The Key to Car Sharing Success – Data Analysis

Posted by Peter Soutter on Jun 26, 2018 11:55:44 AM

41The Key to Car Sharing Success – Data Analysis

You’ve got your fleet of cars, you’ve negotiated with third parties for parking spaces and you’ve spent money and time on marketing to get members, so you’re all set right? Wrong! Now you need to start analysing your data.

There is a fine line between success and failure - for car sharing operators data analysis can help you stay on the right side of that line. So what data should you be looking at?

1 Price Elasticity

Car sharing companies cover parking, maintenance, gas, and insurance on the vehicles. One of the major selling points for a car sharing membership is the fact that members don’t need to cover these costs themselves, so those costs need to be considered when setting rates for membership fees and rental rates.

However in our experience membership fees are a bad idea. You want a ratio of 45 to 50 members per vehicle. Membership fees put people off downloading your app and becoming a member of your car sharing service. Worse membership fees badly affect the virality of peer recommendations. If a friend strongly recommends a service to you, you may download its app but if that service tries to charge you a $50 membership fee you’re much less likely to proceed. Basically any saving from membership fees is offset by higher marketing spend to recruit members. This is one of the most common pitfalls suffered by Car Share Operators

To learn about other common pitfalls of Car Sharing and how to avoid them see our Guide to Car Sharing

On the other hand testing your rental rates is essential. What your testing for is the correlation between price and utilisation. A station-based car sharing operation should aim to be profitable with a minimum utilisation per vehicle of 5 hours per day. If a vehicle at a location is being rented for less than 5 hours per day it is advisable to reduce the number of vehicles at that location.  However, success is not simply a matter of having the highest utilisation possible. A vehicle that is being booked out for more than 12 hours a day is effectively unavailable to many members. If members are consistently unable to rent a vehicle when they need it they will quickly cease to be members. So your goal is to have the highest rental rate possible that will ensure your vehicle is booked for about 8 to 9 hours per day. Apart from the rental rate the other factor that effects vehicle utilisation is the suitability of the parking location. That is why its vital to also look at utilisation of vehicles per parking location and the number of members per vehicle at a given location.

2 Daily Utilisation of Vehicles per parking location

For each location in your operation you should track the average daily utilisation of that locations vehicles. That is on average over a week how long has the vehicle been rented each day. If the utilisation figures are consistently low reduce the number of cars at that location and consider removing the location altogether if utilisation does not rise after the number of cars has been reduced. Some locations are simply not suitable for car sharing.

3 Number of members per vehicle at a given location

For each vehicle in each location you should work out the ratio of members to vehicles. Typically this is calculated by working out how many members are within a 7 minute walk of the location and then dividing that figure by the number of vehicles at that location. A ratio of 45 to 50 members per vehicle is a reasonable target and should help ensure sufficient demand for your vehicles.

4 Number of vehicles at a location

All cities and neighborhoods are different and it will take some informed trial and error to work out the best metrics for your operation but as a rough guide, when you have reached an average daily utilization of 8 hours per vehicle and you have a ratio of 40 – 50 members per vehicle, it is advisable to either add another vehicle to that location or establish another nearby location to add additional vehicles.

Some argue that each parking location should have a minimum of two vehicles to provide a level of redundancy for late returns etc. However that depends on how closely positioned your locations are. If you’ve agreed parking with the local municipality than it can make more sense to place one car per location but have the locations densely packed near each other (one on each street in a neighborhood say). This allows the user find a replacement vehicle a short walk away while giving your users more choice and it makes users feel you’ve a larger fleet than if you place two cars in half the number of locations. On the other hand, if you have a strictly limited number of parking locations (say you negotiated with a chain of gas stations for parking locations and are limited by the number of gas stations in the town) then it may very well make sense to put more than one car at that location.

Summary

In our experience 7 to 8 hours is a good target for vehicle utilization. Above 10 hours it is advisable to add vehicles to the location or create a new parking location nearby. While we suggest a guide of 45 to 50 members per vehicle we do see variations in this figure depending on whether a membership fee is charged and depending on the make up of the members. Factors that can influence ride frequency include what percentage of members do not own a vehicle as compared to members using car sharing as an alternative to owing a second vehicle. The quality of public transport in your town will also affect what the ratio of members to vehicles needs to be.

The challenge for the car share operator is to tweak their pricing while tracking the effects of price changes on the other metrics given in this article. The goal is sustainable profitability produced by providing sufficient vehicles per location that members are generally able to rent a vehicle when they need it at a price they are happy to pay. Only by consistently analyzing vehicle utilization and the members to vehicles ratio for your car sharing operation can you learn what rental rate works for your operation and what locations are proving successful for you. Data analysis isn’t a big job but its is an important one that is often overlooked. To protect your profits and effectively plan future vehicle deployments it’s vital to put a little time aside every week to analyse your operations data.

For more help with making a success of Car Sharing book a meeting with one of our Car sharing consultants or download our guide to car sharing below.

Get our guide to Car Sharing for the Car Rental Industry

Topics: Car Sharing, Data Analysis, Car Rental

Written by Peter Soutter