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How Fast Can This Thing Go, Anyway?

Soon, managers began to come up with cool promotional ideas. "Now's where that P&L started to work for us, because they became competitive with each other," Griffith says. In Harvard Square, the Boston team stuffed bags of frozen Ikea meatballs inside a Mini Cooper and asked passersby to guess how many were inside, a task that titillated Harvard's math majors. In San Francisco, which launched in August 2005, the team bought an old SUV, painted it puce, parked it at the foot of Market Street, and offered passersby the chance to swing a sledgehammer at it. In Chicago, which opened in September 2006, employees drove Zipcars onto a flatbed semi and drove around town with a bullhorn. By the end of Griffith's first year, there weren't tons more members--the number had risen to about 10,000. But the cars had higher usage rates. The splashy events also helped lower customer-acquisition costs from about $150 per member to less than $50 today. About two years ago, Griffith began offering city managers cash bonuses for hitting targets for revenue, profitability, car usage, membership, and customer satisfaction. When managers are responsible for their results and empowered to make their own decisions, Griffith found, their results tend to be a lot more interesting.

5 Sell Where Your Competition Won't

Once he had revved up Zipcar's approach to marketing, Griffith stopped to consider the market. At most car-rental companies, it's standard policy not to rent to people under 21 and to charge extra--at Avis and Hertz, it's about $25 a day--to renters under 25. (Insurance companies require higher premiums for those in this riskier age group.)

Chase had begun targeting younger drivers, offering memberships for students at Harvard and MIT in exchange for on-campus Zipcar parking and marketing help from the schools. Griffith took the strategy a step further. Before Chase left the company, she had begun talks with her alma mater, Wellesley, to see if the school would pay insurance premiums for its under-21 drivers. Wellesley finally agreed in the fall of 2004, after Griffith had taken over. The Wellesley drivers had good records, and Griffith took that data to Zipcar's insurance company, Liberty Mutual, which agreed to a policy with lower-than-usual premiums. That let Griffith try the program at three more schools. With solid results from that, Griffith struck a deal with Liberty and extended the under-21 program to 35 schools. The university program will expand to 140 campuses by the fall, and it's a moneymaker for Zipcar. The schools let Zipcar market on campus and provide less expensive parking spots, and some have their own fleet-management crews that clean and maintain the cars, which can offset the higher costs of insuring young drivers. What's more, renters become Zipcar fans at a young age. "We're taking a page from the Apple (NASDAQ:AAPL) playbook, really creating awareness early on," Griffith says. About two-thirds of Zipcar's members are under 35.

Courting young customers was easy--it's a market other car-rental companies don't want. But Zipcar also has its eye on the industry's core market--businesses. Zipcars are used heavily at night and on weekends, and many are idle during the day. For Zipcar to make money on a vehicle, Griffith calculated, it needs to be in use more than 40 percent of the time. He's trying to attract corporations to meet that goal. The company retooled its technology for businesses--now, cars can be booked by a travel manager for individual employees, for example, or billed to specific departments. Zipcar created new marketing materials, too, changing the fun and cheeky vibe of the consumer campaigns to language that is more sober and bottom-line-oriented.

Griffith believes Zipcar for Business can be bigger than the university market. After all, if you're a carless city dweller, why not rent a car near your office for a couple of hours when you need to travel to a client meeting, rather than taking a cab to the Hertz counter and renting one for the entire day? Or, says Daniel Shifrin, who heads Zipcar's business group: "When you fly in to San Francisco, to get a car, you get a shuttle, wait on line an hour and a half--it's a very frustrating experience. With Zipcar, you can hop on the BART, go downtown, and then when you need a car just pick one up a block away from your hotel." Griffith hopes the division will eventually account for as much as 40 percent of revenue.

6 First, Prove It. Then, Fund It

Griffith knew from the outset that if Zipcar was to take off, it would need millions in venture capital. But instead of pitching investors right away, he waited. For two years, he held off from seeking any venture capital, instead fueling Zipcar with $4 million in angel funding. "I felt like we just weren't ready for prime time, and we had to prove the model," he says. Tom Stemberg, the founder of Staples (NASDAQ:SPLS) and an early investor in Zipcar, advised Griffith to follow a tried-and-true retail model: Get the box right first, then build more boxes. It was only in 2005, after Boston, Washington, and New York had become profitable, that he began meeting with venture capitalists. Benchmark Capital ponied up $10 million in July 2005.