In North America alone, recent statistics show that the local ­market (off-airport) car rental segment is comprised of nearly 12,500 locations — estimated to represent $11 billion in combined revenue among retail, insurance replacement, body shop and dealership-based car rental operators.

As part of collaborative research done in conjunction with Auto Rental News, the Frontline Performance Group (FPG), a Khoury Group Company, conducted a survey on the local market customer. The intent of the survey is to understand the local market customer and to give the rental operator insights to gain a larger share of this important revenue stream.

The results were presented by FPG at the 2012 Auto Rental Summit, which took place Oct. 29-30 in Hollywood, Fla.

Survey Methodology

In addition to more than 40 hours of independent research, FPG’s field team conducted 850 surveys among local market customers, branch managers and senior leadership at more than 65 corporate, licensee, independent and dealership-based stores in U.S. and Canadian markets.
Research was centered on three customer types: traditional retail, insurance replacement/service and repeat customer.

Survey questions were structured with the goal of providing evidence of the opportunities that exist in this emerging business segment, and to assist local market operators in creating “Urgency, Belief and Action” throughout their customer-facing service, sales team and operational staff.

Here are some extrapolations from the survey data.

Survey and Research Highlights

Among 850 surveys of local market customers, branch managers and senior leadership at more than 65 corporate, licensee, independent and dealership-based stores in U.S. and Canadian markets, the top reason cited for renting was because of service repair/insurance replacement of their regular vehicle.

Among 850 surveys of local market customers, branch managers and senior leadership at more than 65 corporate, licensee, independent and dealership-based stores in U.S. and Canadian markets, the top reason cited for renting was because of service repair/insurance replacement of their regular vehicle.

In general, local market customers are repeat customers. Branch managers stated that 61% of their customers are repeat renters, and the majority (58%) of local market customers rent three or more times a year. To book the car, customers called locally or were a walk-in/referral 69.8% of the time.

While 52% of survey respondents stated that the car rental company brand does not matter, 53% of local market customers stay loyal to one provider. Loyal customers say that their commitment is driven primarily by price (46.8%), branch location (28.8%) and the established personal relationship (22.8%).

(These “commitment drivers” involve primarily non-service/insurance replacement rentals, which have factors that affect choice such as contractual obligations with insurance companies and repair shops.)

Price was named as the primary decision factor by 49% of survey respondents.

Price was named as the primary decision factor by 49% of survey respondents.

The local market customer spends an average of $116 (pre-tax) for a three-day rental. If you can keep them loyal to your brand, it will pay off in price. The “loyal” customers, those who rent four or more times per year, will “brand hop” for a rental rate difference of $8 per day. Less frequent customers, those renting one to two times per year, will switch brands for as little as a rental rate difference of $3.50 per day.

For many, location won’t stand in the way of switching to another company: 47% of branch managers surveyed have three or more competitors within a five-minute drive of their location.

Providing customers with a good experience is essential to keeping them loyal. After price, getting good service was the second most important customer “want” (34%). The news of bad service will travel: 53% of customers who had a bad experience said they will tell six or more people about their travel (rental) provider.[PAGEBREAK]

By giving customers good service, you’ve got an opportunity to gain new business even during the transaction: 45% of local market customers have someone else with them at the time of rental.

On average, car rental companies in the survey said that pre-existing customers makes up 42% of their local market business.

On average, car rental companies in the survey said that pre-existing customers makes up 42% of their local market business.

In regards to service/insurance replacement-based rentals, when renting due to service of a primary vehicle, customers drive a different vehicle brand from the one they placed into service 39.7% of the time.

Conducting a dealership-based service rental at an off-site car rental location adds an additional 22.1 minutes to the overall rental experience. This is important in light of statistics from J.D. Power and Associates that show that lengthening any part of the rental process affects customer satisfaction.

Take-Away Techniques

So what can your service and sales team and operational staff do to better address the wants and needs of the local market customer?

The Retail Customer

Making up one of the largest groups of customers in the local market is the traditional retail customer. Understanding their needs and applying a specific service-based sales process for their rental is critical.

Apply the following strategies to ensure your local market team is effectively engaging the customer:

  • Acknowledge future need for rentals and accept the fact they “brand hop.” Always ask for future bookings at the end of each rental.
  • Utilize customer-focused pricing strategies by stressing the true value of the car’s rate and what they could potentially save by renting from your firm.
  • When negotiating price or securing the reservation commitment, create urgency on the rental demand, add the value of a larger car class or extended location hours and discount if necessary.
  • Ensure your associates have specific service-based sales dialogues designed for the local market rental transaction.
  • “Own the phone.” Establish a professional opening greeting that stresses the associate’s name, secures the customer’s name and sets the location of your business in the customer’s mind.

The Repeat Customer

In other parts of the travel experience, namely hotels and airlines, the loyal customer is granted “perks” or a higher level of service. The same should be true in car rental. Consider having the contract pre-printed before arrival. Can you deliver the car to the renter? Be more lenient on the late fee if the renter is running behind.

Here are some additional techniques on how to ensure repeat customers stay loyal to your brand and become ambassadors:

  • Secure your customer’s future commitment by asking for a reference or testimonial. When customers write something flattering about your company it emotionally binds them to your business.
  • During the rental, acknowledge how frequently they rent from your location. This will demonstrate to customers that you are aware of their consistency.
  • Create a mindset of social proof for your customers by stating that many of their colleagues, neighbors and friends also rent at the location.
  • Never assume that all they want is the same car or services each time. It is critical that all your products and services are presented to repeat customers.

The Service/Insurance Replacement Customer

The service/insurance replacement customer is one of the most varied of any segment. In addition to the car owner, that customer could be an adjuster or service writer, or even the dealership principal or general manager.

Though the way the rental is transacted is often less personal than other types, remember that service customers are people, not numbers. They’re most likely not too happy to have their car in the shop, so there’s no need to dwell on the reason for service, especially if it’s an accident.

Utilizing these techniques will further enhance their experience:

  • Delay requesting the form of payment until end of rental. Establishing a sincere rapport with the service customer prior to asking for the credit card will allow your team to identify their needs and qualify them more thoroughly. Service customers all too often enter a location insisting they are not paying for anything, even though the branch manager needs to secure a credit card for booking and for any ancillary costs.
  • Always inform the customer of additional coverage products and services like a “Rent to Own” program or new lease offer. Although it was not the customer’s first intention to purchase something the same day as placing a car into service, presenting all your products 100% of the time will lead to higher sales and service levels.

About the Author

Ken Stellon is a managing partner for the Frontline Performance Group – a Khoury Group company. For questions regarding the research or the Frontline Performance Group, contact Ken Stellon at (630) 788-2879 or email him at [email protected].


More features from ARN's January/February magazine issue can be seen here.

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