MKT Tutorial Case Study

Uber: Delivering People and Goods

If you had asked any customer before 2009, hailing a cab simply meant flagging a cab that you see on the streets. However, with the introduction of Uber in 2009, the meaning of 'hailing a cab' has changed.

Travis Kalanick and Garrett Camp founded Uber in 2009. The Android, iOS, and Windows versions of the phone app have rapidly expanded to 57 countries since then, gaining much popularity across various states. Kalanick believes that there is always a solution to every problem, if you were creative enough. This 'edge' of creativity is seen in Uber, a platform that essentially connects riders with drivers using their phone's GPS.

Uber prides itself in being a 'platform,' with a smooth interface that lets one know of the rider and driver's location real-time with rare report errors. Unlike traditional taxi booking services, Uber removes the question of when the ride will actually arrive from the customer point of view. Unlike traditional taxi operator hotlines, with Uber, you do not have to call anyone for confirmation of your driver. Being a 'platform', Uber also has gone beyond just providing a ride for customers by showing the potential to be a groundbreaking delivery servicefrom making quick deliveries from the nearest pharmacy or your favorite ice cream stand miles away.

Besides being just a ride sharing service, Uber has realized its potential to be a potent delivery service. Uber Essentials in Washington, D.C., allows users to add products from its inventory list following which, its drivers would get them at the nearest convenience stores for its customers. Further, the launch of services such as Uber Cargo in Hong Kong and Uber Rush in New York, which uses vans and bike messengers respectively to deliver parcels, shows a glimpse of Uber's potential to be a real-time logistics network.

As these services deliver parcels through the same seamless cashless and convenient process as per any other Uber service, they would only delight existing Uber fans if they were extended to other cities. While global logistic powerhouses such as FedEx or UPS already have drivers every clay to meeting delivery needs, Uber's existence as a real-time network means that its available drivers at any block at a given minute can instantly fulfil a delivery need.

Being a 'platform', Uber operates whenever there is demand. If there is always someone looking for a ride and drivers to provide one, Uber is alive. This process is made easier by the fact that the entire transaction is completely cashless as payment is done between Uber and the rider via their credit card, following which, Uber pays out to the driver while taking a small cut for itself.

Uber's service is further branched into various specialties, depending on the type of car and the number of passengers riding. UberX, known as the low-cost Uber, provides everyday cars such as Toyota Prius, Honda Civics that seat four passengers. UberBlack, the original service provides a luxury black sedan that is pricier while UberSUV or UberXL provide SUVs or Minivans that can seat up to 6 passengers.

There is also UberTaxi, where local taxi drivers use their taxis for the app's service. However, the range of services for every country or city varies according to local regulations and individual city's base of operations. Some countries such as Thailand have gone as far as to provide UberCopter, a premium service where one can hire a helicopter for a ride.

Uber constantly addresses the issue of safety in the service that its platform provides. Safety refers to not just the safety of the riders but the safety of the drivers too. Unlike conventional taxi drivers, Uber drivers are able to view all the particulars about their rider within the app such access has never been available for any driver before. This ensures the safety of the driver, as they know beforehand whom they are ferrying, via the app.

One of Uber's female drivers from India, Maya, states "that she is not afraid of driving at night." Drivers are even able to give feedback on their riders on the app via the simple press of a button. Riders too, are guaranteed of their safety. Uber requires every driver to have a license and pass a background check. They must also own the car and it must be insured. However, the process of being an Uber driver is much more convenient, hassle-free, and easier than that of being a regular taxi driver.

However, not all is smooth sailing, as it seems. The rapid expansion of Uber has come at the cost of conventional taxi operators. Since the launch of the Uber Taxi service in San Francisco in 2012, the average monthly trip per city taxi has nose-dived from 1424 in 2012 to 504 in 2014. As such, many taxi companies have protested vehemently against the app, calling for local authorities to take it down or subject it to strict local regulations. This has resulted in some countries and cities implementing a blanket ban on the app completely or implementing measures to minimize conflicts between the taxi operators and the app. Uber's cost break down, which consists of a base fare and then a per-minute and per mile charge, has been viewed to be generally "less" than that of regular taxis. UberX, the lower end of the Uber service claims to be 26 percent cheaper than the pricing of a regular cab.

Uber's expansion into one of the world's largest markets, India, has been laden with obstacles. As the case in many other countries, Uber faces much protest from the local taxi operators as it started out. Mumbai's auto union leader Shashank Rao highlighted Uber as one of their competitors, eating into their revenues and commented that the government should take action against the newcomer, as they are not subject to the same regulations as regular taxi operators.

Meanwhile, the car ride-hailing service has also expanded further into the east by setting up shop in China. The service began to reap the benefits of tapping onto the potential of a 1.4 billion-sized population in China. As of June 2015, the app was reported to have been logging an astonishing 1 million rides per day. What makes this even more surprising is that Uber has only operated in 11 Chinese cities so far. Uber aims to expand to over 50 cities in China and given its current unprecedented growth rate, this means that Uber will join the list of foreign companies that have been essential in spurring growth in the less developed areas.

However, Uber's venture into China is not unchallenged as it faces stiff competition from another local taxi booking app Didi Kuaidi. Didi Dache and Kuaidi Dache were market leaders with up to 90% of the market share, when they merged in February 2015. Didi Kuaidi has since, been valued at $8.75 billion.

Uber positions itself as a 'vibrant', fun' and 'boyish' brand. Such a position differentiates Uber as a unique brand that customers can have a connection with, especially given that most companies in the transportation sector rarely place much emphasis on branding themselves. Most taxi operators or Uber's competitors such as Didi Kuaidi in China or GrabTaxi in Southeast Asia rely heavily on the economic viability and rationality of their service for their business and hence, appear to be of the mindset that there would always be a demand for their services as long as they provide it.

Along with its branding, Uber aggressively markets its app by encouraging customers to download it through providing free credits or discounts for their first ride with the app.

However, Uber does face some serious challenges, looking forward. As an app or platform being the marketplace linking rider and driver, its business model or service is easily replicable or not hard to imitate. This is evident from the rise of similar car hailing or taxi booking apps such as GrabTaxi, Hailo, Ola, or Didi Kuaidi in various Asian markets. Regardless of the differences in their interfaces, these applications essentially operate as a marketplace bringing drivers and riders together similar to the service that Uber provides, in the eyes of the customer.

An example of the Uber service being replicated in local markets can be seen in the case of Jakarta. Go-Jek, a motorbike-hailing app in Jakarta, was launched in 2011 before Uber entered the city. The app allows commuters to get across its jam-packed city by booking a motorbike. The exponential growth of the app stems from the fact that motorbikes are a popular means of transport within the Indonesian capital.

In 2015, the app had a revamped mobile app interface, resulting in it having been downloaded 400,000 times and an increase in its drivers from 1,000 to 10,000 as of June 2015. It is a common sight to see motorists in prominent green jackets and helmets providing an alternative and efficient means of transportation to local commuters.

Uber Indonesia faces the threat of such local competitive services being introduced even before it enters a city. In June 2014, it started its Jakarta operations as a later entrant.

Q 1: Is Uber a product-oriented or customer-oriented company? Justify your answer with 500 words.

Q 2: What are the challenges faced by Uber during marketing in different markets?

Describe how these problems could have been avoided.