$1,000 Lyft Promotion: Their Last Resort or Surge to the Top?
The Cost of Customer Acquisition Today
I received a most outrageous text this week. It wasn’t from a boy. It was from Lyft and if I must say, I very much prefer automated messages from computers — and one’s that will bring me income!
You see, Lyft said “You now get $1000 for a driver referral in your city. They do too, if they give 200 rides in their first 60 days.”
That’s a $2,000 customer acquisition cost!
Virtually the next moment I am on Facebook and my newsfeed reads $20 towards DogVacay boarding. They’re everywhere: money incentives to sign up for apps, services, subscriptions. Groupon seems to have always given $10, there’s also Living Social who would give you the deal free, but you do some work — refer three friends to purchase it. It seems to be getting easier and easier to get “free money”.
Does Lyft’s outrageous offer point towards the fact that the tech bubble really is bursting? (That’s good news for those complaining about real estate being astronomical and the city’s changes as described in the recent NY Times article.) Or maybe that the numbers really do make sense. Or is there something beyond just the numbers they are counting on?
In a world of startups where the last one I consulted with wanted to spend $5 average per customer, the Lyft deal is quite significant. Let’s break it down. The requirement is 200 rides in 60 days; that’s only 100 rides a month, which is about 20 a week — less than a handful a day. You can bust out over 20 in one day if you really put your mind — and back (you could be sitting for 12 hours) — to it . But does Lyft even have that much demand? And can they be trusted? Will they go out of business before you can complete the rides? Afterall, I put in a Helpdesk ticket about three weeks ago on March 19 and still haven’t heard a word.
Of course it crossed my mind that if I try really hard all I need to do is get one person per day and I can make $365k for the year! I have even written about why rich people should drive for car sharing services. But amazingly so far people from all walks of life have turned it down — often not even giving it a thought — even though I told them clearly how they can pick up people on the way to places they are already going, so they really never have to pay for gas again.
I find that we live in a very disparate world. Being back in South Florida after nine months away — seven and a half being in the Bay Area — it is really amazing at how disproportionally less progressive it is here and maybe the rest of the country save for some scattered cities; the city of Miami even did away with Car2Go the Smart Car sharing service.
Regardless though, looking at the ride numbers above and considering common sense, this promotion is surely finite. I’m interested to see how far Lyft can spread their thousands, and we’ll know by all the pink mustaches on the road. Lyft is certainly generating some buzz, and there is sure to be not just drivers but also riders jumping on, lowering the $2,000 customer acquisition cost penny by penny.