Posted by News Express | 3 October 2016 | 2,418 times
The underlying value that Uber has strived to provide all the customer segments is reliability. A person who wants a ride can literally get one by tapping his smartphone. Uber’s ability to give the desired choice to a customer at any time and then fulfilling that request within ETA of 10 minutes and lower has been the key to success on the product side.
How this becomes possible is pushing every geographic location towards a critical mass of customers and driver partners and then let the network effects kick in.
Something to learn from Uber’s Business Model: The would-be disruptor should follow an approach that makes it easier and more affordable for people to do what historically has mattered to them. Making the complicated things simple and the expensive things affordable is why disruptors have the potential to dramatically expand a constrained market or prosper at price points that are far lower than market leaders.
Uber’s Value Propositions for Customers: Uber gives customers an option to choose the type of ride they want – an SUV, Uber Black, Uber X, etcetera.
Exclusive ride at an affordable price,
Convenience – comes at the doorstep,
On demand availability,
Certainty – will get a ride for sure,
ETA – Track the cab while it arrives,
Shorter wait time for a ride,
Uber says that Choice is a beautiful thing.
Uber’s Value Propositions for Drivers: For the drivers, Uber gives them the flexibility to decide when and how often they want to drive. In addition, Uber drivers reportedly earn more per hour, viz.a viz., industry standard hourly averages. Again this can be attributed to busier days and more time spent serving customers.
Extra income – Flexibility to choose work hours.
Busier and efficient days
Higher hourly wages on an average – Network effects: For most of the marketplace platforms network effects have a huge role to play, once they move beyond a critical mass. The usefulness of such platforms for the end suppliers and consumers is associated with how many other users are using this platform. Beyond a point, it is difficult to topple the incumbent.
When applied to Uber these network effects apply in a certain geographic area and the playbook needs to be repeated in every new city it enters. But for a particular geographical area, more customer means increasing utilisation of the taxi network, busier day for drivers, more income, more drivers, lesser costs for customer and better pickup times.
Putting it in a nutshell, it goes like this: More customers — Busier day for drivers — More income per hour — More Drivers and larger coverage area — Better pickup times and lesser costs for customers. So, it’s a win-win situation for Uber Customers, Uber Drivers and of course Uber as a company.
Uber Channels: How Uber Reaches Out:
The Product Itself: The Uber app is itself a channel for Uber to reach out to people. It might seem strange but it is a fact that Uber has created a strong demand for its app. It has become the need of people to download the app and use Uber services.
Previously, people used to wave to taxis while standing on the road edge in order to stop them and have a ride. But Uber has changed the situation as now you can have a taxi at your location with a tap on your smartphone. Hence for Uber, the product itself is the best channel to reach out to people.
Accelerants – Reaching out to people after launching a product is the most difficult task for startups. It would have been the same for Uber if it would not have captured these accelerants. So, what are these accelerants? You may consider an accelerant as a push that has the ability to give a lot of users in one go that too without hampering the revenue. So, it’s nothing about discounted campaigns or something like that. Here’s how Uber made the most.
Restaurants & Nightlife: People often had to make arrangements to go back home after a party. Uber was quick to understand this and offered its services at major night life points in the city. Anyone who availed the service became a fan of Uber and made the word spread through word of mouth advertising.
Weather: With its surge pricing technology, Uber has made the most of weather changes. When a person needs a cab and is struck due to rain or bad weather, he urgently needs a cab at his location. Uber is the best and the only available choice to people in such situations. This technique also led to criticism for Uber during hurricane Sandy, when they increased the prices. But after all, business is business and the fact is that Uber has a pending patent of its price surge technology.
Sports: Another common channel captured by Uber is sports events. A lot of sports events take place and Uber was the first taxi company to reach out to masses by offering discounts to people when they book a ride to the event or while coming back home after the event. This strategy again acted as an accelerant as Uber was able to create the hype by letting people travel back home easily in a VIP manner by skipping the hassle of getting a random taxi on the road.
Social Media: Social media is obviously a channel which has helped Uber gain fans and turn them quickly into paying customers. All offers, discounts and giveaways are pushed through social media campaigns. Social media is still an important channel for Uber to market out to new cities where it is yet to roll.
Partnerships: Partnerships with organisations who have Uber’s potential customers has been a major part of Uber’s Business model to gain new customers. Uber recently had a partnership with a mobile manufacturing company where it went out to deliver the phone to their customers. Apart from this, Uber has always been on the forefront to partner with well-known companies in the territory in which it wants to acquire more customers.
These partnerships have helped Uber build brand awareness. You may go through the following news from Uber India to understand more about the type of partnerships.
- Uber tied up with Zomato to offer a ride when a person books a restaurant for dinner.
- Bharti Airtel and Uber Announce First-of-its-Kind Strategic Partnership
- Times Internet and Uber enter into a strategic partnership
Events: Another strategy to gain users for Uber has been to serve people who wish to attend some event. Whether day or night, Uber has been active to tie-up with event organisers and provide services to those who wish to attend the event within the city. Uber’s blog from their newsroom has a dedicated service on this: Bring Uber to your next event.
Stunts: As if the above channels were not enough, Uber has involved itself in some eye-catching stunts. No, not car or bike stunts, but some great marketing stunts like ice cream trucks. Being a cab company, uber launched a motorcycle pick up service in Paris, a mariachi-band delivery service in San Francisco and some other attractive services in various cities. Uber recently launched Uber eats to deliver food from local restaurants.
Everything that Uber did to grab eyes of its target audience was welcomed by the people which ultimately led to word of mouth advertising.
Uber Revenue Model: Just like all other aspects associated with Uber, revenue model incorporated by Uber is simple enough. Uber takes 20% cut on all rides (when there are no ongoing promotions on the customer side or driver side). The fact that Uber is currently valued at around $51 billion clearly indicates irrespective of bullishness the revenue numbers must be substantial.
Let’s talk about the last year’s leaked numbers which stand at $2 billion projected net revenue by the end of 2015. Another astonishing number within the same leak said that most of the Uber’s revenue was coming from five cities among the 130 odd cities where the company was present at that point. This clearly implies that as Uber goes on to mature in many other cities the revenue numbers would significantly rise.
The Bottom Line: Just like any other successful business, Uber did not gain popularity overnight. However, one thing which made Uber go viral was word of mouth advertising. The initial traction for Uber came from corporates and other high class people but Uber soon realised that they had to target masses and give options to customers. This led to various segments like Uber X, Uber Black, Uber SUV etcetera and also made drivers to partner with Uber. The service provided by Uber to riders and easy payments to drivers accounted for a win. But again I will assert that Uber’s success is due to the fact that they touched a great market, had a great team and made a great product.
The moral of this whole discourse is to help cast light on the entrepreneurship in this clime to tow the line of efficiency, viability and currency in conceptualising business ideas and processes both for business success and societal impact as it is the practice in other more advanced cultures.
•Lawrence Nwaodu is a small business expert and enterprise consultant, trained in the United Kingdom and the Netherlands, with an MBA in Entrepreneurship from The Management School, University of Liverpool, United Kingdom, and MSc in Finance and Financial Management Services from Rotterdam School of Management, Erasmus University Netherlands. Mr. Nwaodu is the Lead Consultant at IDEAS Exchange Consulting, Lagos. He can be reached via email@example.com (07066375847).
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