Auto Rental Subscription Services on the Rise
Companies jump on board the Netflix way of doing business
Car rental companies continue to toy around with a variety of transaction options to suit the needs of its clientele. Now, it seems the way to go is via the Netflix route: charge a monthly subscription and offer a variety of packages according to what types of vehicle models are available and the number of amenities tacked on to make such an offer worthwhile.
Besides Netflix, car rentals aren’t the only industry that’s stumbled on this solution. They’re part of a new sharing economy in which the number of companies going the subscription route has annually doubled in the past five years. While the most recent estimates peg the subscription economy at $2.6 billion back in 2016, there’s no doubt that it’s escalating and fast, with such retailers as Amazon, Birchbox and Ipsy leading the pack.
Car rental companies aren’t retailers as most of their activity is geared more towards selling services than actual product. Therefore, it’s taken a bit of a reworking of their business models to take advantage of this revenue stream, which is what Enterprise did in April.
Which Companies Offer Subscription Services?
That’s when it became the first car rental firm to introduce subscriptions in a few select markets. Enterprise is offering a $1,499 monthly fee to cover 3,000 miles. They even have an incentive to change vehicle models up to four times monthly.
Hertz isn’t far behind, trying to compete price-wise against Enterprise. They provide a two-tiered series of monthly subscription packages ranging from $999 to $1,399. The Hertz My Car program offers a series of vehicle protection and maintenance services as well as the option to switch rides twice a month.
Meanwhile, Avis hasn’t announced any subscription initiatives, banking on its Split My Bill incentive to allow customers greater payment flexibility. The new service is available on the Avis mobile app, which is what the company is upgrading by adding more high-tech services to create greater efficiency and improve customer service.
So far, other players like Budget and National haven’t made public any plans to introduce subscriptions. However, there’s no doubt the rest of the market is looking at how well those incentives are working.
Subscriptions from the outset seems a logical route to pursue. The success experienced by major retailers dealing almost exclusively in e-commerce validates that. It’s also a way to diversify payment options. This could make it more attractive to consumers who might find that subscriptions better fit their travel budgets. But there’s also a wealth of demographics to attract as well.
Benefits Of Subscriptions
For openers, car rental subscriptions might draw in the 25-44-year-old set that’s most active in subscribing online. This could especially ring true for residents of the northeastern part of the U.S. who annually earn between $50,000 to $100,000.
Since millennials in particular are fickle by nature. For example, only three-quarters of that demographic segment owns a driver’s license. The convenience of an e-commerce subscription, however, could boost demand. But fickleness works both ways. Millennials are also more likely to drop a service if the amenities associated with convenience aren’t immediately realized.
In terms of gender, it’s a chance for car rental companies to reach women who make up about 60 percent of consumers subscribing online. With men four times more likely to rent a car, there’s ample opportunity to garner more female clientele.
All of which makes subscriptions a likely path for the rest of the car rental field to consider. That is, at least, until another incentive comes along.
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