Logo courtesy of Revenue Analytics
Revenue Analytics, a technology-enabled consulting firm, provides analytics-driven solutions for the automotive rental industry.
A consummate pricing science provider for Fortune 1000 companies across a spectrum of industries — including airlines, automotive, retail, and travel & hospitality, Revenue Analytics builds comprehensive solutions that can result in organic revenue uplift for its clients.
For rental companies, Revenue Analytics believes organic revenue growth can best be achieved through the sale of ancillaries — by bundling products together and presenting them to customers at the right time, right place, and for the right price, according to the company.
Hertz, for example, has presented to investors that it foresees ancillary profit growth outstripping that of core revenue..
“Given the commoditization of vehicles, it makes sense that many automotive rental companies are looking for fresh sources of organic revenue growth,” said Matt Busch, partner at Revenue Analytics. “That’s where ancillaries come in, as they present an opportunity for automotive rental companies and are not as vulnerable to outside variables.”
Revenue Analytics recently worked with a major American airline. The airline was trailing competitors in ancillary profits and customer service scores — and losing out on potential organic revenue growth. Revenue Analytics helped the airline make the ancillary purchase process more intuitive and personalized by determining which products to combine, who best to offer them to, and what to charge for them.
Then Revenue Analytics built an analytics engine to tell the airline’s customers what “passengers like you also bought” and recommend the best ancillary product bundles in real time. Using these analytics and new strategies, the airline now provides tailored offers that enhance the customer experience, build greater brand loyalty, and drive revenue growth. As a result, the airline anticipates $130 million in extra revenue annually.
Similar results are possible for the auto rental industry, according to Busch, if certain revenue management practices are put in place.
“Auto rental firms must implement advanced analytics to segment customers using historical data that will show them which ancillaries to bundle together, when to offer them, to whom and for what price,” said Busch. “Understanding whether a customer is on business or personal travel, or if they’re travelling for a week or just a weekend, will trigger a targeted offer of ancillaries for each unique situation.”
One problem the rental industry will confront in a move toward greater ancillary sales will be corporate contracts. Up to 30% or more of an auto rental company’s business comes via contract, and many of those contracts have built-in discounts or rules that prohibit the sale of ancillaries. Loyalty members also pose a problem, since they typically avoid sales reps at all costs and are less likely to purchase ancillaries.
Despite these challenges, Busch said, the benefits for big players like Hertz, Enterprise, and Avis are significant. Hertz, for example, has reported the potential revenue growth from ancillary merchandizing could be more than $485 million from 2018-2020, with profit margins of around 70%.
“Rather than blaming excess industry capacity and intensified pricing pressure, the industry could be talking about organic revenue growth and sustainability,” said Busch. “By offering customers products they want at the right time and for the right price, auto rental companies will endear themselves more to consumers, turning them into repeat customers, which adds up to customer lifetime value.”