Is Uber launching a loyalty program for its users?
It’s been a couple of months since Uber’s CEO Jeff Kalanick resigned, leaving behind him an empty throne and a company under scrutiny.
Uber will hope that their new CEO Dara Khosrowshahi will help to fix their image and end their PR nightmare, but it will be a long road for the pioneer in the sharing economy.
In the US and in Europe, it’s facing competition from Lyft and other newcomers who made the most out of Uber’s 10 day descent into the abyss.
Amidst allegations of sexual harassment, criticism of the workplace culture, and a video where you can see the ex-CEO having a heated argument with a driver, Lyft, amongst others, embarked on an aggressive campaign to position itself as a socially conscious alternative to Uber.
The campaigns worked and have dealt a further blow to Uber’s brand image.
Perhaps more worryingly for their new CEO, the problem is more than just image. Uber is facing opposition to its international expansion in Asia, especially from Didi Chuxing, its Chinese counterpart.
After “pushing” Uber out of China, Didi Chuxing bought Uber’s Chinese operations. Their battle isn’t limited to the Chinese market, as Didi is competing with Uber in Southeast Asia through Grab, previously an aggregator for taxis, and, also in India, through Ola, that is backed up by the government.
After failing to impose itself in Russia, Uber also merged with Yandex, the Slavic Google, where the hope is that its regional knowledge will help Uber to enter and thrive the Eastern European markets.
But, as a result of all of these commercial setbacks, the multiple scandals, and with trending hashtags like #deleteuber on Twitter, the company has seen its performance drop. Engagement on the platform in the US dropped from 20% in February 2017 to 16% in May, and user retention is also suffering.
For the competition, this is a blessing. Users are seeking out alternatives and rivals are seeing growth and stability that seemed unthinkable in a market previously dominated by Uber.
Lyft, Uber’s main rival in the United States, has perhaps benefited the most, and the percentage of its users that use the app on a daily basis is now stable at 20% in the United States.
Given Uber’s vulnerable situation and the growing competition around the world, the company has been keen to develop a loyalty program. The move would be popular, but the issue is that the initiative would come years after its users began asking for it.
On Braineet, the loyalty program is one of the most popular suggestions for Uber. On Quora, users regularly ask if such a program exists and, if not, why not.
There are plenty of suggestions as to why Uber has been reluctant to launch such a scheme. Many believe that it is because Uber originally positioned itself a high-end service and that it would be the quality of service that brought users back, not loyalty programs.
Another possible answer is the fact that Uber had little competition when it first launched and thought that it could dominate a market that it was helping to create.
The landscape has changed, and in many ways Uber has been a victim of its own success. It has shown that there is a demand for its services around the world, and competition is popping up faster than ever.
That competition will force Uber to adapt, and a loyalty program might be one of the first changes needed.
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Uber started testing a VIP loyalty program last year in the United States. The test-run was limited to Dallas and New York and only available for UberBLACK riders. It was a move to reduce the outflow of users switching to the cheaper UberX.
The offer, rather than promoting a free ride after a certain number of rides or money off, rewarded frequent riders by sending them the best cars and inviting them to special events.
A different loyalty program has been launched in India and in major cities on the west coast of the United States. This is a more conventional loyalty program and allows users to earn credits to pay for future rides. After it was tested in New Delhi, Los Angeles, and San Francisco the program has been made available to users as a means of countering the threat posed by rivals Ola and Lyft.
However, in spite of its users’ complaints, loyalty programs aren’t totally new to Uber. In the past, Uber has partnered with the likes of Visa, AmEx Barclays, and Starwood in loyalty programs that allow users to earn points and use them for Uber rides.
For example, for the first $10,000 spent per year with Uber, you earn one Starpoint every dollar spent, often earning more points if you were spending the money on Uber rides.
The issue with these types of programs, and why users continue to complain and push for new loyalty schemes, is that they are not available to the entire Uber user base.
They target bigger spenders and those using Uber’s most expensive services, they are not there to encourage the average user to take that extra ride. The reason behind this? Think of the Pareto principle, with 20% of the users creating 80% of the value, those more active users are the ones on whom Uber will rely on to stay profitable.
But is this the path to take? Not appealing to all its users equally might be a dangerous game for Uber, especially when their VIP’s have already complained that the loyalty program offers no real value.
Those offered the ‘best’ cars as an incentive have noted that this usually just adds unnecessary waiting time. VIP drivers require a 4.8 rating or higher, and users have not seen the point in waiting for a 4.8 to be available in their area when a perfectly good driver is already free.
So far Uber’s approach has been responsive rather than proactive, targeting cities where their competition is gaining ground and where their business is slowing.
This might be the right tactic, but in doing so Uber is missing out on the possibility of changing the way that the majority of their customers use their service. A real loyalty program might change rider habits, encouraging you to use the service in specific ways in order to maximize your rewards.
Uber wants to be seen as more than just a replacement for taxis.
They’ve extended their business into other products and services, and a loyalty scheme might be the perfect way to develop long-term relationships where customers are encouraged to use all of the services that they offer.
Uber’s struggles might reach a point where they have to turn to schemes like loyalty programs as a means of keeping business. The question is, have they already passed this point and might it now be seen as being too little, too late?
Their rivals may continue to make ground, develop new innovations that improve their services, or even implement a successful loyalty program before Uber is able to.
When so many of its users are calling for them to launch a global loyalty program, can Uber really continue to ignore them? Let us know your opinion!
Originally published at blog.braineet.com on August 29, 2017.