Avoid Car Rental Terms when Signing up for Cloud Services

cloud servicesWhile continuously trying to differentiate between service quality and product choices, car rental companies have mastered pricing schemes for their optimal gain.

One no brainer scheme they have successfully used is the unlimited mileage option. It gives peace of mind to the consumer. And it is easy math for the rental company. Agencies know opportunity cost of their fleet being out of the rental lot hence unavailable for others to rent. Additionally, they figure the maximum mileage one can put on a rental per day, and rely on the fact that most consumers will average much less - as evidenced by the historic data they aggregate. They then carefully apply the right heuristics to pick daily/weekly rates to assure handsome profits.

It does not stop there. They ask the customer whether he would opt to return the car with a full or empty tank. While the customer may think he was given a choice, this always turns out to be a no-win proposition for him. Those who opt to return the rental with a full tank are likely to be late to catch their flight or simply too tired, or lazy to fill up before pulling into the return lot. Others who know they will drive long enough thus opting for returning empty for a pre-agreed surcharge are likely to have some gas left in that tank. Either way, this translates to more profits for the rental car companies.

We see similar pricing schemes adopted in Video Conferencing / Visual Collaboration / Teamwork like offerings from the cloud nowadays. The package bundles may seem like a deal because they lure the customer in with unlimited hours of usage per host coupled with excessively large numbers of maximum participants. The trick is to get the consumer to buy up capacity that is quite unlikely to be fully utilized. You think you got a bargain, but it is not!

Taking advantage of the trained minds of the consumer with car rental terms when selling cloud services? No, we do not think this will last especially when the service is coming from the cloud, with all the elasticity the cloud brings to actual cost of goods it is only a matter of time before the consumer catches on. In the cloud, resources are consumed to the extent they are utilized. They are not pre-manufactured like the cars in a rental car fleet would be. No cost of manufacturing. No cost of storage. No opportunity cost of renting or not renting. Unlimited inventory is just waiting to be spawned at any time - yet only when needed.

Benefits of the cloud can only be reaped by the end user to the extent that they are passed to the consumer by the service provider. This is only possible by charging customers for their real usage, instead of forcing them to bundle capacity that they will only end up using a portion of.

Written by Osman Duman

Osman Duman

Appointed CEO in 2017, Osman Duman leads eZuce’s long-term market strategy and day-to-day operations while guiding the company’s vision toward increasingly collaborative and insightful enterprises. After serving four years on the board of directors of eZuce, he joined the company in 2014 as COO. Previously, Osman completed a 12-year tenure as CMO of publicly listed Ulticom and Karel where he contributed to achieving their significantly higher market success. During his term Ulticom moved to the number one spot in the worldwide telecommunications signaling software market. From 1998 to 2002, Osman was an area vice president and general manager at Lucent Technologies responsible for softswitch solutions. Osman previously took on various Engineering and Marketing SVP positions at New England area software startups MassMedia Communications and NewNet where he played key roles in successful acquisitions into Lucent Technologies and ADC Telecommunications, respectively. Earlier phases of his career involved software development and management roles at Motorola Codex, GTE Communications and ITT Telecom where his journey started in Raleigh, North Carolina. He holds BSEE and MSCS degrees from M.E.T.U. in Turkey, and Executive MBA certificate from MIT Sloan School of Management in Cambridge, Massachusetts.

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