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Since rideshare apps like Uber and Lyft hit the market, there has been a noticeable shift in how people use car services. To better understand the measurable change in behavior, our analytics teams at Epsilon-Conversant analyzed travel marketing spend with our proprietary data assets for the Rideshare Effect whitepaper.
We sat down with Amit Deshpande, SVP Analytics at Epsilon, to talk about the research and its potential impact for both car rental companies and rideshare services.
MC: Can you talk a little bit about this research? What are the main learnings for car rental companies?
AD: The hypothesis we wanted to test was that the car rental and rideshare market is going through a shift from car rental to rideshare. This hypothesis, which many travelers had been observing anecdotally, was certainly validated through factual data. Rideshare is causing a shift in the marketplace, and a significant portion of consumers that were previously using car rental companies are now shifting their business to rideshare services. As we talked to clients, we noticed there wasn’t enough appreciation of the shift that was going on, so we put together the whitepaper to quantify these trends.
To gain share in this shifting marketplace, both car rental and rideshare companies should focus on making every customer interaction count and transforming ordinary customer experiences into meaningful, human experiences. Every interaction that brands have with their customers needs to be personal and purposeful so they can beat their competition. Getting towards that means really understanding the consumer. Many brands have some understanding of what their customers do with them, but they don’t have the holistic insight about what consumers are doing with their direct and indirect competitors.
Because of this lack of insight, they don’t always focus on their most important, or valuable, customers. For example, take a customer who may have had only one transaction with a brand. Are they a truly infrequent traveler, or are they spending a lot with other car rental companies or with rideshare services? If there is enough potential, even if they seem like a one-time customer, brands need to treat them as a high-value customer to gain a fair share of their spend. Brands today don’t have that in-depth view. At Epsilon, we are helping our clients understand people and consumers holistically so we can help them win the “interaction wars.”
MC: So why should car rental companies care about rideshare services and vice versa?
AD: From a car rental point of view, there are significant stakeholders in the car rental industry that believe (or actually state) that rideshare services pose no risk for them. They think that there is a difference in rideshare versus car rental customers. Based on our research, we know that is not true.
People who have previously rented cars are slowing down in their car rental usage while simultaneously increasing their rideshare usage. Our rich transactional data shows that. Business travelers have been anecdotally saying that they are renting less as well. Because of this shift, car rental companies need to ask: Who is shifting to rideshare? What are the types of consumers that they need to add for better stickiness?
While rideshare companies have grown at a fast rate, their customers’ spending amount has been typically much smaller than what a car company would demand. Rideshare companies have the opportunity to grow their share further within the business traveler segment and continue to grow faster.
MC: What was the most unexpected finding from the analysis?
AD: While the shift was hypothesized and anecdotally known, the extent of the shift from car rental to rideshare was illuminating. 63% of car rental users reduced their car rental spend year over year. For car rental customers, overall rideshare transactions increased by 71% while car rental transactions saw a 42% dip year over year. Given the decline in car rental transactions and simultaneous increase in rideshare transactions, we can safely infer that customers who were previously high car rental spenders moved toward increased rideshare activity.
Another interesting part for me was gaining insight into the differences between the types of consumers that tend to over-index on car rental, rideshare or both (Figure 3 in whitepaper). For example, those that over-indexed on car rental but not on rideshare tended to be in the “Easy Street” segment, which is made up of white collar Baby Boomers with a lot of discretionary spending and “IRA Spenders” segment, who are retired households with no kids at home.
Understanding who is at risk of shifting share, who could be the stickier customer and which consumers could be the source for future growth are important for car rental companies to know as they develop their marketing strategies.
MC: How do generational differences factor into car rental versus rideshare usage?
AD: Life-stage, lifestyle and affluence do seem to factor into who used what services. Some segments that tended to over-index on both rideshare and car rental were “Big Spender Parents,” affluent Gen Xers with kids; “Go-Go Families,” parents in their 40s with heavy discretionary spend; and “Chic society,” business and culturally oriented households. In general, they tended to be the more affluent segment. Those that over-indexed on the car rental side tended to be older and in further life stages, like the retired households in the “IRA Spender” segment. Those that over-indexed in rideshare tended to segments like the “Just Sailing Along” segment: They were earlier in their life-stage than other segments and had lower spend.
MC: We saw a large percentage of car rental users reduce or entirely stop spending in that category. How can car rental companies react based on this information?
AD: This involves multiple parts. The first is a retention strategy that includes a value proposition, overall brand experience and communication plan that drives greater relevancy for current car rental customers. The second is about obtaining fair share or more from current and new customers.
For retention, car rental companies should understand who are the customers that are likely to decline their car rental use before they actually do. Companies need to take proactive steps from a communication and value proposition point of view to stop the leakiness of this bucket. To do so requires identifying these people, understanding their reasons for declining spend and defining the value proposition from a service, experience and value perspective to reduce their attrition.
Retention is necessary, but it’s also important to fill the bucket. For growth via current and new customers, car rental companies should look at consumers who are giving more than a fair share of their spend to other car rental brands and rideshare when they could be spending more with their brand. To grow this customer base, car rental companies should identify the heavy travelers from whom they are currently getting a lower share and consumer segments with stickiness who over-indexed with both car rental and rideshare.
MC: Based on the results of this research, what next steps should car rental companies take?
AD: To summarize, within their customer and prospect base, car rental companies need to identify who is spending with their competitors: both car rental and rideshare customers. They also need to get an in-depth understanding of their at-risk segments. That in-depth understanding can be obtained not only at the segment but also at the person-level. And lastly, they need to have the right CRM and loyalty plans in place to personalize relevant brand experiences and communications. By focusing on making every interaction count, car rental companies can transform ordinary customer experiences into meaningful, human experiences that matter and drive revenue.
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