Car price business shifts gear
Cost optimisation is coming to rental vehicles, Hamish McNicol reports.
Acompany which takes the price of a rental car from being ‘‘finger in the air’’ to one which can fuel growth is thinking about how much capital it will need to shift up a gear.
But its new strategic adviser reckons it has about two to four years to really accelerate, else its window of tens of thousands of potential customers will close.
Wellington company director Charlie Daily, who in March left as chief executive of NZX-listed health supplements company Promisia, has joined MarginFuel in a strategic advisory role.
MarginFuel was described as price optimisation and forecasting software for vehicle rental operators which made optimised pricing decisions for rental companies.
It was established by Andrew Pascoe, who played a major role in developing similar programmes at Air New Zealand, KiwiRail and Interislander.
Basically, MarginFuel helped rental operators get the best price for the rental vehicles, changing prices automatically to reflect up to date changes in the market.
Daily said MarginFuel had initially tried to introduce price optimisation to a range of different industries about five years ago, particularly with big retailers, but it did not stick.
It tried the rental vehicle market about three or four years ago, but back then it was not ready for the product.
Fast-forward three years, however, and the industry was ready.
‘‘They are starting to see real value in charging the right price.
‘‘The real challenge for MarginFuel now is to get out there and sell the product.’’
MarginFuel has about 15 customers in Australasia, as well as a couple in America and the United Kingdom.
But Daily said there was about 40,000 operators around the world, and less than a quarter were using sophisticated pricing technology.
The company had two major competitors which were wellestablished, but MarginFuel had a key point of difference.
Daily said its product was more sophisticated as it could forecast out for a year.
MarginFuel could recognise when a rental operator was starting to get a blip in bookings, say six months before an event such as the British and Irish Lions rugby tour, and could adjust the price to meet the demand automatically.
Its competitors required customers to tell it when it was expecting a big event, however.
Daily said MarginFuel had delivered a significant increase in revenue and margin for operators.
As an example, a medium-sized operator with a fleet of 1000 cars and annual turnover worth $10 million had seen its revenue increase 8 per cent within two months of using the product: an $800,000 difference over a year.
This made it quite an easy sell, Daily said, because most companies were employing people to optimise prices, when MarginFuel just required 15 minutes at the start of a day.
‘‘There’s an element of finger in the air at the moment, I think this [price optimisation] is where the market’s going to go.
MarginFuel would roughly cost between $500 and $6000 a month, depending on the size of the business and how much sophistication it required.
Pascoe said Daily would be instrumental in MarginFuel meeting its growth ambitions and would review its capital requirements to do so.
It was easily tempting to look at other industries, but the focus would be on rental vehicle operators for now, Daily said.
‘‘There’s a small window here, we probably have two to four years to do this.’’
The real challenge for MarginFuel now is to get out there and sell the product