Its ease of use, hassle-free negotiable platform, and reliability has attracted many city dwellers, especially tourists, to choose online taxi services over traditional methods of cab booking. But among many online cab service providers, Uber has established itself over the others in a short span of time. Especially in the United Kingdom, their market shares are astonishingly high compared to the country’s oldest running taxi services such as Addison Lee and Black Taxi. More than the usual marketing tricks and colorful experiences to fool the customers, there is a working system under this whole operation of Uber to ensure that the ride fares stay reasonable for both the driver and the customer (Knight 2016). And this study shall be looking into this astounding service management to understand what makes Uber stand out from the crowd of online cab service providers.
Introduction
Uber began its services in San Francisco on May 31, 2010. And since then it has established its market over many countries and cities (400) and even took over many native cab services of the host country. This global trend was observed in United Kingdom as well. The amount of profits that Uber indicated in their fiscal profit statements of 2014 were over 8 million pounds. The most alluring factor that attracted drivers into Uber in the past was the opportunity to avoid nagging customers that they frequently ran into. Many drivers had also indicated that Uber helped them avoid taxi services in London that were run by corrupt managers. During the beginning era of Uber, even with the reduced profits that these drivers earned compared to traditional taxi ride services, they agreed to work with Uber.
The first customers of Uber were the tourists who had difficulty in landing a taxi service in the London crowd that did not exploit their naivete and ignorance about the city. Uber was able to snatch the market from these traditional service providers with their ease of use and reliability. But when their market shares started to decline steadily, these traditional taxi service providers began to look for ways to surpass the attractiveness of Uber services. This is where most economists and analyzers made a wrong prediction that the number of Uber customers will reach a saturation level beyond which Uber might not be able to expand. But within a few months, Uber registered a record number of downloads in their smartphone app. Most of these downloaders were first time Uber users too. Within a few years, Uber completely snatched the whole cab market from old service providers in London.
The rise in profits of Uber in association with the rise in the number of customers of Uber has peaked the amazement of many economists who predicted in the opposite. Even when the whole financial and business environment of London’s cab services pointed otherwise, Uber snatched the entire business from everyone else. This incited a sense of “how” in almost everyone, not just in journalists and economists. How was Uber capable of turning the tables around without compromising their profits or commitment of their drivers? This study shall be attempting to answer this “Uber Phenomenon”
Uber: Reduced Fares and Customer Satisfaction
As the traditional taxi services started to explore the opportunities of using smartphones and internet, Uber realized that London might become a hard egg to crack if not acted promptly. This was what started the slashing of ride fares. And, just as Uber expected, it resulted in more and more customers downloading the app. The reciprocations of reduced fare was reflected almost suddenly in online cab services. People were rushing to get a cab booked with the Uber app even though they were not in a dire need for cabs.
But according to experts there is yet another reason why Uber has been slashing ride fares continuously over the years (Campbell 2015). The truth is that Uber, with their continuous rate cuts, are targeting a larger untapped potential customers. That is, most of Londoners rely on their own car to travel to and from their offices every day. If Uber can ensure that their fares are only slightly higher than what these customers would have to spent on gas, then they would ditch their own cars for Uber services. And since grabbing a taxi through Uber is not difficult at all, these customers are likely to stay with Uber in the future too.
But rate cuts are seldom acceptable to everyone. In this case, Uber services had received serious flak and dissent from its drivers. The drivers often complain that they make much less than what they used to make before (Bates 2016). But according to Uber, this is not true. For instance, due to rate cuts, Uber drivers had met with higher demand per day. Even though their work has increased a little bit, their earnings are now much bigger than what was before.
The drivers’ grudge has also come from the backdrop of the fact that Black Cabs fix fares in a manner that takes into consideration many external factors such as the traffic, the time spent and sometimes the fuel that need to be used. But with Uber the rate fixing is a little less cumbersome. Even though Uber’s system reduces profit considerably (for drivers) they are much more reasonable in the eyes of the customer and hence seem appealing to them.
Uber and Advertisement Strategies
Uber services need a surge in user demands to keep up their efficiency and ease of operations. For instance, if the number of customers through Uber are lowered for a brief period of time, it is highly unlikely that the drivers would want to stay with Uber services due to their low incomes. In this regard, the success of Uber lies in the efficiency with which they increase their demand but with the least amount of compromises from their part.
And once you have a great new product, the herculean task that follows is to improve its reach and popularity. Uber opt many traditional as well as non-traditional communication channels such as television, social media advertisements, etc for this purpose. But nothing tops their offers such as the one for free rides for a first time customer. This made sure that every smartphone owning Londoner would download the Uber app and try a ride even when they had no intention or reason to hire one.
Besides such marketing measurements, Uber has adopted social marketing campaigns as well. One such instance is the UberSleigh program. Drivers working for Uber collected toys from their customers and delivered it to the needy. One big advantage to this initiative was that, apart from the smiles of children, many customers booked a ride with Uber for the sole purpose of donating a toy. And adding to everything else, Uber also plays advertisements on their app while the customer is riding their cab. By accepting a slight fee for these advertisements, Uber increases their profit per ride without excessive rate cuts.
Uber: Allegations and Future
Uber services have received serious backlash from many cities where their drivers were accused of indulging in many atrocities towards their customers (especially female customers) that ranged from simple irritable behavior to serious criminal offenses such as rape. This serious issue started with the erroneous ways through which Uber tried to recruit potential drivers.
At the beginning of its establishment, Uber did not have anything much to attract drivers from existing cab services. So what they did was recruit solo drivers that had no affiliation with any existing taxi services. This turned out to be a big mistake. Most of these solo drivers were criminals and some even had arrest records, especially in countries like India. London drivers were not entirely well behaved either. Uber drivers in London were accused of about 32 sexual assaults in just one year (Collier 2016).
For Uber to overcome such instances in the past, they need to offer much more that just slashed prices for their sustenance. This is what Uber is intending to achieve through some of their future plans. One of these plans include the deployment of incident response teams to areas where the customer had reported any grievance due to the activities of a particular driver (Staff 2015). They are also mooting a plan to employ off-duty police officers as well.
Conclusion
Uber has identified that they have only scratched the surface of cab service markets. Their marketing teams are constantly on the lookout for ways in which user experience can be tremendously improved. Services that range from Uberpool (Uber ride shares) to UberTaxi (London’s Black Taxi through Uber) are symbolic of this profound and constant search for service improvement. Even when serious allegations generated a fear among customers about Uber services, this taxi service giant was able to counter all of them through quick recovery measures. The steady increase in their popularity is an indicator of this success. As of 2015, Uber was valued at $68 billion, much bigger than anything any startup has ever achieved (Petropoulos 2016).
References
Bates, D., 2016. Uber Cuts Prices—and Kneecaps Drivers. The Daily Beast. Available at: http://www.thedailybeast.com/articles/2016/02/01/uber-cuts-prices-and-kneecaps-drivers.html [Accessed May 23, 2016].
Campbell, H., 2015. What To Do When Uber Lowers Rates In Your City. The Rideshare Guy Blog and Podcast. Available at: http://therideshareguy.com/what-to-do-when-uber-lowers-rates-in-your-city/ [Accessed May 23, 2016].
Collier, H., 2016. London Uber drivers “accused of 32 sex attacks in one year.” Evening Standard. Available at: http://www.standard.co.uk/news/crime/uber-drivers-accused-of-32-sex-attacks-on-london-customers-in-one-year-a3251706.html [Accessed May 23, 2016].
Knight, S., 2016. How Uber conquered London | Sam Knight. the Guardian. Available at: http://www.theguardian.com/technology/2016/apr/27/how-uber-conquered-london [Accessed May 23, 2016].
Petropoulos, G., 2016. Uber and the economic impact of sharing economy platforms | Bruegel. Available at: http://bruegel.org/2016/02/uber-and-the-economic-impact-of-sharing-economy-platforms/ [Accessed May 23, 2016].
Staff, 2015. Uber moves to improve passenger safety. the Guardian. Available at: http://www.theguardian.com/technology/2015/mar/26/uber-improve-passenger-safety-rape-allegations-india [Accessed May 23, 2016].
