Driving change in consumer habits
Influencing consumer behaviour is a challenge for entrepreneurs at the best of times, but the ingrained habit of car ownership has been a particular hurdle for car sharing firm Flexicar.
According to the Australian Automobile Association, nearly half of all Australians now own a car. Just 13% of us use public transport to get to work, says the Australian Bureau of Statistics. We’re a nation that likes to own cars and drive them. Everywhere.
Monique Conheady, founder of Flexicar, has a vision to change the habit of car ownership in order to build a $2 million revenue business. In 2005, she launched the company, initially called Flo Carshare, in order to introduce to Australia the concept of a pool of shared cars for short journeys.
“I don’t see hire cars as being our competition. I see private car ownership as our competition,” she states. “Flexicar is for local people – you usually hire a car if you’ve travelled interstate. We are cheaper, cleaner and easier than car ownership.”
“I’ve always had a big vision for the concept, for it to be part of mainstream public transport options. We want to become part of an integrated public transport system, with trains and trams.”
But, surely, a system that enables car use is reinforcing the use of cars over public transport? Conheady thinks not.
“Yes, it might increase the amount of driving by some people, but the net impact is much bigger than that,” she insists. “This is particularly for ‘second car families’ who have a second car just for occasional trips.”
“There’s a green element in sharing a car with your neighbour and it makes you think about your trip a bit more. If you pay for it each time, you think ‘do I need the car for this?’ It encourages people to catch public transport more.”
The Flexicar system works by having cars dotted around the city in conveniently-placed parking bays. People sign up for membership – around 3,000 are currently on Flexicar’s books – book online and are given a swipecard, which they use to unlock the cars and deactivate their immobilisers.
The point of difference with hire firms, as Conheady points out, is that you can use Flexicar by the hour. It costs $10 for an hour, with people using the cars for an average of three hours.
“You’re not tied to the hours of a car rental depot – you can swipe in at 6am to go to the airport,” she says. According to Conheady, the cost of Flexicar is favourable compared to car ownership too – she says it costs $8,000 to keep a Toyota Corolla on the road for a year, compared with the $100 to $200 for Flexicar usage.
As Conheady admits, the benefits of Flexicar aren’t easily summed up. She found that a smart marketing strategy, heavily focused on word-of-mouth, was needed in order to switch driving patterns.
Educating the market
“We had to educate the market before we could do anything,” she says. “The traditional modes of advertising didn’t really work because you need an explanation of the concept to understand it. You need a bit more than an ad on a tram.”
“We always ran with the ‘cheaper, greener and easier’ message. We do a lot of email marketing, social media and bit of sponsorship. We don’t seek to have our logo everywhere in our sponsorships – we want tickets to give to our members so that they can take someone to an event and maybe have a conversation about Flexicar.”
“Our best source (of new customers) comes from referrals. That’s because you need a conversation to explain how it works. Our existing customers are extremely precious. We have spent a lot on customer service.”
Conheady says that the company’s customer service ethos is “all hands on deck.” Every one of Flexicar’s 12 employees has interaction with customers.
“I’m involved with handling calls on Wednesday afternoon, which means that someone had to cover for me to have this conversation with you,” says Conheady. “I hold it as a key priority – at every team meeting we bring up issues and everyone spends time on the phone with customers, even if they work in IT or marketing. We want that constant interaction with customers.”
Forming the idea
Conheady’s formation of Flexicar with four university friends appears unusual given her background – she worked as an engineer and project manager in the infrastructure sector.
However, she says that she grew up in an entrepreneurial family – her father owned his own business – and was always sharing business ideas with friend Tim Watts, a co-founder of the Flexicar.
“I was living in London in the late 1990s and Tim was in Boston,” she explains. “Our friendship was based on entrepreneurialism – we still throw ideas around now.”
“We saw the Flexicar idea in Zip Car, which was around in Boston at the time. It was around the time of the dotcom boom, so we were interested in that, but it was also the concept of sustainability – both financial and social.”
“I thought the idea was cool and thought how it could work in a city infrastructure, enabling people to do things differently and more productively. I saw it as the missing link in transport options. There was nothing like it in Australia at the time.”
It wasn’t until Conheady and Watts were back in Melbourne five years after that they decided to put together a business plan and launch the business.
After getting initial funding from friends and family, the team managed to secure around $250,000 in grants from the City of Melbourne and the State Government. They also benefitted from the now-defunct Shell Livewire scheme.
“We needed to get something focused on the idea so we entered Livewire, which was a business planning competition,” Conheady says. “It was a great competition. We had a mentor go through the process with us and we won the innovation category. It gave us confidence to go forward with the idea.”
Two major challenges faced the business in its formative days – the creation of a system that allowed people to book and access the cars and obtaining the cars themselves.
“We tried to be a car and technology business and we needed to be one or the other,” Conheady says. “We chose to create our own system, through contacts from university with programming and IT skills.”
“The other challenge was getting financing for the cars. We knocked on a million doors and some said yes. Some very big names said no – we now have them ringing up asking if they can do something with us.
“At the start, we couldn’t lease the cars under the business, so we thought ‘why not lease one each under our own names?’ So we started with five cars.”
Happily, local councils in Melbourne were enthusiastic about the idea and allocated parking, although the lengthy decision-making process dragged out the start-up phase. Flexicar’s technology also took time to create, but the system now compares favourably even to Melbourne’s much derided public transport smartcard Myki.
“The system is not dissimilar to Myki – perhaps a simpler version of it, but still the same technology,” Conheady says. “Bremen in Germany and Chicago in the US use a similar kind of card for their public transport network. We have ongoing conversations with the State Government. They are aware of what we are doing, but they are still working through Myki.”
In November last year, Flexicar was sold to car rental giant Hertz. Conheady has remained as director of Hertz’s car sharing operation in Australia, but the company has effectively been swallowed up. It will eventually cease to be called Flexicar, morphing into its parent’s car sharing arm Connect by Hertz.
“We wanted to scale the business and ramp the system up and that requires more capital,” says Conheady. “We decided a sale was preferable and we knew that Hertz was interested in the Australian market.”
“It’s a capital intensive business. I think we’ll end up seeing three or four names consolidate in the car rental market and we wanted to be number one in Australia.”
“Obviously, I have a strong attachment to the business, but I’ve always had a bigger vision for it. I’m chuffed to build it up to the point where I could sell it.”
Unsurprisingly given her successful quest for a capital injection, Conheady advises budding entrepreneurs that the start-up process takes longer and costs more than they anticipate.
“But don’t be put off running your own business,” she says. “I get such a thrill from driving a Flexicar branded car and having people wave at me from another Flexicar car. It makes it all worthwhile. The rewards are fantastic.”