You might be wondering how car rental companies end up making money. Well, they buy cars in reasonable amounts and then make money by selling them for more than they paid. Just like any owner who rents out his home for tourists on vacation, when car rental businesses rent these cars out, they are merely covering the operational expenses while waiting to resell the vehicles at a fair price. Sounds crazy but this is the way such businesses have been operating for decades. Moreover, yes, that’s the reason you might still be able to rent a car at $6.50 a day in Las Vegas sometimes.
The future of such businesses is very uncertain, though, and things may soon change. There can be a couple of factors that might attribute to this –
- Large car manufacturing companies like Ford may start renting cars directly to customers
- Share-ride services like Uber and Ola at much cheaper rates
- The resale value of the cars keeps on declining as time passes
Car rental industries are way more complex in terms of functionality when compared to Industries, like airlines and manufacturing. Such a complex structure ends up affecting pricing and forecasting way more complicated than it usually is. This complication can be attributed to several variables involved. All these variables will eventually lead to each car having a distinct price. Hence building up Predictable revenue in such terms is very important. Let us now discuss some factors that can help contribute to building predictable income in car rental businesses.
Predictive Analysis and Future Proofing
Analyzing the incoming data from a car rental business may itself be enough to provide insight into what might be able to bring profits. This focus on data and probability will be beneficial in predicting how a potential customer’s mindset works. Using predictive fulfillment to know what a customer might buy before they decide to can do wonders. Car rental businesses need to open up to using artificial intelligence and machine learning systems to analyze this data and build an efficient predictive fulfillment model. There have been many successful models as such, for example, Amazon, whose predictive models have helped the firm build upon revenue on an unprecedented scale. Once this model is in place, with a couple of years’ worth of data, an upscale to this model will help in creating a future proof plan for the business.
Superior Customer Service
Customers generally are willing to pay more if they are promised a better customer experience for the service. Excellent Customer service is one of the main challenges that car rental companies generally face, especially when it comes to customer complaints. These complaints may come in the form of various scenarios that include but are not limited to excess amounts being charged, a lack of information on additional payments and long waits for an already booked car. Car rental companies are now trying to improve this experience by improving response rates to customer complaints. They have also started using new technologies to provide better rental booking experiences.
Offering Competitive Incentives
Customers are attracted to a specific business the moment they see that the opportunity would be financially beneficial for them. The same is with any Car rental business and its competitors. Once a car rental business can provide certain offers and discounts to its customers, in a way that it compensates for the rebate by bringing in more customers who are willing to buy the service, profits will start building up. However, the business should ensure that the offers and discounts don’t end up disrupting the profit margin. At the same time, the industry should make all efforts to provide healthy competition to its rivals. In today’s market, most sophisticated car rental companies determine price fluctuations depending on the game. They look at incoming bookings and then predict a number they might eventually fetch. Once that is done, they take a look at the competition’s pricing and price relative to the market before actually deciding on a final quote.
Understanding the Customer Base
Different customers have different choices. One customer may have a liking towards a specific car, or a particular type of service (like a short-term rental as opposed to long term rentals). Targeting your customer base with effective marketing techniques will work only if the business can define its potential customer base. Once this is established and the service is marketed, there is a higher chance of getting more customers to buy the service as they already know that this business will be able to provide something that suits their needs and requirements. In such cases, building up an Ideal Customer Profile will also help the business meet specific customer needs more efficiently.
Customer Churn rates, if not checked, can severely impact your business. Using innovative data-driven decisions and methodologies, you will be able to keep this rate as low as possible and retain customers for your business as well. To discover more, we suggest you try out Datoin.