Say you are back after traveling from a long fun trip and you are busy recalling all those wonderful experiences you had. You might spend a couple of minutes recalling the car rental experience. But more often than not, you might end up forgetting it. You may notice that it’s not really a problem with the car rental industry being deficient in certain tools, technology or the workforce. The issue here would most likely be the mindset of the service providers who would rather approach this business as just an income earning service and not exactly something that can count as experience.

This approach is harmful to the business considering the fact that around 86 percent of the customers are willing to spend more for better customer experience. Once we can understand what our potential customers are looking for and how we can set a benchmark in achieving service expectations, this will pave the way for an optimistic impact on Customer experience in this business.


What Is Churn Rate?

This is one concept that needs to be understood while dealing with Customer Churn. When a valuable customer, one of the many any business must have acquired by investing a lot of time, money and effort, decides to churn away, it does feel agonising. We will be talking about 3 such mistakes that car rental companies end up doing that leads to customer churn. But let’s first discuss the essence of customer churn analysis in business.

Fundamentally, the customer churn rate is a simple concept: The churn rate is the percentage of customers that leave service over a given period of time.

However, a complex design lays hidden behind this super simple concept. Above everything, it is important that you understand what variables build up your churn rate and how affecting these variables might have a significant impact on the number.


Mathematical Metrics –

Churn rate is a business metric that calculates the number of customers who leave a product over a given period, divided by total remaining customers. That looks like a basic formula but,

(1) the two variables here, how they are defined, will greatly influence the output.

(2) certain external factors that might be business dependent will end up affecting both the variables and might have a significant impact on the final output.

The total number of customers per month will vary because we will not be able to predict the number of new sign-ups and cancellations that might happen during that time.

For any given period, there are typically three kinds of customers you may run into –

  • Customers who are already signed up with the business and are up for this period’s service renewal.
  • Those who will be joining during this period as first-timers.
  • The customers who decided to end the service anytime during this period


Which Customers Churn Most?

New customers generally tend to churn away much quicker than those who have been using the service for a while now. This means that if you have a company that is growing fast, your churn rate might really go high during that growth phase.

The moment of churn can then be defined in two ways:

  • A customer does not choose to renew his service subscription after it ends
  • When a customer decides to cancel his subscription mid-way.

If a customer cancels a service, that does not mean they have churned already. We still have a chance of winning back those customers who decide to cancel their subscriptions mid-way because they still would have access to the service until the subscription ends as they have already paid for the entire period.

Now let’s talk about 3 such mistakes that car rental companies end up doing that leads to customer churn.

1. Improper Customer segmentation in car rental

If your business is unable to pull up sales or generate proper leads, there might be a couple of things that you need to check. Is your Ideal Customer profile definitive? Have the customer challenges been figured out? Are you only speaking to those potential customers or are you trying to market to a broader audience who might fall a bit outside the profile?

Car rental providers first need to identify their potential customer base. To do so efficiently, they need to consider the existing pool of customer records and the feedback received from the same about the service. Once this potential customer base has been detected, advanced analytics can help define buyer personas. Then depending on the persona created, a productive service model can be put in place.

Once this is done, all customers must be segmented into groups that best fit their profile. Common traits need to be specially considered while this grouping is done. Appropriate segmentation is the key to effective customer experience as the customer must feel that his requirement is fairly understood and that the solution or service provided effectively fits his needs.

2. Negligent Customer Experience

The advertisements may tell a different story altogether, but renting a car is no piece of cake. A lot of other stuff comes into picture the moment you go to rent one. Product and insurance information, terms and conditions, additional top-up details are thrown towards you when all you need is that car you came looking for. Most of the time, you tend to overlook all of these and just try to finish them as soon as possible just to be done with the process.

Let’s say, you are done with this tedious process mentioned above and are now traveling to an exotic destination of your dreams. Your car suddenly breaks down in the most unpredictable way possible, miles away from the nearest repair station. The only way you will be able to reach out to the service provider is either via email or telephone. When you call the number, you are first connected to an increasingly time-consuming IVR system before the support is provided. In times of emergency, the already irritated customer will be frustrated even more by this. And as statistics reveal, 91% of customers cut ties with an organisation where they have experienced poor service.


3. Inefficient End of Rental Schemes and Other Tie Up Services –

This is where things take a turn for the worse. When the car is returned, the customer needs to go through another tedious process which includes a detailed inspection of the car. If there is damage, that might take additional time. After all of this is done, the invoice is generated which shows an amount that is significantly higher than what you expected. The reasons may include any extras or ancillaries that were opted for when the car was rented to or some terms and conditions that the customer failed to meet during the travel period, like exceeding a distance range.

Later, the rental provider does not make any effort from their part to keep the engagement going by means of promotions, greetings or surveys. So, the likelihood of the customer returning for another engagement with the service provider, even in case of excellence service might be lost.

Instead of losing customers, using data-driven marketing strategies to enhance customer experience will not only retain customers that would have churned, but it also increases the loyalty of the customers. If you are looking for a platform to help you out, try Datoin.