Read the case (Zipcar: Refining the Business Model) and the article (Business Model Analysis for the
Entrepreneurs), both accessible on Campus/Syllabus/Session 5. Answer the following questions in up to two
pages (excluding cover if you choose to use one), font size 12. Name the Word file: “FamilyName Zipcar
case.doc” and upload it on the specific assignment question on Campus before session 5 (deadline: October
22rd, midnight).
Value proposition: What is the customer problem/ pain that Zipcar value proposition is addressing? How unique
is Zipcar's value proposition compared to alternatives?
Cash flow formula: Describe Zipcar pricing structure (i.e. the prices it charges for the different services it offers)
and how it changed between December 99 and May 2000. How do you think this pricing structure and changes
might affect members behavior and the revenues of Zipcar? Out of the financial data provided in the case,
please give an example of each of the following:
A variable subject to a decision by the founders (i.e., internal decision)
A variable that implies an estimation by the founders (i.e., does not depend on their decision and is currently
unknown/depends on future performance)
A variable that is a given to the founders (i.e., does not depend on their decision and is currently known)
Performance metrics: please refer to Appendix 3 of the article (Business Model Analysis for Entrepreneurs) for
definitions and guidance on calculations:
Churn rate (rate at which users unsubscribe) is a key metric for subscription based business models like
Zipcar’s. Please calculate the attrition rate for Zipcar on September 2000 based on the data presented in
Exhibit 8a (include both the formula you used and the numeric result you obtained). Compare this figure to the
15% rate that the founders had estimated in the revised financial plan (2000) and explain what impact that
difference will make in terms of members’ lifetime value (LTV) (note - you do not need to calculate LTV, just
explain whether it will be impacted positively or negatively and why).
Customer Acquisition Cost (CAC, cost to acquire each new client): what total costs has the company really
incurred (vs planned) to acquire new clients? Using the information about members actually acquired up
between May and September 2000 (exhibit 8a), calculate the average CAC (include both the formula you used
and the numeric result you obtained).
Here are the links :
https://services.hbsp.harvard.edu/api/courses/760302/items/803096-PDFENG/sclinks/89a0d7c28493165ef0229a9ae0fcc655
https://services.hbsp.harvard.edu/api/courses/760302/items/812096-PDFENG/sclinks/69f422a37e415c254e1a64a46133c4f6
Thing to help :
In general, keep it simple: the formulas you need to use are very simple from a mathematic point of view, and
you have the necessary data to apply them. The company is in a very early stage (4 months in the market), so
the information available is also limited - this is about trying to apply the concepts as we best can with the
information available. If I have pointed you to a specific exhibit is because the information you need is there. In
one subquestion, I have not mentioned where to find the information, but it is in the case.
When you apply a formula, remember to write the formula. The questions also involve explaining the results,
how you reason both is more important than having the right numeric result. In Appendix C of the article, there
is an explanation of both concepts, attrition rate and CAC; you can either infer the formulas from there, or do a
quick search (remember, they are both simple ones).
When using data, take into account the time basis - monthly, annual or "so far" (if we say from May to
September - Zipcar started operating in May and we are in September, so it is the same as saying "so far" or
accumulated). Also, when you have data for different moments in time, refer to the concept/formula to decide
what time is relevant for each variable.
Read questions and concept descriptions in detail, you have all the information you require.
Sample Solution