Jon Michaeli’s Blog


Hertz’s Loyalty Disincentive

Disclaimer: It is likely the commentary below applies to a broader set of rental car agencies, but as I have been tracking the Hertz website over time, my complaint is directed at this one company.

As a Hertz Club Gold member, I book with the company on a regular basis. And each and every time, I am amazed at how they try to take advantage of their best, and presumably most loyal and lucrative, customer segment. If your sole aim is to book as quickly as possible, or price isn’t a primary concern, you can easily pay 50% more than a typical visitor to the website.

For a recent one-day reservation in Las Vegas, I compared three different rates for a daily rental: 1) the standard rate (i.e. no discount code), 2) the “exclusive” Gold rate, which requires log in, and 3) the AAA-promotional rate. For a midsize “Madza 6 or similar” rental, the rates were $45, $65 and $19 respectively. That’s right, the “loyalty” rate was $20 higher per day than the rack rate and $46 higher than the AAA rate (which did not even require validation). Fortunately, you can still book the lower promotional rates while you’re logged into your account; you’ll just need to know (or learn) your way around the site and be willing to spend more of your precious time.

Yes, I am quite familiar with the business rationale behind price discrimination, but these rates were available on the same Hertz.com website at the same exact time, and none of the rates required manual entry of a coupon code. It seems to me like Hertz feels entitled to collect a huge premium in exchange for the convenience of having a car waiting when you arrive at the airport, the one real perk of a Club Gold membership. No wonder why it’s so easy to have the $50 initiation fee waived.

There’s always the chance, however slight, that Hertz has done thorough pricing analysis, and from a pure revenue optimization standpoint, this has proven the optimal result during the testing period. Still, I imagine that many other frequent travelers have had the revelation that Hertz considers gouging its premier customers as sound business practice, which no doubt has led to negative sentiment towards the brand. I’m relatively certain Hertz has no clue what that bad will translates to in terms of lost revenue in the medium to longer term.

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My love-hate relationship with Amazon

I admit it. I buy on Amazon.com all of the time. The bottom line is prices are aggressive and the return policy(ies) are typically consumer friendly (this varies depending if you are buying from Amazon directly or from one if its merchants). If a smaller “category-killer” e-tailer is competitive on these measures, it has a good shot of earning my business. That said, if it’s a registered Amazon merchant, I’ll likely opt to buy through Amazon.com instead of on the company’s website, because I am less confident that the rinky-dink operation shipping out of its garage observes best-in-class privacy and security practices. And, I believe if a merchant feels accountable to Amazon – with the risk of being removed should Amazon receive too many complaints – it will be more inclined to resolve consumer issues quickly.

Amazon is approaching a “one-stop shop” in the truest sense, so I can get my online shopping done at one destination, without providing my credit card and shipping details multiple times. I know it’s lame, but I also enjoy the challenge of qualifying for free super-saver shipping with as close to the minimum $25 purchase as possible.

My issues with Amazon relate to user experience. In its effort to rule the land of web commerce in a head-to-head faceoff with eBay, Amazon has drastically complicated the browsing and buying experience and thoroughly confused shoppers. Average consumers don’t know that Amazon has two distinct business models, 1) taking inventory and shipping from local distribution centers, and 2) passing orders onto merchants who drop ship from their own stores or warehouses. Despite Amazon’s efforts to explain within the selection and checkout processes, most consumers don’t grasp why items do or do not qualify for free shipping or why they have to pay multiple shipping fees.

Perhaps even more difficult to understand is why the same product can show up multiple times on a search results page, often with a range of prices (if you’ve never experienced this before, just do a search on Melissa and Doug Deluxe Wooden Multi-Activity Table and look at the top 3 results). Again, this is because numerous merchants within the same category – or “department” in Amazon terminology – are selling the same product. Sometimes price disparities are due to games retailers like to play (e.g. charge a lower price and make it up in the shipping and handling charges), which consumers have grown accustomed to when viewing cross-merchant product availability and pricing on shopping engines like pricegrabber.com and bizrate.com. But, this is awkward and unexpected behavior for a single website. My favorite scenario is when Amazon has its own inventory to display, and its prices are higher than its merchants. This probably does not happen too often though, and when it does, Amazon still gets a bounty on the sale, collects valuable consumer data, and owns re-marketing rights.

So what’s the solution? For starters, I’d love to see Amazon more intuitively organize and display its departments, merchants and product selection. Perhaps it should consider mimicking the metasearch and parametric filtering combination used by Kayak.com (travel) and Indeed.com (job search), but instead of clicking away, keeping users within the Amazon storefront. This would make the seller’s name more visible, clarifying when Amazon is the merchant or just the middleman, who is charging which fees, etc. In addition, it could allow shoppers to drill down to the details (e.g. shipping fees, merchant rating) they need to gain comfort with the purchase and complete the selection. Then via an open pane in the window, customers would return to the main Amazon site where the purchase is funneled to a central shopping cart.