Analysis of Uber Marketing Strategy - Case Study Example

UBER Name Tutor Institution Course Date Executive summary The entry of UBER into the taxi and car hire business has acted as a wakeup call to existing transport service providers. This is because of the ease with which it has made acquiring a taxi look. The entry of UBER into various markets has been growing month by month. While some countries have prohibited this product from their markets, it is a reality that will catch up with every market in a matter of time. In Sydney, Australia, Black Cars offers airport taxi services as well as luxurious car hire. A marketing analysis of UBER provides an insight into the major selling points and where other transport service providers can leverage so as to improve their services and match up or fend off their incoming competitors. This paper provides an assessment of the Uber marketing strategy as a benchmark for the old taxi business model, majorly looking at the Black Cars taxi in Sydney. The paper aims to carry out a customer analysis, consumer analysis and competitor analysis by looking at situational analysis on UBER, critical issues faced in the industry and how they were addressed by UBER. It shall also review the marketing objectives and strategies of Black Cars and provide recommendations to improve the services offered. Introduction The concept of digital disruption as a way of changing the status quo of current businesses has brought about massive changes in the market place (Hudson, 2015). UBER, an on demand car service, utilized the elements of digital disruption in revolutionizing the taxi/ cab service industry. By looking at the frustrations faced by consumers, UBER founders’ imagination was that of consumers getting the services needed instantly wherever they were. This led them to developing a digital solution that was the app-based taxi service. While the company has faced many challenges, mainly out of resistance from their competitors, there are lots of lessons for the old taxi models to learn from and improve their business and marketing strategy. Situation analysis (5 Cs) UBER is an on demand taxi service provider that is web based. The company uses a mobile application in connecting clients to drivers for taxi services or car hire (Marsden, 2016). The difference between UBER and the conventional taxi service providers lies in the use of the mobile application, where the service is available at the tap of the mobile app. Additionally, UBER uses GPS tracking to sow the location of the car to the potential client and payment is web based. The expected amount to be paid by the client is shown to them immediately on the application. The service is fast, reliable and has provision for driver ratings, which is used to provide the client with useful information about the driver’s profile. The company’s promise to the customer is to deliver value by reducing the time and effort in getting a car service. All this is achieved with no increase in the price paid (Iacobucci, 2014). Uber has collaborated with car owners who, in some countries, are required to obtain business licenses for their cars before they can be used for commercial purposes. This has provided an opportunity for job creation to car owners as well as individuals who can drive, yet do not have their own cars. Uber also collaborates with its clients in determining the ratings of drivers. This is useful information for both the employer (UBER) and the client. It enables employers recognize their best employees, and at the same time, provides information to clients about the profile of the driver as reviewed by other clients. Customer analyses of UBER provide an insight on the market size, market segments, among other aspects of the customer base. The market size of UBER is ever so expanding. As of April 16, 2016, the UBER website, https://www.uber.com/, indicated that UBER services were available in over 60 countries and 406 cities worldwide. In some cities such as San Francisco, UBER’s revenues are estimated to be growing at over 200% per year (Blodget, 2015). This wide market base, which is ever expanding, albeit facing resistance in some countries, comes with a promise of value to customers. The frustrations that led to invention of UBER included being stranded in a location while waiting for a taxi that would take so long to arrive. In some countries, especially the third world countries, the frustrations involved lack of trust of the customer to the driver. UBER is a screen touch away; with the car often arriving less than 2 minutes after the request is made. While this has saved a lot of time for the customer, it also saves a lot of emotional energy involved in worrying about the charges, the credibility of the driver, and the worry on whether or not a car is available. All the information that is needed by the customer is provided at the mobile application, including the expected amount to be charged. The tariffs change with demand, and this information is given to the client before they choose to select the service. The service offered by UBER has a lot of competition from the conventional taxi service providers in the respective areas of operation, public transport systems, drive for higher companies like “Sidecar” and “Lyft” and ride sharing services such as Pedicabs and Car2go. Sidecar and Lyft have a similar model to UBER. In areas where the public transit system is not as effective and comprehensive, like Texas and Austin, there isn’t much competition faced. To effectively counter the taxi services, UBER promises the value of cheaper and a faster alternative, thereby giving clients a no-brainer. Direct competition to UBER comes from Lyft and Sidecar. To effectively counter this competition, UBER gives a premium service model that has upgrades to Lux, Taxi, SUV and Black car services. Additionally, UBER has integrated the use of Lincoln Town Cars and Limousines. This is used in its model as a transportation network. One of the strengths of the conventional taxis is in their network of loyal customers. UBER counters this by the use of driver ratings, which enables the customers to base their selection on the reviews made by other users. The climate of operation for Uber has been adverse. In some areas, the regulations have limited entry of the business into the market. For instance, in the Northern Territory of Australia, Uber has been denied entry (Caid, 2016). By and large, there have been regulations put in place in every market place of operation, including requirements for licenses and accreditation for drivers. The economic environment has also favored the growth of Uber, which has in return, enhanced the economy of such environments through handsome returns. The case of the growth in revenue in San Francisco is one such case. One of the factors that has greatly favored the growth of Uber in various markets is the high uptake in use of applications in the ever expanding internet age. In some countries, use of the mobile based application to get a car for taxi is seen as a trending fashion, enhancing the use of Uber in those locations. Tan (2015) reported that there has been a consistent trend of growth in use of electronic taxi services on a month to month basis in Australia. Finally, the whole concept of Uber development is founded behind the concept of digital disruption, an innovative technological concept of challenging conventional ways of business operations. This appeals to the technological climate of UBER development. Industry Analysis (porter’s five analysis) Supplier power Supplier power has a great influence in this industry. The higher the supplier power, the greater the ability to negotiate. UBER uses drivers and partners who are willing to use their vehicles in providing their service. In this model, the supplier has the power to control the terms at the expense of the company. The drivers also have the option of switching between rival companies, hence their great influence in this industry (Hitt et al, 2016). Consumer power This industry is not used by the consumers on a day to day basis. The customers use the service only during specific circumstances. This gives the customers the power to choose between the companies that they want. The advantage for the service by Uber is the low switching cost with a guaranteed better service in terms of time, energy to get a car and price (Miller et al, 2011). Competition The taxi and car service industry has been reported to experience imperfect competition in cases where there exist significant fixed costs and fall of the average cost vis-à-vis the size of operation (Abelson, 2011). As with every other service industry, competition is driven by the quality of service offered by the company. Abelson (2011) further suggested that competition in the taxi industry helps to improve the quality of services offered. It is also as with the case of Uber and its competitors; the battle for market share has been driven by both the quality of service offered and the price. Uber has assured its clients of timely services at premium rates, a feat that has led to the high level of growth in every market it gets into. Even so, government regulations have been based on the maximum fares charged and the requirement for an operating license. Potential for new entrants New entrants into any business create a relation with the economies of scale, requirements in capital, product differentiation as well as the technology and knowhow. The taxi and car service industry provides an easy way for new entrants to get into the business. For the business model by Uber, it is only through a patent that this threat can be controlled. Threat of substitute products Various substitute products are available in this industry. These exist in form of the competitors. Where there is an option of using a mobile application, there is another option of using the website to book for a taxi service, as with Black Cars in Sydney, Australia. This makes the industry weary of the service offered, as the threat of substitute products has a bearing on the service offered (Foo et al, 2013). Market mix (The 4 Ps) An assessment of the marketing mix of this industry involves having the right product at the right place and selling it at the right time with the right price. Typically, this involves positioning the product at the right place, and with the right timing, a customer gets the service required at the right price. The product required by the customer is transport service. This is required from the location of the client to a destination of their choice. Common taxi services offer this product when they are approached by the client physically, or sometimes through online bookings or telephone calls. Uber customers obtain this product through their mobile phone application. Additional benefits obtained by Uber customers include the ease of finding the product, with less energy and less emotional stress. Accodring to Viglia (2014), the price offered also influences the customer’s decision on selection of the product. The price also influences the profit margins accrued by the company. Prices are dependent on the product required. Uber bargains and promises to offer their products at rates that are appealing to the clients. The location of the company with respect to the clients is also key to the success of the business. Most taxi services are found around airports and along streets where they can be easily identified by potential clients. Uber services are located “everywhere”, or in other words, within the vicinity of the client. This is one of the strengths of the company in winning most clients. According to 50minutes.com (2015), it is important to disseminate information about the company and its products so that as many clients as possible can know about the product. One of the means used in promoting Uber is through referrals, extensive launch campaigns and celebrity stunts. These have proved very rewarding to the company as the growth of Uber has been witnessed in the many countries. Key findings and critical issues The taxi and car service industry has shown a lot of dynamism in the manner of attracting customers, treating the customers and promoting the services offered. In the old taxi business, reliance is based on old and loyal customers who would call back the drivers who offered the services previously. This is based on the trust that has been built between buyer and supplier. In other cases, the suppliers stay out on the look for clients who would come asking for the service. This is seen in cases such as taxi drivers parking at the airport and waiting for passengers who alight from the airplanes. With the growth of the internet, most companies now provide an option of online booking of the services required. Black Cars in Sydney offers such services. The company’s clients make their bookings online and make cashless payment. This has been adopted in a bid to fight off competition from recently launched taxi services such as Uber, Sidecar and Lyft, which can be accessed via mobile apps. The overall target by most service providers is to enhance the comfort of their clients. Before the development of Uber, the founders faced the frustration of waiting for a taxi for thirty minutes, at one point. This led to the thought of finding a way to make it easier for a client to get the taxi service, or a car for hire. Other taxi companies have also based their needs for improvement on making their clients’ lives easier when they look for a taxi service. All these developments have been based on leveraging on the growth of the internet. In addition, competition has played a part in making the companies improve their services. The entry of Uber has made other taxi companies strive to make their services better so as to fight off competition. For instance, Black Cars has improved the packages it offers to clients. From taxi movement from point A to B, Black Cars now offers a wide range of products including luxury car hire as well as expanding their products beyond airport taxi services. Conclusion and Recommendations for Black Cars One of the greatest strengths of Uber is in the promise of offering value by saving the client’s time and giving them piece of mind when they seek the services. Black Cars bases its strengths in offering a comfortable drive that is cost effective (Blackcars.com, 2016). In addition, the location of Black Cars greatly favors its business potential, as it is located at the Sydney airport. Partnering with air ticket booking agents and hoteliers would give a full package to the clients, hence ensuring that clients who alight at the airport use Black Cars to their destinations. This would save them the energy as they only book once and expect to be at their hotels. Further, promoting their services online, especially through use of social media platforms and blogs would form a medium of communication to clients. In addition to this, building the trust of clients through driver ratings would promote the relationship between the clients and the company. Information on driver ratings should be made available to clients through the company website, and shared with the partners who include air ticket agents and hotels. Finally, the products offered by Black Cars are superior, providing a great alternative to clients. This can be made to be the best option by leveraging on the price of their products. Getting the right mix of price and numbers is essential for the profit margins of the company (kim, 2008). Continuously monitoring the price of their products would ensure the company is able to alter their prices as optimally as it would be possible. 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