5 Keys to Zipcar's Success

Here are a few secrets of Zipcar's success to date:

Encourage feedback. Word-of-mouth promotion is vital to Zipcar's membership-based business, so the company encourages customer input. The makeup of the fleet—which includes Mini Coopers and BMWs—is heavily influenced by member suggestions. And when customers turned their noses up at the $10-an-hour price to rent a fuel-efficient Toyota Prius, the company dropped it to $7.

Passing the Zipcard over a sensor unlocks the door.

Keep it simple. This is a self-service business that requires no face-to-face interaction, so it's got to be hassle free. To join, customers pay a $25 application fee and choose between an hourly plan and a prepaid driving plan. Within a few days, a Zipcard (which serves as a car door key) arrives in the mail, along with a three-step instruction book explaining how to activate the card, reserve a car, and unlock it.

Invest in technology. It's often easier to buy technology than to make it. But Zipcar chose the tough road, says chief executive Scott Griffith, because "nothing out there came close to what we wanted to deliver." The result is a unique system that uses radio frequency identification to lock and unlock the cars, as well as wireless technology to monitor such information as miles driven, battery voltage, and fuel level.

Brand with personality. Zipcar's hip, ecoconscious image helps set it apart from the droves of traditional rental-car companies. "They've distinguished themselves in mind and philosophy from the rental companies," says Neil Abrams, an industry consultant. "Members see them as the antiestablishment option." Zipcar touts that branding on its website, where it encourages customers to "become part of the solution."

Go where your competition won't. Zipcar is courting college students, a population that car rental companies have largely ignored because of liability concerns. The idea, says Griffith, is to gain early adopters who will continue using the service when they graduate.