than 120 universities, including Wellesley outside of Boston, that have made cars available to students. In New York City, the Stuyvesant Town and Peter Cooper Village housing complexes offer Zipcar service to tenants. And Washington, DC, Metro transit officials have spurred subway use by placing Zipcars at dozens of Metro stations in the city and its suburbs; customers can take the subway most of the way to their destinations and finish their journeys by car. “We’re part of the public transit fabric,” notes Matthew Malloy, Zipcar’s marketing vice president.

Founded in 2000 in Cambridge, Massachusetts, Zipcar quickly covered metropolitan Boston and spread to New York and Washington, DC. But buying all those cars soaked up a lot of capital, causing the company to sputter in 2003 when it ran out of funds for expansion. Zipcar’s financial backers responded by installing Scott Griffith as CEO. Griffith is an engineer and former management consultant who, before taking the Zipcar post, headed software-maker Digital Goods.

Griffith told me he took the job because he was fascinated by the Zipcar concept and thought it had the potential to grow to millions of members worldwide. But he saw the need for a new business model that would engage people so thoroughly that it would change their lifestyles. “If you can optimize the model,” he explains, “then the sky’s the limit.”

To achieve Zipcar’s potential, Griffith decided to jettison the “heavy iron” of the company’s old approach in favor of a more distributive, self-service model. He knew the changeover would not be easy: “We were actually asking people to change their basic attitude and behavior toward cars.” But if the company could entice customers to try Zipcars for their convenience and then persuade them to embrace the concept wholeheartedly, Zipcar would move into the fast lane.

And that’s just what happened. From only 150 cars and 4,000 customers when Griffith arrived in 2003, the company now has 35 times more cars and 65 times more customers. Sales and members have doubled each year, and some cities have been in the black since July 2004.

From my point of view, the most impressive and instructive Zipcar statistic is the number of full-time employees: It takes just 250 people to keep this fast-growing enterprise rolling. That’s largely because Griffith’s self-service model enlists members to do much of the work typically expected of staffers, from making their own reservations to filling their cars’ gas tanks. Zipcar relies on members to report problems with cars, and members agree to abide by Zipcar’s six simple rules: report damage, keep it clean, no smoking, fill ‘er up, return on time, and keep pets in carriers.

Zipcar strives to simplify the work members are required to do, and technology eases the way. A user-friendly Web site enables a member to reserve a car without talking to a person; the reservation travels directly from the member to the car’s onboard computer. A voice-mail system allows members to leave a message when reporting a problem; a distressed customer goes to the top of the list. The visor organizer holds fuel credit cards, making it simple for members to stop and refuel if needed.

Looking for Answers

Zipcar has grown, in large measure, because of the drive and dedication of its chief executive. Before joining Zipcar, Griffith was stricken with cancer, a battle that changed his approach to life. “I was making a lot of money,” he explains, “but I didn’t like what I was doing at all. So I made a promise to myself that I was never again going to get into a situation where I wasn’t passionate about my work.” Zipcar’s concept and potential fired his passion, and it shows.

When Griffith took over, Zipcar had only one vehicle parked in each of its various locations, which made potential customers nervous: “What if another Zipster wants to use the car at the same time I do?” they wondered. The company’s less-than-popular answer was to go to a Zipcar parked farther away. Instead of engaging with the customer, the company’s solution seemed to break its basic promise of convenience and was hardly calculated to increase the customer base. Yet the company was wary of buying more cars than it had to, and rightly so. How could Griffith untangle this knotty problem?

Zipcar had just entered the New York market that spring. “It was the right time of year, the high season,” Griffith remembers. “Especially in the Northeast, people sort of shake off the winter blues and want to get out and drive.” But Zipcar was choking in its new territory. Reluctantly, he approved a long-planned major advertising campaign to spread the word around the Big Apple. By midsummer, the results were in, and they were disappointing. The campaign had indeed introduced Zipcars to New Yorkers, and many of them had contacted the company—but hardly anyone was signing up. Market research unearthed the reason: Similar to potential customers everywhere else, New Yorkers thought their nearest Zipcar location was just too far away. Zipcar now defines its target market in each city where it operates as anyone who can walk less than ten minutes to a Zipcar. Today, that is 13 million people.

Griffith’s response was fast and bold: “Stop screwing around with putting two or three cars into a market. Blitz the place. Put 100 cars into some New York neighborhoods, and if that works, put in another hundred. We’ll lose money at first, but we’ll learn what the number is where we’ll start to make money.” At the same time, in pursuit of a better way to engage with potential customers, he pushed his marketers to find the right neighborhoods—those with demographics that matched Zipcar’s promise.

The model customer, it turned out, was relatively young, well educated, an early adopter of new technology, and committed to living in the city. By the end of the year, the Zipcar blitz was underway, aimed at zip codes with a high percentage of residents who fit that description. Instead of parking just one car in a certain area, Zipcar would have four or five. Instead of a dozen cars sprinkled throughout a zip code territory, Zipcar would have scores or maybe even hundreds. And it all worked incredibly well. Targeted customers were signing up in droves when they weren’t busy telling their friends how easy it was to use Zipcar and how much money they were saving.

Griffith also upgraded the company’s somewhat austere menu of cars. Prior to Griffith joining the company, the fleet mostly consisted of Volkswagen Beetles and Honda Civics. Today members can reserve what Zipcar calls “mood cars,” including Mini Coopers, Prius hybrids, Mazda Miata convertibles, and even BMWs—more than 25 models in all. And if customers don’t want to be branded as a renter, they can get a Zipcar without the big, lime-green “Z” on the door. However, most members don’t care about that; if anything, they’re proud to drive Zipcars. Corporate customers, who now make up 20 percent of Zipcar members, relish the range of choices and so do everyday drivers. The Civics and Golfs were “okay,” says Christina Michaud, a teacher at Boston University who joined Zipcar three years ago, “but who wants to rent a Civic to go for a fun drive?” Michaud says the Mini Cooper is “the only car I feel I can actually park. And it’s so fun. I feel happy and friendly in it.”

Therefore, Zipcar’s engagement with its customers was strengthened by giving them more: more nearby locations and more car choices to indulge their fantasies. Now not only does a member get a car when and where it’s needed, but the company also guarantees to deliver “the car you want.”

Griffith has also increased the company’s engagement with customers by making their transactions simpler and more transparent. When he joined Zipcar, it charged low hourly rates plus mileage, the common car-sharing practice. But after spending time interviewing members when they returned their Zipcars to the parking areas, he decided to make some changes. “People loved us at $4 an hour, 45¢ a mile,” he told me. “Then they’d use a car for a few hours, expecting a $15 bill, and it would be $35. Sticker shock.” What the company needed was a way of simplifying the charges so that members could know in advance just what a trip would cost them.

Simplified pricing means that members now pay an hourly charge that includes 180 miles per day; anything over the limit costs drivers a standard 40-45 cents per mile. “If you give them too many miles,” Griffith says, “they’ll run the wheels off those cars, and they’ll depreciate too fast.” He also found a way to reward frequent users: Those who pre-commit to certain amounts of driving receive 15-20 percent discounts on standard hourly and daily rates.

To correct the imbalance created by cars being used mainly in the evening and on weekends, Griffith targeted businesspeople who primarily need cars on weekdays. He engaged with employees of large and small companies alike, but entrepreneurs and consultant types such as Waterfall have found car sharing particularly useful. Elan Ackerman, a special-events marketer in Manhattan, spends about $150 a month on Zipcars that he uses to pick up disc jockeys at the airport and to deliver cases of beer for his biggest client. He values the extra convenience Zipcar gives him for a lot less money and hassle than other options might demand. For example, if he had a company car, Ackerman says he would have to worry about capital costs, depreciation, maintenance, and insurance—and he would be spending $400 a month in parking fees alone.

Griffith has made the leap from engaging with corporate customers to finding corporate partners with little trouble. When a company’s brand and demographics match those of Zipcar, he offers a co-branding arrangement. For example, IKEA sponsored 14 cars bearing both IKEA and Zipcar logos in Boston. IKEA then created “Zipcar parking only” spaces at its new store to entice Metro Boston residents to leave the city and visit its out-of-town location. The co-branded cars were available to Zipcar members at a discount that was reimbursed to Zipcar by IKEA.

Zipcar’s corporate connections—Zipcar for Business (Z4B)—have paid off in a big way. In addition to adding hours to the average Zipcar’s weekly use, Z4B now accounts for about 20 percent of all revenue.

With new learning from the launch in New York, Griffith revamped his marketing approach. By aiming his efforts directly at the targeted customers—what he calls “zone marketing”—he generally engages with more customers at far less cost.

Zipcar’s customers tend to be young, well educated, technologically sophisticated city dwellers who cluster in characteristic neighborhoods. Similar to an army planning an invasion, Griffith and his marketers studied the maps of each Zipcar city, using postal codes and census data to find zones rich in drivers who fit the desired demographic. Then instead of paying a hefty price for blanket newspaper or TV ads, the Zipcar team focused on the people it wanted to reach.

They put up Zipcar posters in local theaters and left brochures in racks at restaurants. Employees set up booths at street fairs and gave Zipcar materials to residents exiting the subway or other mass-transit operations. In some zones, Zipcar workers parked outside Whole Foods stores, offering shoppers a free ride to their homes. Zipcar became impossible to ignore in its target neighborhoods.

The company’s constantly evolving zone-marketing strategy, with its detailed matching of targeted customers and available cars, is a major competitive advantage, Griffith thinks. “I got goose bumps,” he says, when he first saw the breakdown of all the zones in Boston and the way available cars dovetailed with the targeted customers. The CEO boasts that the strategy puts Zipcar on par with the patriots in the Revolutionary War—the Americans shot from behind trees while the British soldiers marched in tight formation out in the open, turning them into sitting ducks. Armed with zone-marketing weaponry, Griffith says that his Zipcar troops are “behind the trees,” making it a lot easier to mow down the competition.

Rules of Engagement