Hertz came back to the Bay Area this past weekend for another connected car hackathon this year. With an assortment of prizes, along with other sponsors including AT&T, Mojio, and Gracenote, there was plenty of stuff for developers to play with.
This year, Hertz left it open to what hackers could hack. From business plans to full apps, the developer was encouraged to innovate to their heart’s desire.
Rob Moore, the Chief Technology Officer kicked off the evening.
It was great to see Linda Senigaglia and Mike McDowell from the NeverLost team were back this year along with other members of the Hertz team.
Friday night, dinner was tacos. Bagels and pastries were breakfast on Saturday, followed by awesome sandwiches for lunch, and pizza for dinner.
Mojio is a cool device that plugs into most cars built after 1995. It monitors the cars system and different things like location, gas levels, and error codes. All this data is sent up to their cloud service via cell networks and is accessible for developers to build apps around this data.
The fuel option problem
I have rented from Hertz quite a bit. From the month long All You Can Jet journey back in 2010, to those awesome $5 per day drive out of Florida and Arizona deals that I’ve managed to snag a couple of times over the past few years, Hertz is truly #1 in my heart. Being a gold member, I love how super quick and easy checking out a car is. At select locations, I just have to find my name on the board in the car lot, and find the vehicle at the numbered spot. No waiting in line or dealing with all the paperwork.
But when returning the vehicle, it’s not just as easy. I usually get anxious trying to find a cheap gas station nearby the airport, while already pushing the timing of when I should be arriving at the airport for my flight. Err, yes, I do run my vacations to the very last moment and the task of finding a close and cheap station often takes longer than I plan for. Why isn’t there a cheap option to fill up for just the amount of gas I used at the airport?
And that dreaded $8-$10 per gallon surcharge you get if you don’t bring it back full can leave a “large” dent in the bill.
For the business model track, I decided to tackle a new way to give Hertz customers a superior experience and present Hertz with additional revenue. It was simple. Give customers a reasonable price per gallon and increase the volume of gas Hertz can sell.
Because of the two extremes of refuel options (buy a full tank at the beginning of your trip which you might not use, or buy what you used at an exorbitant price when you return) offered create a feeling of being cheated, customers go elsewhere to fill up. Hertz ends up losing thousands of gallons of gasoline sales per day because customers never like being charged more than they should be.
By lowering the prices to the neighborhood gas prices, customers will find it more convenient to return the car back to Hertz, and pay a reasonable price (maybe even a slight markup for the convenience). In a way, being “too greedy” results in lost sales.
However, talking with the Hertz team quite a bit over the weekend, this idea isn’t so simple as implementing a new pricing model. Exactly what would the price charged be? There is additional labor costs for filling up all those additional tanks. Another question that came up, what could a reasonable markup be for the service of filling it up be? A business traveler would opt for the fill up and use the extra time for business tasks, whereas a leisure traveler on a budget might go for the cheapest station nearby.
Apparently there was a short term test on changing the price, but it either didn’t run long enough or ended up not making very much additional profit to make it feasible.
And, unfortunately, we still have the “price gouging” feeling that leads to a poor customer experience. Until a rental company takes the plunge and changes the industry, renters will be faced with the same three options, all with their own pros and cons.
Hertz Easy Return
If the pricing issue was determined to be profitable for Hertz and reasonable for the customer, I came up with a simple screen for the NeverLost unit. When the customer is seeking the directions to the return center at the airport, we could assume the customer is returning the vehicle.
Easy Return would use Mojio to get the fuel level to determine how much gas is needed. It would look up the closest and cheapest gas station nearby. Easy Return would then display two options, one with the cost at a nearby gas station, and the other, if Hertz filled up the tank.
The customer can make their decision based on how much their time is worth. In this example, $4 might be worth the 24 minutes I save.
The customer has to commit to the Hertz FillUp option before they get back to the airport, or they still face that dreaded $10/gallon cost. By presenting the option before the renter is on their way back, you’ve captured that sale before they visit a nearby gas station.
In this example, there is a markup to cover the labor cost Hertz incurs. But it is far from the extreme price.
It’s a tough sell
On one hand, by implementing the FillUp option, you can capture sales of gasoline that would otherwise go to neighborhood gas stations. You also give the customer a lot of convenience for the value. That could lead to more rentals in the future, knowing that checking out and returning a Hertz vehicle is way faster than with other competitors.
However, we’re talking about many financial factors that end up complicating the situation. And businesses rarely sacrifice the bottom line if they can help it. And exactly what each number ends up being in the complicated equation of economics may result in such a small difference for the bottom line that customer experience is sacrificed as it has been for many years.
Maybe this can be a limited option to customers with Gold memberships, or who rent the NeverLost unit. Packaging this offer with other products that are paid for might defray that extra cost.
With enough candy to feed a whole neighborhood of children on Halloween, there was some extra time to exercise the creative skills.