Armed with this vision, she and a German friend, Antje Danielson, raised $1.3 million from a few venturesome investors and set up shop in Chase’s hometown of Cambridge, Massachusetts. They were determined to convert car-sharing from a tiny niche into a mass movement capable of having a real impact on the nation’s energy and environmental problems.
Chase’s husband, Roy Russell, became the new company’s chief technology officer. He and a team of programmers set about creating a Web-based system for reserving and tracking cars. Cars would be kept in prearranged parking locations in neighborhood garages or lots, and anyone who paid an annual membership fee could find and claim the nearest available vehicle with a few mouse clicks. A digitally coded card would enable the member to access the vehicle. Billing would be handled online automatically, eliminating paperwork. There would be no insurance forms to fill out—coverage would be included in the hourly fee—and even the cost of gas would be taken care of, with the membership card usable at the pump much like a credit card.
These innovations dramatically improved the functionality of car-sharing—the first half of the magnetism equation. “Our goal was to make access to cars as easy as getting cash from an ATM machine,” Chase said, and the new Web-based rental system came impressively close. One early adopter remarked, “I was ten miles down the road at the time I would have been wrapping up the paperwork at the Enterprise counter.” Another marveled, “You never have to deal with a live person—just reserve a car through the website.” And a third called Chase’s system simply “the easiest and cheapest way to get around the city.”
The improvements Chase developed were important. A magnetic product must be functionally superb: It works well; it’s affordable and convenient; it reduces hassles. But as we’ve noted, function alone doesn’t create magnetism—after all, an MP3 player by SanDisk or any other manufacturer plays tunes just about as well as an iPod. Emotional engagement is required, too—produced, in the case of the iPod, by a combination of unique characteristics, including brilliant design, a superlative user interface, and a system for finding, buying, and organizing content that is practically universal, easy, and fun. That’s why for every person who owns an ordinary MP3 player and says, “It works” or even “It’s fine,” there are ten people who own an iPod and say, “I love it!” You can even state the relationship in the form of a simple equation:
M = F×E
That is, magnetic equals great functionality times great emotional appeal. Recognizing this reality, Chase also gave a lot of thought to the company’s name, which she knew would help shape public perceptions of the brand. She and Danielson dreamed up several possible monikers and started gathering opinions from strangers on the streets of Boston. One name, Wheelshare, was quickly shot down because it sounded too much like wheelchair.
The next candidate was U.S. Carshare. Asking people about it, Chase was startled to discover that many had a deep-seated emotional aversion to the very concept of “car-sharing.” “The word makes people nervous,” she later explained.
They feel they’re being scolded or told to wait their turn. At that point I banned my staff from using the phrase “car sharing.” Do we call hotels “bed sharing”? That’s way too intimate. Do we call bowling “shoe sharing”? Who would want to bowl?
For the idealistic Robin Chase, the term car-sharing evoked all that was communal, earth-saving, and virtuous—but for the average American, it sounded weird and distasteful. Chase listened to her customers, and dropped the term.
Eventually Chase named the company Zipcar, evoking fun, hassle-banishing qualities like speed and convenience, and paired it with the slogan “Wheels When You Want Them.” She deployed a small fleet of cars—funky lime-green Volkswagen Beetles, chosen for their hip look and eco-symbolism—first on the streets of Boston, then in Washington, D.C., and New York City. Zipcar was up and running.
And in response, nothing happened—the two most dreaded words in the world of demand creation.
Or almost nothing. In the first year, just seventy-five people signed up. Between 1999 and 2003, Zipcar grew steadily but very slowly, plateauing at just 6,000 members and 130 cars in three cities.
Chase labored creatively to infuse greater magnetism into her struggling product. She played up Zipcar’s social mission, aiming to create buzz among young city-dwellers who shared her concern for the environment. She launched a company newsletter with community-building features like a “Caption This Photo” contest and letters from readers describing the oddest thing they’d done with their Zipcar. “Making customers feel like they have input and a stake in the game really makes them want you to succeed,” Chase remarked. She invited members to a potluck dinner and remained ebullient despite having just twenty-five people show up. What matters, she explained, was “the four thousand people who think, ‘How cool—I belong to a company that has potluck dinners.’ ”
It was all charming and fun. But it wasn’t magnetic enough to trigger large-scale demand. Profitability was a distant vision. More deeply wedded to her green vision than ever, Chase remained optimistic. She joked that her vision was “world domination” and that she would consider Zipcar a success as soon as it was hit with an antitrust lawsuit. More seriously, she described her “death bed” dream as bringing the Zipcar system to countries like China, “before the dream of every child becomes what it is here: ‘When I grow up and turn seventeen, I will get my own car.’ ” And she added, “Frankly, I have no doubt that is going to happen.”
But as the months passed, Chase’s investors began to grow restless. They worried that their zealous CEO was more focused on saving the world than on earning them a decent return on their money. In 2003, a $7 million round of mezzanine financing required to fund Zipcar’s operations fell through at the last minute. Although Chase managed to locate an alternative source of funding, the company’s board decided they’d had enough. They ousted Chase—the woman whose vision, creativity, and drive had been literally everything for Zipcar—and turned the reins over to Scott Griffith.
GRIFFITH HAD WORKED at Boeing and Hughes Aircraft as well as two high-tech start-ups, one (Information America) a success, the other (Digital Goods) a failed early attempt to crack the e-book market. He’d also been a partner and principal at a couple of strategy and investment firms with connections in the world of private equity capital, which promised to be valuable in the ongoing quest for funding (a struggle Zipcar shared with many other would-be growth companies).
But the immediate challenge Griffith had to address was a different one. The Zipcar product crafted between 1999 and 2003 by Robin Chase and her team—call it Zipcar 1.0—was far more attractive than the original car-sharing operations. But its fitful sales growth showed that it lacked the critical characteristics needed to galvanize a really large customer base. The big question was, why?
Scott Griffith’s chief job was the development of Zipcar 2.0—the irresistible product that Robin Chase had dreamed of but had been unable to build. It meant broadening Zipcar’s appeal beyond dedicated environmentalists, emphasizing the ways it could improve daily life for any urban dweller. “This has to be a lifestyle choice that people make,” Griffith declared, “because you’re essentially trying to talk them out of a hundred years of marketing that they got from their car companies.” It would take a shift of this magnitude to make the company grow into a viable business—in the words of board member Peter Aldrich, to “turn a political movement into a company.”
Paradoxically, Griffith started by halting planned expansion efforts. “We had to prove the business model at the city level,” he later explained. “The company hadn’t really thought through what it would take to get to profitability.”
There was no shortage of theories about what Zipcar needed to do to jump-start its growth. Some advocated an aggressive marketing and advertising campaign; perhaps billboards, posters, radio ads, and television commercials touting the benefits of Zipcar would prompt people to test the service. Others
favored harnessing the power of free media through publicity events and messaging efforts like interviews and articles that appealed to people’s civic sensibilities and environmental values. Still others proposed traditional merchandising schemes—dollars-off coupons, free trial memberships, Zipcar sign-up booths outside subway stations and inside shopping malls.
Instead, Griffith decided it was time to explore the mind-set of customers. To figure out why the Zipcar product lacked magnetism, Griffith held focus groups with fence-sitters—people who knew about Zipcar but for some reason had refrained from joining. What would motivate them to become Zipcar members? Griffith listened carefully to their comments, paying particular attention to the specific factors that were making the fence-sitters hesitate. In the process, he discovered that growth itself, if adequately focused, could eliminate many of the lingering hassles of car-sharing and greatly enhance Zipcar’s visceral appeal.
With just a few Zipcars in any given city, would-be drivers often found that no car was available on evenings and weekend days when demand was greatest; often the nearest vehicle was parked a ten- or fifteen-block walk from their home. This might sound like a minor inconvenience, but tacking an extra half hour onto the Zipcar rental experience was enough to prevent most consumers from pressing the demand button.
As one Zipcar member told us, “If the nearest Zipcar were more than two blocks away, I would get annoyed having to walk there in the dead of night.” Another said, “If the car was more than a five-minute walk from my door, I wouldn’t bother.” They speak for countless others.
This posed a tricky chicken-or-egg problem. How to make Zipcars plentifully available—and therefore popular—when Zipcar’s lack of popularity was itself limiting the number of Zipcars available?
Griffith solved the puzzle by ingeniously redefining it. The key to Zipcar’s future, he realized, was density. Vehicles had to be available very close to members to make the service a truly convenient substitute for car ownership. If Boston had, say, 200,000 Zipcar members and 8,000 cars, that would be no problem. The real challenge was for the company to simulate that level of penetration with a much smaller organization.
To achieve this effect, Griffith decided to concentrate Zipcar’s efforts in just a few, carefully selected locations. Almost immediately, the demand-creating power of this approach became evident.
Rather than trying to stretch its fleets across the vast extent of entire cities, Zipcar consolidated them into relatively dense clusters in a few urban neighborhoods filled with prototypical Zipcar members: young and tech-savvy, environmentally conscious, and eager to economize. By focusing on districts where likely customers congregated, Zipcar could create density even while starting from a small base.
Zipcar assigned street teams to promote Zipcar “block by block, zip code by zip code” and launched colorful marketing campaigns tailored to particular neighborhoods. In a Washington, D.C., district filled with young, carless professionals, Zipcar dropped a battered sofa with a sign atop it reading “You need a Zipcar for this.” Students from Boston’s many universities found the city’s T-line transit system plastered with Zipcar posters saying, “350 hours a year spent having sex. 420 hours looking for a parking space. What’s wrong with this picture?”
Zipcar was acutely attuned to variations in demand. Different neighborhoods got different kinds of cars: eco-conscious Cambridge was stocked with hybrid Priuses, while Boston’s posh Beacon Hill district was seeded with Volvos and BMWs. “We were like the coffee shop or the dry cleaner,” Griffith recalls—a local company offering local services catering to local sensibilities. Zipcar was assiduous in identifying many different types of potential customers and tailoring product offerings and combinations to appeal to each of them.
Most important, the hyperlocal strategy enabled “instant density”: In the chosen neighborhoods, Zipcars were thick on the ground, making them easily accessible as well as readily recognizable. The math was compelling: Put one Zipcar location in a neighborhood like the ten-square-block area of central Cambridge, and the average customer had to walk ten minutes to reach it. Increase it to seven locations and the average walk was cut to five minutes; grow past twenty locations and the walk shrank to two minutes. With each increase, the value provided to customers soared.
Griffith’s instant-density strategy ignited an upward growth spiral. In the chosen neighborhoods, people got used to spotting Zipcars on the street and started asking their friends about them. Once a critical mass of local residents became Zipsters (as Zipcar members call themselves), the company expanded to the next community over … then to the next, and then the next.
It’s a remarkable truth about demand, and human nature: We let little things govern big decisions. Zipsters save thousands of dollars a year compared with car owners, not to mention countless hours dealing with hassles like parking, maintenance, repairs, and insurance. Yet what catalyzes their decision to go with Zipcar is often the discovery that a car is available five minutes from home rather than ten minutes. The five-minute difference, it seems, is the tiny trigger that’s even more powerful than huge savings.
Suddenly people by the thousands began to discover the magnetic properties of Zipcar—and to talk about them to friends, family, and acquaintances. “No more spending eighty bucks and investing time in travel and paperwork to rent a car when I want to visit my friends in the suburb,” one Zipster told us. “Now I jump in the nearest Zipcar, spend more time with my friends, and pay less than half as much money.”
“My wife’s a professional photographer,” said another. “She uses Zipcar three or four times a month to tote her equipment when shooting a wedding. Otherwise, she’d have to buy a car—a big investment she can definitely do without.”
“We can do things with Zipcar we could never do without it,” said a third. “We’ve stopped using a grocery delivery service, and we save money by buying a case of wine instead of a bottle or two. Last week, we brought home a Christmas tree tied to the roof of our Zipcar. Try doing that on the subway!”
“I love using a Zipcar for business meetings,” said yet another. “My clients ask about it—they think it’s cool!”
Encouraged by the sudden growth spurt, Griffith soon found other ways to achieve instant density and its magnetic appeal. In the process, he also attracted new types of customers to Zipcar.
One approach was to partner with universities by providing cars for use by students and faculty. Most colleges fit perfectly into Zipcar’s demographic sweet spot: They were densely populated communities with lots of young, tech-savvy, environmentally conscious, and cash-strapped individuals who needed cars for occasional trips and chores. And university administrators typically spent inordinate chunks of time wrestling with the problems of student drivers, such as parking rules; they appreciated any program that would reduce their car-related hassles. (“Customers” aren’t just end users of a product. Zipcar turned college deans into “customers” by fixing the deans’ hassles with student drivers. Demand is a highly complex game that can be played on several levels at once.)
In 2004, Griffith worked out a deal with Wellesley College to provide Zipcars with discounted insurance costs for its under-twenty-one drivers. The safety results were so good that Griffith took the data to his insurer, Liberty Mutual, and persuaded them to offer an even better rate at three more colleges. When the results there were just as good, Griffith parlayed them into a series of additional deals.
Now the company has crafted partnerships with more than 150 colleges and universities that offer huge long-term demand-growing possibilities to Zipcar. Students under twenty-five are delighted to discover they are eligible to rent from Zipcar, which is not the case with most traditional car rental outfits. When those students graduate, will they automatically switch to Hertz or Avis, or will habit and gratitude combine to keep them as loyal Zipcar customers? Zipcar hopes for the latter.
Griffith also began promoting Zipcar as the “company car” for small busine
sses that need a vehicle occasionally—to pick up a client or to make a sales call, for example. This new customer type broadened demand for Zipcar’s product across another dimension—time. Most of Zipcar’s core customers want cars on evenings and weekends, leaving them parked and unproductive during ordinary business hours. The small-company and corporate clients Griffith and his team courted helped pick up the nine-to-five slack, turning those hours into revenue generators for Zipcar and helping to improve the company’s finances. By 2009, business customers were producing 15 percent of Zipcar’s revenues, and as of late 2010, ten thousand companies had signed on as clients.
Achieving density was crucial to the magnetic appeal of Zipcar 2.0. But Griffith also instituted other changes to eliminate the remaining hassles that discouraged would-be customers. For example, Zipcar customers had been required to pay a per-mile charge after each rental. They hated watching the miles tick away, each tick costing them money. In Zipcar 2.0, 180 free miles were included with each rental.
In its new incarnation, Robin Chase’s dream of a car-sharing system that could support a mass-market industry was now showing definite signs of life. While retaining the emotional appeal of being hip and eco-friendly, Zipcar had become increasingly magnetic by reducing or eliminating the hassles of car ownership for a growing array of customer types. As one Zipster puts it, “I like the idea of being green, but I can guarantee you I’m doing this because it puts more green in my pocket.” She’s typical: Practically every Zipster we spoke to cites the convenience and affordability of the service as its chief attractions, with “the idea of being green” a distant third.
Even seemingly unpredictable hassles are eased by the Zipcar system. One member reported losing his Zipcard halfway through a rental (he was moving from one apartment to another and probably dropped the card while schlepping boxes). He called Zipcar and learned from the service agent that a spare card was hidden in the car. He found the spare and had it immediately activated over the phone.
Demand_Creating What People Love Before They Know They Want It Page 3