Olympic Rent-A-Car U.S - Customer Loyalty Battles

Should Olympic match Enterprise loyalty program? How much does it cost?

Olympic Rent-A-Car is a car rental company, founded in 1976 by a former pole-vaulting champion, John Uelses. Its capitalization was built on the founder’s popularity and initial strategy was to price lower than Hertz in any market. In 2012 Olympic has $1.54 billion revenues, which is 7% market share, 108k cars fleet, and 464 car rental locations (2.7% share). The market leader, Enterprice (50% market share of revenues) has launched aggressive EterpricePlus customer loyalty rewards program, based on dollars spent as opposed to Olympic’s program, based on rental days spent. In addition, Enterprice offers their cars with no blackout days. The total car rental market is accounted to $24 billion and 1.6 million rental cars and is growing 2-3% during past two years. At least 40% of all market revenues are business travelers (80% of airport rentals (50%). Market has reached its peak and there exists a demand decrease danger due to teleconferencing popularity.

1. The costs of the following Enterprise loyalty program.

At the moment 1.45% of total rental days of Olympic (~25million) are free rentals for Olympic Medalist program members’ rewards. Free rental days claimed in 2012 accounted for 375k. The expenses for them: 375k x $21= $7.9million. If Olympic follows Enterprice’s loyalty program, Seth Bergman expects an increase in free rental days to about 1.65% to 1.95%. We will assume an average increase of 1.8%, which would account for 452k claimed rental days or 452k x $21 = $9.5million. At the moment all free rental days amount for about 8.6% of all rental days of Olympic Medalist customers. We could assume that with the new system of bonuses per dollar spent this percentage could increase to approximately 12%. So, if 452k days are 10%of all days, the total loyal customer days could be approximately 4.52million