Global Car and Truck Rental Company:
Product/Segment/Price Optimization and Financial Performance Improvement
This case highlights our ability to successfully navigate highly complex business, organizational and data environments in leading the implementation of high impact, fact based financial actions
The newly elevated president of this mid-tier vehicle rental company reached out to us to take a broad-based look at improving marketing and operations performance, primarily within its US network of company owned 1,000+ vehicle rental locations. The brand operates in a dual corporate and licensee environment, offering both car and truck rental services to leisure, tour, corporate and government customers. It also provided reservation, marketing, sales and customer support services to its global licensee network. It served both airport and local renters.
The brand was known as a “best value for the money” alternative in the daily vehicle rental marketplace. It enjoyed a special preferred relationship with one of the “Big 3” US auto manufacturers, and worked closely with the automaker to develop unique product alternatives, such as the industry’s first premium vehicle offering [Lincolns and Jaguars] at everyday pricing, and later with pickup trucks.
While the brand consequently enjoyed broad appeal, it found itself increasingly squeezed on the high end by the top three car rental brands, and on the low end with upstart entrants who served principally airport customers from low cost off airport locations. Furthermore, it encountered increasing difficulty managing the multidimensional complexity inherent in its global dual operating/licensee model.
Upon taking the helm, the president inherited an organization staffed by longtime car rental managers, and decided it was time to tap the thinking of those who could bring a fresh, unique and structured perspective to the table.
The brand was repositioned to compete directly with the top-tier leaders, offering the same quality service and vehicles for less. To generate risk free trial the service promise was backed up with a satisfaction guaranteed claim. This repositioning allowed the brand to go after large global corporate accounts that flattened out the seasonality and generated a more consistent revenue base.
This base of business allowed the Revenue Management organization to optimize retail pricing on a day in/day out basis. Revenue Management also worked closely with the Financial Planning and Analysis team and other functions to identify and implement several performance improvement initiatives, among them:
- Sharp reduction in car class substitution rates, by aligning fleet mix to customer demand
- Introduction of market and channel financial models using activity based costing concepts, allowing management to identify high profit segments to grow, and low profit ones to rationalize
- Development of a negotiated rate pricing model used by the corporate sales force to help sign more profitable corporate and tour business
- Application of predictive analytical techniques aimed at quantifying impact of key variables that drive rate per day
- Introduction of rigor in identifying key risks and opportunities against revenue forecasts
- Reduction in exposure to adverse selection in high risk customer segments, such as local renters, high-mileage local weekend renters and underage drivers
- Focus on completion of a 25 basis point financial turnaround of the loss leading New York operation
These and other actions helped the president and the senior management team produce an earnings turnaround equivalent to 8% of revenue within a twelve month period, thus positioning the company for its subsequent sale. Also noteworthy is the participation of one of our professionals in an equity road show that helped the new owners raise almost $200 million in equity capital needed to complete the transaction.