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The Ride Ahead

How to Survive Uber

Five ways to win the global ride-hailing race.

Uber is ubiquitous as a way to hail a ride in the United States, but around the world a host of other players are vying for market share in different ways, from providing adjacent delivery services to tapping into new customer markets.

The realm of ride-hailing apps is competitive. In our global survey, crowd-sourced taxis are catching up to traditional taxis in usage; 22.8% of respondents used them in the past year compared to 50.4% usage of traditional taxis.

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To remain relevant, developers and backers of these apps need to consider leading technology trends, changing consumer expectations about cost and convenience, and the potential for new competition from players in the greater transportation industry. They also need to offer competencies and partnerships that set them apart while still assessing their ride-hailing apps’ capability to respond to changing consumer needs.

The following scenarios highlight leading trends that can help companies maintain unique offerings that create ongoing value for customers. Below we explore important information for any company trying to compete in the ride-hailing app space.

Scenario 1: on demand everything

Ride-hailing apps will maximize efficiency for delivery of both people and products across a fleet of vehicles using dynamic traffic-routing technology. Advanced logistics frameworks for managing on-demand drivers will lower delivery costs and time for merchant partners. Customers will get same-day delivery of not only the items ordered, but also suggested products based on individual tastes. Sophisticated delivery systems will mean same-day pick up for returns that are simple for customers and cheap for retailers.

Compete today: Sidecar Deliveries offers same-day delivery for e-commerce companies by using drivers to transport both people and packages. Uber delivers food with UberEATS and, according to TechCrunch, is testing a high-end fashion same day merchant delivery program. Ola recently launched a food delivery spin-off called Ola Café in India. On-demand drivers deliver both people and packages using intelligent traffic-routing systems — these systems are poised to become more integrated and efficient.

Win tomorrow: Ride-hailing apps should develop logistics technologies for selecting the fastest route, such as a network of connected sensors between cars and infrastructure that feeds real-time traffic patterns. Traffic-routing software will enable more convenient on-demand shopping experiences for customers of new retail and service partners. For example, Ola could partner with fashion site Myntra to deliver hand-picked outfits within a day in India. Rocket Internet could use its Easy Taxi fleet of drivers for fast delivery of products from online shopping site Jumia in Nigeria, while Sidecar might partner with Pager to enable safe delivery of on-demand doctor house calls in the United States.

Scenario 2: safety-based services

Taxi services will focus on safety to capture niche markets like minors, women, and elderly passengers. Ride-hailing apps can differentiate from other providers by training a fleet of drivers to uphold consistent, quality service. Additionally, real-time transmission of ride-tracking data to both the passenger and a connected party could add an additional layer of security. Customers will pay a premium for consistent riding experiences and peace of mind.

Compete today: Shuddle specializes in transporting minors and the elderly who need a driver to accompany them outside of the car (for example to sign kids in and out of school or to help someone negotiate an icy walkway). Drivers are specially trained and the vast majority of those drivers are women. MARAMOJA Transport in Nairobi uploads driver credentials to their app and relies on safe, well-trained drivers in its thoroughly vetted system. And New Delhi recently issued a demand for taxi fleets, including those of hailing apps, to install tracking devices and in-car panic buttons.

Win tomorrow: Apps that differentiate on safety must develop comprehensive driver training programs that generate a sense of comfort for riders in various situations, such as elderly passengers, people in wheelchairs, and minors coming home from school. Connected ride-hailing cars should offer more ride transparency, from displaying speed, distance, route, and time for the customer to including options to communicate that data in real time to a loved one, such as a parent. There should be more customer choice when selecting drivers, based on driver safety profiles or by re-selecting drivers who created a safe transportation environment in the past.

Scenario 3: driverless taxi fleets replace car ownership

Autonomous shared vehicles will drive down personal transportation costs, leading to the end of car ownership for certain populations. With drivers out of the equation, taxi apps will be in the business of growing a fleet of on-demand vehicles, rather than on-demand drivers. Consumers will say goodbye to speeding tickets, insurance payments, petrol stops, and oil changes. Total savings will vary across the globe. The average cost to buy and maintain a new car from 2010-2012 was roughly $50,000 in cities such as New York, Tokyo, Paris, and London. Rome and Sydney residents paid close to $65,000, while costs were sky-high in Delhi, Sao Paulo, and Shanghai at above $120,000.

Compete today: Uber has partnered with Carnegie Mellon University to develop strategic self-driving car technology, and Google is ready to test drive its autonomous car prototype (and is speculated to release its own driverless ride-hailing service in the future). Tesla announced that a software update would allow Model S sedans to drive autonomously on highways by summer 2015. Singapore officials are expected to authorize driverless taxis on public roads.

Win tomorrow: Taxi apps must partner with driverless car manufactures now or build a fleet of their own. As consumer ownership of cars drops, car manufacturers will be looking for new buyers and revenue streams. Ride-hailing apps should already be marketing the value of their brand and app technology to manufacturers for a first-to-market driverless taxi fleet play. Competition among on-demand driverless car apps will heat up from sharing services (car2go and Zipcar), technology giants (Google), manufacturers (Tesla), and even rental companies (Enterprise).

Scenario 4: one-stop shopping

Ride-hailing will become part of an integrated system where city dwellers reserve and pay for on-demand taxis through their choice of mobile shopping, communication, and transport platforms. City governments and large internet players consolidate services so customers can find, order, pay, and receive multiple types of goods and services in one seamless mobile experience.

Compete today: WeChat app customers book Easy Taxi or Didi Dache cabs directly through the messaging platform in Asia. (Tencent owns WeChat and heavily backs Didi Dache). China’s Kuaidi Dache, backed by Alibaba, allows payments through the mobile Alipay Wallet. moovel app in Germany brings multiple mobility service providers together under one app for finding and paying for transportation such as car sharing, car rental, taxi services, trains, buses, and city railways.

Win tomorrow: Taxi apps need to integrate their delivery services into a broader consumer mobile experience that supports finding and paying for products or other types of transportation. This requires partnerships and integration with shopping, communication, payment, and public transport mobile platforms. Big players with several of these capabilities have an inherent advantage.

For example, Tencent and Alibabi — the two Chinese internet giants behind merged Didi Dache and Kuaidi Dachi — could integrate ride hailing with their mobile shopping, messaging, payments, and package delivery services. Taxi apps should work with city governments to participate in public transportation payment systems, so customers can find and pay for all of their transportation needs through one mobile app.

Scenario 5: big brands deliver new experiences

Big brands will leverage partnerships with taxi-hailing mobile technologies and car manufacturers to create customer experiences that further expand brand loyalty.  As a result, consumer choice for specialized transportation services will explode. Consumers will be able to order a free ride to Flywheel class or get kids to soccer practice on time with the Nike+ app. Scheduling a Sunday afternoon tour of five open houses will be possible through Zillow. Additional examples of this type of branded partnership could include finding a pet-friendly vehicle through Petco, booking a ride to and from the airport with Southwest Airlines, and asking Disney to haul the family to visit grandma with a kid-tastic driver and car.

Compete today: Ford acknowledges the start-up thinking of Google, Uber, and Tesla and is experimenting with app-based vehicle fleet service ideas. Nike sponsors Designed to Move, an initiative that connects with schools, cities, companies, and role models to inspire kids to be more physically active. And Disney CEO Bob Iger says Disney is set apart by its ability to, “successfully and consistently create multiple experiences and products out of our creative properties in ways that generate consumer enthusiasm.”

Win tomorrow: Expect free or reduced-cost transportation to be included as part of  wider products or service offerings in the future. Those taxi apps that successfully partner with big brands to generate customer enthusiasm will win market share. This requires an understanding of the partner company’s brand strategy and the customer’s day-to-day transportation habits; taxi apps need to show potential partners how extending into specialized transportation services delights their customers in measurable ways for returned value. The right partnerships will expand a brand’s service offering, lead to repeat business, and generate higher customer lifetime value.

Apps that differentiate on safety must develop comprehensive driver training programs that generate a sense of comfort for riders in various situations, such as elderly passengers, people in wheelchairs, and minors coming home from school.

Stay competitive: a summary

To be successful in the future, developers and backers of ride-hailing apps should consider their technology and partnering potential today. Competition for the next generation will include technology leaders and transportation providers that can support efficient traffic routing, real-time analysis of connected sensor data, and autonomous vehicles. Customers will expect more streamlined mobile experiences, including integrations with mobile shopping, communication, payment, and transportation platforms. Close relationships with city officials and brand managers will position taxi apps to extend to new services and new customers. In the future, these apps will differentiate in more nuanced ways than simply enabling users to find a nearby ride; they will integrate technology, partnerships, and transformative human experiences to build specialized transport services that not only survive but crush the competition.

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For more information about the survey, click here to visit the Study Appendix.

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Caroline Bone

Caroline is a frog strategist in Boston, MA.

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