Tag Archives: uber business model

Uber Business Model: How Uber Dominates A New Market

 

As a pioneer in ridesharing, Uber has enjoyed enormous success in almost every market it has launched in. The Uber business model for operating a ridesharing business has been copied by many other budding companies. The model seems to work as evidenced by the company’s growth over the years. Uber has proven to be a flexible source of income for drivers and Uber fleet owners. If you have a car registered on the Uber platform as a driver, you get to drive on your own schedule and be your own boss. It is safe to say that Uber has empowered people who are interested in partnering with the rideshare giant in various markets.

The Uber business model has remained the same since its official launch in 2010. The company takes a pretty aggressive stance when it launches in a new market. Uber Business Model

So how does this model work? Let’s take a quick look at how Uber has dominated new markets over the years.

 

The Uber Business Model

 

Aggressive Marketing

Uber enters into a new market with the intent to dominate almost immediately. The company adopts various marketing channels to get the word out. Users can download the app via various channels like Facebook, Google and other social media platforms. Also, people get rewarded for referrals. Marketing tactics take an “in your face” approach that leaves competitors rallying to compete fairly. Uber is valued at a whooping $69 billion and has enough funds to help get the word out.

 

Driver Recruitment

New drivers get huge sign-up bonuses. Existing drivers also get mouth-watering referral bonuses that encourage drivers to recruit others. Drivers who don’t have access to their own cars are linked to Uber partners who have cars registered on the platform but do not want to drive. Also, leasing programs are created to help drivers who don’t have their own vehicles have access to cars and potentially own these cars. In May of 2016, auto giant Toyota announced that it would be entering a partnership with Uber. Uber and Toyota would work on creating new leasing options that would allow Uber drivers lease vehicles with Toyota Financial Services providing financing to these drivers.

 

Dispute government policies

In Austin Texas, the issue of finger-printing drivers prompted Uber to halt its operations in Austin, Texas. Uber argued that requiring drivers to be fingerprinted as part of criminal background checks would hamper their seamless registration process. This is just one of the many instances where Uber has thumbed its nose on policies that it disagrees with in a new market.  Uber fights these city regulations as the Uber business model aims to make the sign-up process for new drivers as hassle-free as possible. However, the company has come under fire and faced lawsuits due to its perceived “relaxed” security policies when registering drivers on the Uber platform.

 

Dirt Cheap Prices Uber Business Model

To get more riders on the platform, the company’s brand management team goes into overdrive. The platform is painted as the greatest thing since slice bread. People from all age groups are targeted and the company slashes its prices. Since the company has enough funds to expend, it can afford to make prices dirt cheap while paying drivers the difference. This way, both riders and drivers are happy.

 

Once the company feels that it has become a city favorite, prices are raised again and some of the promos come to an end. However, when a new competition enters into the picture, the whole cycle repeats itself.

 

 

Conclusion

It seems the Uber business model is taking a shift for the better as the company has sold to competitors in major regions.  According to Uber’s new CEO Khosrowshahi, Uber’s business model and strategy will be focusing on systemic growth, “one of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors… going forward we will be focused on organic growth—growth that comes from building the best products, services and technology in the world, and re-building our brand into the mobility brand that riders, cities and drivers want to support and partner with” He said.

This statement was made to explain the company’s exit from Southeast Asia and merging with rideshare company, Grab. The company also merged with Yandex in July 2017 after investing $225 million into the venture. Uber also merged with China’s Didi chuxing.

Mergers are not necessarily a loss. When a company isn’t making any headway in a market, it’s important to know when to either cut your losses or form strategic partnerships. It seems Uber is doing the latter.

 

 

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Uber Business Model

 

This post discusses the Uber business model. Specifically, the key players in the said business model. We will have another post that goes into the Business model canvas.

Personally, it fascinates me to imagine how a company that started about 7 years ago (March 2009) grew and spread to well over 311 cities in the world. You must know that the growth of  Uber’s business involved a meticulous understanding of inefficiencies with private car transportation and ruthless execution of their game plan. In this post, we will attempt to evaluate the Uber business model by checking how it works at various levels. Note – we will not be breaking down the famous “Business Model Canvas” by Alexander Osterwalder: We will likely have another post for that.

 

The Uber Driver

The ease with which one can become an Uber driver is one of the reasons why there are so many Uber drivers in the world today. Uber business modelDriving for Uber provides the everyday driver the opportunity to make money using their car without having to brand it with the ‘taxi’ sign. All you basically need to drive for Uber is a valid license and a car. Although there are some other necessary paper works and steps that can take 3 to 4 weeks to finalize, everything you need to become an Uber driver (at least an UberX driver) is not beyond what a usual road user should have.

 

Getting Uber Drivers

Uber has been very successful at getting rideshare drivers to sign up with them. They have done this successfully in city after city by employing a couple of strategies:

  •  Guaranteed Rates for Uber Drivers – To qualify for guaranteed rates, you generally would need to have received an email from Uber inviting you to participate (for existing Uber drivers). Also there are some minimum requirements you would need to meet such as minimum rides per hour and minimum trip acceptance rate.
  • Signup Incentives – For some cities you make as much as $1,000 for just signing up to be an Uber driver. Note -there are however some minimum number of ride requirements you need to meet to get this driver signup bonus.
  • Strong Brand Recognition – This is pretty self explanatory. Uber runs a lot of promotions and has a pretty close relationship with the startup ecosystem in a lot of major cities. People signup for Uber because they are a household name at this point.
  •  Car Acquisition Programs – There are various programs for potential Uber drivers who don’t have cars. (See our post here)
  •  Marketing – I am sure you see a lot of the advertisements on craigslist and even on TV now. Some people become Uber drivers because they respond to these advertisements.

 

The Uber Passenger

To be an Uber passenger, you ought to have downloaded the Uber mobile application which is available for windows, android and IOS.
After registering an account with Uber, you can then order a ride when you need one. To ensure that you are at rest, the app allows you to monitor the movement of the driver as they come to pick you up for the trip.

 

Getting Uber Passengers

Uber has also been very successful at getting ride-share passengers to sign up. A couple of the strategies they have employed include:

  •  Free Rides for New Uber Riders – Nothing beats free. By offering a free ride to new Uber riders, Uber reduces the barrier to trying out their services. Usually there is a cap on the amount that is credited to you for a free ride.  (Don’t go taking a ride from Brooklyn to Manhattan expecting for it to be free).
  • Free Rides for Existing Uber Riders – As an existing rider, you have a lot of incentive to tell your friends about Uber especially if you consider it a good service. By referring your friends/acquaintances, you are credited with a free ride also (capped at a certain amount).

 

Uber Fares & Payment Method

Uber car fares are set exclusively by Uber. Although there might be certain variations at certain times, the chargeuber business models are set to ensure that both Uber and the drivers are never at a disadvantage. Majorly, the type of Uber service and therefore comfort-level of the car you ordered are the greatest influencers of price range. While UberX is a regular, comfortable car and moderate fare service, Uber BLACK on the other hand involves the use of luxury vehicles and professional chauffeur services, with a fare rate to match. Until recently when cash payment was introduced to a few cities, payment was made only with the use of credit and debit cards which is pre-registered on your Uber account.

 

Uber Revenue

Uber makes money by taking a commission/royalty from every fare paid by  a rider for an Uber ride. Uber’s commission varies depending on your signup city. 

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The Uber Business Model – How to Verify Your Uber Revenue

 

As the owner of an Uber business, or fleet, you set the tone and are the authority over your drivers particularly in the areas of earnings and quality of service! You are the person in control of operations at every level of your business and are ultimately responsible for making the success of the uber business model as it relates to your business.

There are many factors that determine if your business will be profitable. You need to be aware and in control of all aspects of your business to ensure profits, which is the growth engine of this business.Uber Business Model

Believe it or not, revenue is not the only driving factor, though it is a major one. Be sure to also educate yourself by reading our other material on how to control costs and manage other aspects of your business that may negatively impact your revenue. While it’s true that you will make more money as an Uber Black fleet owner as compared to an UberX fleet owner, these suggestions apply to any kind of Uber business, as well as other rideshare and transportation services. We hope you enjoy these tips and the savings right away!

Your revenue is earned by transporting Uber’s worldwide network of riders in your fleet of cars and also referral revenue for new drivers you have added to the Uber network.

Your revenue, as you know, is calculated using the distance driven and the time spent waiting, or actively transporting the customer (such as waiting in traffic). Although Uber does report these earnings to you, it is the responsibility of every owner to confirm the miles drives and time spent on a ride. Would you pay a service person who worked on your home without knowing the work they did? No, you wouldn’t. Well, the same goes for your business. For this same reason you must track, for every car and driver, their mileage, fueling, time waiting and time performing rides.

There are several tools to help make this process easy and verifiable. Have a high quality GPS tracker installed on your car that tracks time, routes, and enough distance to include your entire transportation service area. In addition to using a GPS tracker, also verify the information yourself by reading the odometer (checked-in and checked-out miles) with your own eyes. There can never be enough checks and balances to be sure you are being paid accurately for the work of your cars and drivers!

Become an Uber Driver

We recommend reviewing the data from each car’s dash panel (2ce a month) to check on the car’s health, and also the mileage since your last check. After getting your revenue summary from Uber, use the dash panel information to provide your first revenue validation (a comparison of miles driven vs. miles billed)

Next, verify those first two data points (checked-in and checked-out miles) against the data provided by the GPS tracker installed on your car. Now you have more information further verifying the accuracy of your data.

In our uberkit(s) we provide you with tracking options for the driver and suggest you use both a physically written method, as well as any number of downloadable driver assistant apps that track time, location and distance of a given shift. Now you have the information you need to analyze your revenue, and contact the company or your drivers to settle any discrepancies.

Ensure you have revenue goals (per mile) for your car(s) so that this data has meaning. This will help determine how you are progressing toward your weekly, monthly, quarterly and annual profit/ROI (return on investment) goals!

 

 

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