Prior to launching any new business, it is important that adequate market research is conducted to ensure that the entrepreneur develops a good understanding of the market and the targeted consumers of the products offered by the new business that they plan to start. This is instrumental in helping the entrepreneur to understand how their business can best meet market needs (McDaniel and Gates 2012). This report provides an in-depth analysis of various aspects of the car rental market in the UK such as consumer trends, market segmentation and product positioning among others and how a new market entrant can make good use of the opportunities within the rental car industry. The report also offers recommendations on possible market strategies that can be applied in order to gain a sizeable market share in the aforementioned industry within Hertfordshire.
he Importance of Market Segmentation and Positioning and the Role of Secondary Research in Identifying Target Markets
Market segmentation is the process through which prospective consumer groups are classified with regard to their requirements, tendencies and innate needs with the aim of generating responses that are similar to a given marketing action. Market segmentation is instrumental as part of the marketing strategy in that it helps businesses in dividing homogenous consumer markets of sizeable proportions into smaller, more defined sub-segments (2012). This enables the business owners or investors in obtaining an understanding of the different aspects of their target market and consumers and how they can best create a compelling product offering for them. In addition, market segmentation is crucial since it informs businesses on the best approach they can use in customizing their products and services in order to successfully address consumers’ preferences, thereby being able to penetrate the target market through appropriate product or services positioning in a way that fosters competitive advantage (Hair et al. 2008).
Secondary research will be used to identify target markets due to its reliance on readily available data from a wide range of sources such as information sites such as UK Business Insider, ONS, and Mintel. One of the advantages of using secondary research in target market identification is that it employs the use of information that is freely available and the process of researching requires a minimal amount of time.
Secondary Research Findings
According to Mintel (2017), the rising costs of holidaymaking are deterring consumers away from using rental cars. Further, the report revealed that the proportion of car rents among customers had relatively declined from 39 per cent to 33 per cent for the three years leading up to the survey. Additionally, proportion of the people aged between 18-24 years (millennials) dropped from 43 per cent to 30 per cent during the same period. The same report indicated that most people within Britain are discouraged from continued use of car rental services due to their past experiences where they were either charged beyond their expectations or had an unpleasant experience with car rental companies. About 41 per cent of the respondents in the survey said that they had experienced cases where they felt that they had been overcharged for services offered by a car rental company during a holiday; and 39 per cent of the respondents reported having had a negative experience when hiring a car during their holidaymaking season. Moreover, 35 per cent of the respondents expressed their intention of avoiding car hiring during holidays. Another market trend that is outlined in Mintel’s report (2017) is that most people in the UK are becoming more inclined to renting cars that are relatively cheap. Even though this is focused on the Britons travelling abroad, it reveals much pertinent information on the consumer attitudes that a car rental business in Hertfordshire can use to make marketing decisions and strategies in order to better meet the needs of the desired target market. More than 62 per cent of respondents travelling abroad and who rented cars at some point said that they prefer hiring cheap cars. On the other hand, others prefer practicability of the hire, with 56 per cent of the respondents saying that they preferred to hire cars that meet their family needs (Mintel 2017).
According to Office for National Statistics (ONS) (2016), among all other means of transport, cars were transportation by cars is the most used on a daily basis. In the survey conducted by ONS, 57 per cent of the respondents reported that cars is the mode of transport that they use most often in a typical day while 20 per cent said they use public means of transport to reach different destinations. Further, more 40 per cent of those who used cars reported that they did so on journeys of less than 2 miles which they could easily walk. The report also revealed that over 27 per cent of British households did not own a car. Further, car ownership varies in the UK, 36 per cent of households in South East owns two or more cars while about 51 per cent of families in South West own only one car (ONS 2016). According to the Hertfordshire County Council (Herts Insight 2018), Hertfordshire was estimated to have a population of over 1.1 million as at 2016 which is expected to grow by huge margins over the next 20 years. The chart below illustrates the distribution of Hertfordshire population in terms of age.
There is an increasing demand for car rental services in the UK with esimated total revenues of £16 billion and with a projected annual growth of 7.2 per cent from 2014 to 2019 (IBIS World 2018). However, rideshare companies such as Uber that are leveraging on emerging mobile technologies in order to take market share from rental car companies by undercutting competition (Oyedele 2017). Also, the dynamics tied around Brexit and the resultant weakening of the Sterling pound is also expected to significantly impact the industry. There are more than 3,627 rental car businesses in the UK (IBIS World 2018).
Interpretation and Analysis of the Findings
There are several threats and opportunities in this industry. For example, weakening pound is expected to see an increase in the rate of inbound tourism, which will have the ripple effect of improving the revenues within the rental car industry. It is projected that car hire businesses that offer quality after-sales services will continue gaining competitive advantage over their competitors (IBIS World 2018). The consumer trend that is manifested in the form of choosy and opinionated customers illustrates the threats that exist in the rental car market, which shows a constricting market share potential for new businesses due to changing consumer preferences. However, the large population in Hertfordshire, which is expected to increase, represents a huge market potential for a new and innovative market entrant. In addition since most consumers in the survey conducted by Mintel shows that that most of them are critical of the services offered by most rental car businesses, new entrants capitalizing on innovating around customer value proposition will have a great competitive advantage in the industry (Hair et al. 2008).
Further, the age groups in Hertfordshire’s population are uniformly distributed population with a huge young population which poses a major opportunity for the services offered by rental cars. The secondary research above therefore provides important guideposts that you can use in creating the Segmentation, Targeting and Positioning (STP) model in developing a marketing strategy that promises the delivery of personalized services for the customers. The secondary research therefore will assists in creating a great market segmentation basis and the features that characterize each segment. Further, this will facilitate appropriate market targeting where the commercial and potential attractiveness of each market segment can be evaluated before selecting the segment that you want to serve in the rental car business in Hertfordshire. This is then followed by optimal product positioning where the appropriate marketing mix for the selected market segment is determined (Hair et al. 2008).
Market Segments
Marketing Recommendations
In order to successfully establish and succeed with the rental car business in Hertfordshire you should work towards providing innovative products targeting the young generation and those aged below 54 years. This are the most populated cohorts and according to the secondary research above, among there are those that seek practicable rental car services that are suitable for the needs of their families. On the other hand, you should have a separate product offering targeting the staggering majority who are sensitive about the costs of renting a car. According to the secondary research, there was a big proportion of people who expressed concerns about the hidden charges that are characteristic of the rental car industry. In view of this, it is important to create packages that are clear and concise for clients to have a good understanding of the total costs expected of them (Wedel and Kamakura 2012).
In order to penetrate the market and take on giants like Uber and others, you should good use of social media marketing strategies in addition to having an attractive website where your customers can make bookings online and leave reviews whenever they are offered satisfactory services. In addition, you should promote discounts for all customers who make their bookings and orders online so as to encourage customer loyalty. Moreover, the online marketing strategies must be accompanied by proper mobile SEO (search engine optimization) to ensure that all people within Hertfordshire seeking to hire a car through Google or other search engine have your address and website appears on top of the search results list. This will give you a great competitive edge especially for the services that you will be targeting the young generation, most of whom rush online before they can buy anything (Ryan 2016).
Therefore, leisure is the best market segment where you should target to position your products, especially for local and international holidaymakers. Offering differentiated services will greatly increase the chances of gaining a market share quickly after launching the business. For example, you may introduce a pricing mechanism where customers are charged per mile and according to the time spent on the road. Airports are a perfect place to begin since there is a constant flow of people there who are always looking for personalized services. In addition, in towns, there are plenty of youths for whom you can customize services for. For example, for cars being rented to the young people, you can fit Smart TVs, WiFi, and Xbox consoles in them so as to keep them occupied when stuck in traffic or when travelling long distances. Other similar adjustments can be made to suit other classes of customers. Marketing can also be done via posters and word of mouth for satisfied customers (Smith and Zook 2011).
Conclusion
In conclusion, performing a comprehensive market research is fundamental prior to establishing a business. This helps in determining the most appropriate market segmentation method and secondary research approach to use. In addition, this will help in determining different market dynamics without the knowledge of which one may focus on the wrong segment and marketing mix. As highlighted in this report, an in-depth market analysis is key to gaining sizeable competitive advantage within the industry. Hertfordshire represents a great opportunity for starting a local rental car business services considering its demographics and expected increase in inbound tourism in the area. In addition, it is crucial to invest in a great marketing strategy with an emphasis on digital marketing in order to reach to the majority of consumers who are fond of the internet and digitalized services.
References
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McDaniel, C. and Gates, R., 2012. Marketing research essentials. Wiley Global Education.
Mintel, 2017. Car Hire Hits Bump in the Road: Number of Holidaymakers Hiring Cars Falls by 6 Percentage Points in a Year. [Online] Available at http://www.mintel.com/press- centre/travel/car-hire-hits-bump-in-the-road. [Accessed June 13, 2018].
ONS, 2016. Five facts about... cars. [Online] Available at https://www.ons.gov.uk/economy/environmentalaccounts/articles/fivefactsaboutcars/201 6-09-22. [Accessed June, 13].
Oyedele, A., 2017. Uber is shaking up the rental-car business. [Online] Available at http://uk.businessinsider.com/uber-vs-rental-car-business-2017-5?IR=T. [Accessed June 13, 2018].
Ryan, D., 2016. Understanding digital marketing: marketing strategies for engaging the digital generation. Kogan Page Publishers.
Smith, P.R. and Zook, Z., 2011. Marketing communications: integrating offline and online with social media. Kogan Page.
Wedel, M. and Kamakura, W.A., 2012. Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science " Business Media.
