Zipcar winds up having to alter membership model

At the beginning of 2013 I reflected on the fact that car sharing leader Zipcar was going to have to alter its membership fee structure if it wanted to grow membership. Part of the problem was that its competitor, Hertz On-Demand, was entering the market without a membership fee.

Well post-acquisition by Avis, the company has finally rolled out a monthly fee in addition to its annual fee. Customers can choose.

The details:

The new option gives members the option to pay membership fees on a monthly basis rather than once a year. In the past, members have paid a one-time application fee of $25 and an annual membership of $60. Members can still choose to pay that way, but now they also have another option. With the monthly plan, a new member would pay $6 a month along with the $25 application fee.

The fear on the part of Zipcar was always that a monthly plan would allow customers to sign up and leave Zipcar’s service without much financial penalty. At the same time, the steep $60 fee was a barrier to getting people to sign up.

What to do? The company has run trials of the new pricing structure in Seattle and Washington D.C., and it appears that the new monthly pricing structure has not proven detrimental to Zipcar’s bottom line. I do think the lower price point will help bring in new customers and really if Hertz ever fully ramps up its service, the option of a no membership fee alternative is going to be very difficult to deal with. Better to bite the bullet now and make the core product more competitive and easier to access.