Why rider loyalty programs are imperative and influential

Ride-haling is not a substitute or a passing fad that will soon fade into the annals of history. It’s a necessity and a booming business in today’s transportation sector. From Uber to Didi Chuxing, Ola, My Taxi, Grab, and Lyft, ride-hailing companies are taking the world by storm. The autonomous car revolution is regarded as the game-changer that’s expected to take ride-hailing businesses to the next level. Because, driver-less ride-hailing will help cab aggregator companies dismiss their profit-gobbling driver partners and save a lion’s share of their earnings.  However, as more businesses jump on the bandwagon to make in big in today’s “pay-as-you-go car era”, the bigwigs are facing the pressure to maintain their relevance and dominance in the market.

Market competition and customer demands

Despite having a viable business model that’s still on track, eclipsing the market is no more easy due to increasing competition and changing customer expectations.  From stupendous growth and market monopolization, some cab aggregators are now reeling in the low-growth world. Their ballooning losses and shrinking balance sheets indicate the impending need for improved strategies to fuel operations and combat competitors’ fare subsidies. Cost cutting or withdrawing from key markets cannot be regarded as prudent and sustainable strategic responses. Instead, the focus should be channelized on augmenting and sustaining market share through feasible and welcoming steps. Customer reward/loyalty program is one such time-tested method.

Loyalty programs

Loyalty or frequent rider programs can undoubtedly drive sizeable market share and attract more customers. But, they have to be devised in simple, accessible, relevant, and appealing manner to attract all riders and cater to their changing needs. Success of loyalty programs mainly stem from valuable services and gratifying customer experience. They are paramount to every business, and helps grow by leaps and bounds. Loyal customers convert better, spend more often, and share positive experiences. As we all know, word-of-mouth publicity drives more new customers than any ads and branding methods.  If The Loyalty Report 2017 is anything to go by, customers continue to join more loyalty programs every year, though engagement rates have fallen flat.  It doesn’t indicate a flaw, but a hidden opportunity to deliver better experiences from reviving unworkable loyalty programs. The investment needed could be substantial, but having a strong and workable financial model in place can ensure long-term success and profitability of loyalty programs.

When it comes to Uber, currently, the perks are currently limited to occasional discounts and referrals, despite previous successes of loyalty programs in partnership with Visa, AmEx Barclays, and Starwood.  The test-run of Uber’s VIP loyalty program was limited to just two cities in the U.S. A different one was launched in selected cities in India.  It was tested in New Delhi, for selected riders, says an official blog of Uber.  UberPASS too was rolled out as a pilot in a few chosen cities. However, none of these offers have been made available to the entire user base in the country so far.

Uber recently launched Uber A-ONE, a driver loyalty program, but overlooked the rapidly increasing number of riders.  Ola, the main competitor of the San Francisco based company, has a ride-with-rewards and ‘Customer of the Month’ rewards programme for users who take maximum rides. However, they haven’t yet worked wonders for the company. GrabRewards, Grab’s free rewards program has been enticing more and more users each day, but cab aggregators in India are yet to recognize the success of this amazing program.

Emotional and transactional loyalty

Loyalty can be broadly classified as emotional and transactional. The former makes customers adhere to a brand regardless of price, convenience, or any other related factors. Transactional is the one that most of us are familiar with; the one that works on attractive and compelling pricing.  Most loyalty programs are based on transactional loyalty. They are driven by discounts, vouchers, and so on; or factors that appeal to our rationality. What if that approach isn’t working? Create emotional loyalty, because, it can play a better and effective role, says experts.  They help create a habit by elevating a brand, be it Ola or Uber, into the most preferred choice. Creating emotional loyalty is a more of a subtle and time consuming effort, but ensures firm foothold and steadily burgeoning customer base.

2018 and beyond

When it comes to India market, the battle royale between the Silicon Valley giant and home-grown is heating up each day. Bootstrapped startups like WagonCab too are giving Uber and Ola a run for their money with their USP of flat fee models with no surging and minimum fare. In other words, the pressure to meet customer expectations is growing at an ever faster pace. If the companies intent to beat out their competition in 2018, their strategies and technology should evolve exponentially while keep customers at the heart of their businesses. Optimized loyalty programs can definitely help take advantage of today’s market to drive customer engagement and profits, strengthen customer relationship, and evolve for tomorrows consumers.

Surge or scourge? Decoding surge pricing of cab aggregators

“I was overcharged.” Not even a day goes by without finding this gripe on Uber rider reviews. The overcharge that most riders whine and snivel about is the dynamic pricing or surge pricing which the ride hailing company has been following since its inception. Frequent Uber riders like you and me have experienced surge pricing at some point or the other.  It’s never fun to shell out those extra bucks, but surge pricing or prime time, the so-called nasty surprise, is just simple economics.

What exactly is surge or dynamic pricing?

It’s an algorithmically-driven pricing that varies with demand and supply, or, when the demand is excessive and supply is less, the fares increase based on scarcity of available drivers. When demand exceeds supply of cars, surge fares are charged by applying surge multipliers, not manually, but based on algorithms or pricing bots that make use of real-time data.  Simply put, the rate is revised to bridge the demand supply gap, along with reducing time delay. It also ensures that more taxis ply during rush hours and meet the increased demand.  Peak-hours, weekend, a festival day, or rainy evening might augment the demand and shrink the availability of cabs for the same exact reason– while riders look for more cabs; drivers may choose not work during those times. It’s simple logic.

Lack of awareness and transparency

Here comes the tricky part of this rather unfamiliar pricing. Despite being active in my city for more than three years, Uber team still fails to help riders understand why fares swing wildly on certain days. Hardly a few commuters in the city are aware of surge pricing, the reason why most riders equate the sudden increase in fares to gouging or swindling. The dissatisfaction and subsequent bad press related to dynamic pricing mostly stems from lack of awareness and inadequate transparency on how dynamic pricing works. That said; riders too are guilty of willful denying the benefits that come along with the fare change which is in no way exorbitant when compared to auto rickshaw and taxi fares. If auto rickshaws and taxis can charge above meter rates and swindle riders, how can surging be termed as gouging and unjustifiable? Surging doesn’t last long, whereas, auto rickshaw and taxi drivers contriving tricky ways for fleecing their passengers remain a usual affair. Furthermore, surge pricing is not a hidden cost. Riders are informed upfront about the fare change, and have the choice whether to take the ride or not. In short, surge pricing is a win-win solution that promises comfort and convenience, with hardly any time delay, even during peak traffic hours.

Is surging a new concept?

Absolutely not! From airlines to resorts, most businesses make use of the whack-a-mole game of surge pricing to strike a balance between demand and supply. Revenue algorithms of most airlines are programmed to apply surge pricing when demand increases and supply declines. Haven’t you seen airfares skyrocketing during holidays and weekends? Hotels and resorts also make use of dynamic pricing to adjust the tariffs of rooms and holiday packages based on demand and supply changes. Of late, the Indian Railways too have implemented surge pricing model, says a recent news paper report. The tatkal ticket booking too is faintly similar to surge pricing or real-time pricing that most people are aghast about.  Online retailers also adopt dynamic pricing in periods of increasing demand and limited supply.  So why can’t we accept the ride hailing company’s rationale?

If we’re vehemently against the dynamic pricing model, shouldn’t the criticism apply to other industries as well? Why blame the ride hailing companies alone? Shouldn’t we argue with our vegetable vendors as well for hiking prices based on changing demand and supply ratio? If capping surge pricing and limiting the frequency of pricing changes is an absolute necessity, it applies to every business that makes use of real-time pricing model. That said; here is one solution that that cab aggregators can make use of – Rebrand the entire concept of surge and focus on promoting the increased convenience and availability that comes along with the fare change.  Surge as a label has garnered humongous amount of negativity and it’s high time to replace it with a better and welcoming one that benefits everyone.

On a side note, unlike Lyft, Uber doesn't help book trips in advance, lock in your fares when they are low. Will apps like SurgeProtector, Ride Fair, and Surge for Uber help avoid surge pricing? Not sure, as the reviews are mixed. Surge protector has a 2.7 rating on Google Play Store, whereas the rating of Ride Fair is 4.7 and Surge for Uber is 4.2. Heat map on Uber Driver App might help find areas where surge prices are in effect, says an recent online article. Can drivers “go offline enmasse”, trick the algorithms used by ride hailing companies, and force surge pricing? It's possible, claims a research by Warwick Business School.