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The Value of Hertz (and the Importance of Details)
09.01.11

I wrote a post a couple of days ago entitled "QA: Clicking on Every Link" [link] -- which emphasized the importance of being maniacal and getting details right. I wanted to expand on it beyond QA by discussing a couple of examples.

I just got back from a trip where I was debating whether or not to get a rental car. I have a huge preference for Hertz (more on that in a second) but Hertz was astoundingly expensive. How expensive? Check out this comparison chart between Hertz and numerous competitors that I came up for me when I checked prices on priceline.com:

Hertz is 3-4x its competitors. So why do they have the ability to have such a high markup?

I'm broadly willing to pay more for Hertz -- maybe not 3-4x, but more. The reason is because they have something called Hertz Gold. It works like this. You pay an annual membership fee (I think it's $50/year) and when you land, you skip the rental counter. There's a giant electronic bulletin board which lists your name and car spot. You go there, the keys are inside, and you drive off to a security booth. There, they look at your rental agreement and driver's license (obviously for security reasons), ask you ONE question (do you want the fuel option -- even this I think they can skip), I say no, and they say, "Have a nice day." That's it.

The alternative, which I'm sure everyone knows and hates -- is you arrive, there's a giant line at the rental counter, you get to the rental counter, and a salesman basically tries to use sell you on various options that you don't need often using paranoia as a tactic. (You don't want the insurance? Oh, you have insurance? How much do you have? If you get this, you don't even have to call the insurance company -- you bring it back with a dent, you just leave it with us and we take care of it.) It's pretty awful. I just got off a plane, I spent way too long in line for a reservation I already made only to watch them basically input the same information again, and then I have to deflect this line of questioning. I generally have to say "no" to about 6 different things. Then they make you reinforce your "no" by making you initial / sign a hideous form. If you make it through that -- you then are told where to go to your car where there are other associates who (sometimes) make you mark existing damage to the car or otherwise try and interact with you. Overall -- it's a terrible experience and why I (and apparently lots of other people based on the markup they're able to enjoy) prefer goin with Hertz.

So how does this tie back to details? The obvious response by competitors would simply to copy Hertz Gold -- and I have done my best to sign up for these services as I would prefer not paying exorbinant premiums to Hertz. By the way, I want to emphasize something. So far, I have said nothing about the actual car I've rented. In fact, I would say that the cars I rent with Hertz are very broadly similar to the cars that are given to me by other rental car companies. (I would give Hertz a little advantage in terms of cleanliness -- both interior and exterior, and a little bit in terms of the car model / miles itself -- but not a large premium to me.) Isn't that amazing? Nearly the entire premium that I'm willing to pay resides solely with the pickup (and dropoff) associated with Hertz. It has very little to do with what one would expect would be the core value of renting a car -- the actual car.

One example of a competitor trying to mimic Hertz is Budget with its Fastbreak program. In theory, this should work exactly the same. Here's how it worked for me out of Denver International. You pick up a shuttle (unfortunately there are no car rental companies that you can walk to straight from the terminal in DEN). On the shuttle, the driver asks everyone if they have a reservation. This is a big minus. The point of Hertz Gold is I don't have to interact with anyone. It's not that I'm unfriendly -- but I'm completely conditioned through many rental experiences that interactions with car rental employees = someone trying to sell me something I don't need. If I say I have a reservation, they ask if I'm FastBreak or not. They do this because then they can drop me off closer to my car. This is of no value. Again, I want less interaction even if I have to walk an extra 50 feet. Instead of an electronic bulletin board, the driver has to radio someone at the counter what parking spot number my car is at. He then has to tell me (and he has to do this with every other passenger.) This is obviously an enormous waste of time. I get to my car. Outdoors, no canopy. (unlike Hertz which is always indoors.) I go to the security booth. The guy at the booth, beyond checking my license and rental agreement, then starts talking about the car he gave me, if I need a map for the area, the fuel option, etc. It's almost like being at the rental car counter but not quite as bad -- at least they're not pushing insurance on me. In theory -- Budget's Fastbreak is almost the same as Hertz. In reality -- it's a world's difference.

There's a documentary called "ShowBusiness" which follows the opening of a number of Broadway shows (including "Wicked" and "Avenue Q"). George C. Wolfe, the director of one of the profiled shows "Caroline or Change", had a great quote in it. He said, "The road from good to great is easy.... The road from great to brilliant involves an endless series of details."

The Hertz Gold vs. Budget FastBreak might seem like an endless series of details. It's not. What it does involve is a lot of work and a lot of iterations. Maybe that's Budget's first version -- what do they have to do next? They have to have the electronic bulletin board. The shuttle driver should only drive -- no interaction with passengers. They need a canopy for their parking lot. The exit person should only be a security guard -- driver's license and rental agreement. That's it. (they also need to make significant improvements to their website, but that's another post.) I totally agree with George C. Wolfe though -- I listed out 4 major changes but in reality, what will happen is the electronic bulletin board isn't bright enough. The canopy doesn't cover the walkways. The training program for shuttle drivers and security guards has problems. It then becomes an endless series of details until it's right and works well.   

Hertz got these details right. They're really not offering a different product -- reasonably similar cars. What they're offering is a different experience because they care about it end to end. They spend the time to get the details right and consequently, can charge a disproportionate amount for their service.

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