Henry was the senior vice president of operations. Tony was the chief marketing officer, and they were talking about Beacon’s latest acquisition—VillageCar. But they seemed to have different opinions on it. The most important thing was—could an auto rental company fully integrate its car-sharing start-up without losing customers? A week later Henry went to Tony’s office and set a paper down on his desk; it was an article from the Journal of Consumer Research which was a study of car-sharing customers. Out of all the things they valued about their experience, the biggest one was access. The environment and community weren’t even on their radar. They cared about affordability and convenience, just like Beacon’s customers do. Functionality was all that matters. According to the experts’ response, they say VillageCar should remain as independent from Beacon as possible.
The two companies have very different business models. A rental is something you use for several days when you go on a business trip or a vacation. A shared car is something you use for a short time to run errands, move a piano, or impress a date. VillageCar’s customers don’t want what Beacon offers. They want flexible access to a car on a regular basis. Henry needs proof that VillageCar solves customers’ problems better than Beacon does and that its business model is profitable and scalable. If that’s not the case, Henry should reconsider the investment and certainly not change Beacon’s business model. Also, keep the VillageCar brand and slowly transform Beacon’s culture to be more like the start-up’s. Eventually Beacon’s brand may become obsolete, but not if there are enough customers who value its uniform service and reliability.
If this segment does become unprofitable, the company can sell it to a firm that still believes in the old school model. The venture should be treated as a partnership, with shared branding—such as “Beacon’s VillageCar.” VillageCar has done an excellent job of connecting with the younger demographic, which is what Beacon is trying to tap into, but Beacon has an established name that is synonymous with experience, stability, resilience, and credibility. In many ways VillageCar’s business is not that different from Beacon’s. But the companies have different purposes and target different audiences. How to handle the VillageCar acquisition is not an easy decision, and Henry has to keep all the immediate financial aspects in mind.