Ride-sharing is gaining popularity among commuters across the globe and the market is expanding at a rapid pace. Consumers are happy to pay for convenience, and a lesser fee compared to flag-down taxis. Identifying the factors that attract commuters and what makes them lose trust is vital for ride-sharing platforms. With the numerous opportunities available in this space, there are also many challenges that companies face in this space today.
Drivers are critical to success
Why are drivers so important in the ride-sharing business? Ride-sharing drivers are basically independent contractors and not always blocked by a single company. So, the more apps they register, the more options they have to explore and hence, make more money. Winning over drivers is an important part of a ride-sharing platform and the main factors that drivers care about are mostly income and flexibility.
For instance, when we compare different markets, in countries like the US or Australia where most people have their own cars, some people can now make some extra money by driving for Uber or Lyft for a few hours. In Singapore, owning a car is more of a luxury than a necessity because of the efficient public transport system and the availability of a wide range of ride-sharing options. So, if you already own a car and are looking for better utilization, then driving for ride-sharing services like Grab is a good option to increase your income. However, this model is not legal in India – car owners and passengers can only opt for licensed taxis.
As drivers are a critical part of the business, ride-sharing companies need to invest in effective training programs for drivers to achieve top-rated customer service. Grab has launched GrabAcademy with a driver welfare program called Better 365 to improve driver behavior. The academy has also rolled out a series of app upgrades comprised of trip rating and in-app training videos for ensuring a safe and rewarding driving experience.
Price wars – A never-ending battle
Before the exit of Uber, Grab had fierce discount wars – the company was offering liberal incentives to both commuters and drivers for gaining market share. In China, Meituan-Dianping had launched its ride-hailing services in seven cities coupled with attractive rewards for commuters, thus challenging Didi Chuxing and other ride-sharing players in the country. To attract commuters, the company is giving out rewards such as three coupons of 13 yuan each, which is equivalent to the flag-down price of a regular taxi in China. Similarly, GO-JEK is offering market penetration pricing right now in Singapore and its fares are much lower than Grab without the surge pricing. We have seen similar price wars in India and other markets.
The only exception to these price wars is Singapore. Even with the entry of GO-JEK, Grab plans to totally avoid the price war with GO-JEK this time and focus on better customer experience with a long-term perspective. This is yet to be observed.
Impact of government oversight and involvement
Regulating authorities strongly believe that disruptive business models create both winners and losers. The shift to ride-sharing is happening at a rapid pace in the US and Asia while Europe is still lagging behind in this landscape. It is also expected that some countries may move towards a unified regulation for both taxis and ride-sharing cabs.
In 2019, the Land Transport Authority of Singapore (LTA) proposed new unified regulations to impose stringent rules on private-hire operators as there were no uniform regulations for private operators like Grab and GO-JEK earlier. Soon after Uber’s exit from Southeast Asia, Singapore’s government had slapped Grab and Uber with fines that amounted to S$13 million ($9.5 million).
Another challenge for ride-hailing players is receiving permissions to operate in various countries. Governments have various established rules and regulations that specifically govern local transportation network companies. For instance, GO-JEK faced rejection at the hands of the Philippines’ government agencies as its ride-sharing service application did not meet the required local ownership standards.
Building customer loyalty programs that stick
Are commuters really loyal to a single app? Do they have many ride-sharing apps on their smartphone or do they use just one? Ride-sharing operators in every market need to know whether consumers are happy switching apps to leverage offers and promos or whether they always prefer to stick to a particular brand.
As a company, we strongly champion the creation of better experiences for customers. In order to gain competitive advantage, operators need to focus on multiple functions including ease-of-booking, managing safety, and creating loyalty. Mastercard is able to offer services which support all these functions, says Rama Sridhar, Mastercard’s Executive Vice President of Digital & Emerging Partnerships and New Payment Flows – Asia-Pacific.
A great UX/UI and ease of use seems to impact customer loyalty as well. For instance, the HKTaxi app has simplified the life of ride-sharing users in Hong Kong with a simple and user-friendly app design. HKTaxi has also entered a new partnership with Mastercard to enable secured in-app digital payments for commuters on HKTaxi’s app platform.4 This service will benefit both cardholders and taxi drivers in Hong Kong. Regular commuters can now enjoy the privilege of handling cashless transactions while taxi drivers are safeguarded from potential threats like cash robbery or receiving counterfeit banknotes.
Approximately 65% of all urban transportation is still paid in cash globally, which slows down consumers in their daily commutes. In response, Mastercard is working to create cashless solutions that empower consumers to get on their way in the easiest and most convenient manner, said Benjamin Gilbey, Senior Vice President of Digital Payments & Labs – Asia-Pacific, Mastercard.
Uber has provided a great template of how customer experience wins when users (especially international travelers) can use the same app in many countries without the need of searching/downloading another local app. Investing in a robust loyalty program is a great way to engage and reward your customers. Features such as priority booking, a dedicated hotline, exclusive access to new features, and shorter wait times are more likely to draw consumers in. For instance, in Singapore, Grab is trying to bring more long-term value to its loyal customers through GrabRewards and GrabClub, a monthly subscription scheme with passes that will help to save up to 40% on rides and food delivery services.
Many opportunities that lie ahead
Ride-sharing players must look for options beyond ride-sharing to enhance their customer base and increase popularity. Effective diversification plans of expanding into adjacent categories help in leveraging the existing distribution network for offering valuable services. Let’s look at the various categories that ride-sharing companies are expanding into.
Delivery services
Grab has launched a food delivery option called GrabFood and a courier service called GrabExpress. Likewise, GO-JEK has GO-FOOD for food delivery and GO-SEND for courier services. China’s DiDi Chuxing has entered the food delivery business recently as well. After acquiring Foodpanda (for food delivery) in India, Ola is now planning to enter the medicine delivery space and revel in the early-mover advantage.
Payments
GO-JEK launched a new payments feature called PayLater to encourage customers who wish to purchase laptops, smartphones, and other goods by offering interest-free installments. Meanwhile, Grab launched its new cross-border remittance feature that will permit customers to remit money to other countries by using the GrabPay wallet. On the other hand, Ola has added a monthly billing option where passengers accumulate rides on Ola and make a payment once in 15 days or once a month – similar to how we pay electricity or telephone bills.
Other financial services
In addition to its other services, DiDi Chuxing launched nationwide financial services, which include mutual protection and crowdfunding products for critical illnesses, credit and lending, wealth management, and auto-financing services. Grab has partnered with Credit Saison Co., Ltd., to provide loans and lending services in Southeast Asia by expanding into financial services. Similarly, Ola launched financial services which offer short-term credit services to users. Furthermore, GO-JEK is partnering with peer-to-peer (P2P) lending firms with the aim of expanding into financial services.
It is no longer sustainable to have one single global strategy, and adapting to new technology is not the only advantage. In order to continue sustained growth, ride-sharing players are heading to adjacent markets – a wide array of measures is essential to make ride-hailing services more convenient to a broader range of users and also as a measure to drive profitability.
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