Car Rental Industry & Elasticity

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The rental car industries as well as other industries within the travel market are challenged with developing a pricing strategy that will maximize profits for the firm. In our analysis of three firms, Hertz, Avis and Budget, our team used qualitative and quantitative methods to develop an understanding of their pricing strategies. We wanted to determine which company has the best overall pricing strategy. Furthermore, these methods helped us develop recommendations involving segmentation and brand differentiation that will help these rental car companies insure greater profitability through pricing that will minimize consumer surplus. Our examination of the three rental car companies and their pricing strategies begins with industry and…show more content…
Budget and Avis are both subsidiaries of Cendant Corp. who bought both companies separately. Although both Avis and Budget were part of Cendant by the end of the year 2002 they operate as separate companies and maintain distinct brand identities. Avis positions itself as a business-friendly rental car company while Budget tries to own the leisure segment. The two brands together operate over 6,000 outlets in the Americas, Australia, New Zealand and the Caribbean. Each rental car company maintains separate advertising campaigns, websites and counters, while combining some "back office" operations to reduce costs. Hertz was a wholly-owned subsidiary of the Ford Motor Company until it was sold in September 2005 to a private equity firm for $15 billion. Hertz dominates the airport rental car market, operating approximately 350 sites in the United States. The company offers customers high-quality vehicles and premium service. It derives the bulk of its sales and profits from rentals in the United States. It considers Avis to be a key competitor. Hertz offers its customers several key features including the low-cost Hertz #1 Club Gold program which provides an expedited rental service to members worldwide. Also, Hertz offers a "Prestige Collection" brand, which offers customers the opportunity to rent from a pool of high-end performance cars, including Jaguar, Land Rover, Lincoln and Volvo.

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