UBER: The Next Logistics Framework
Introduction
For a product or service to cause a significant and often unstoppable effect, it must possess the distinctive traits necessary to reach a tipping point. Malcom Gladwell explained in his novel, The Tipping Point, that a phenomenal shift in the environment will prompt the impetus for individuals to engage in a certain behavior. Furthermore, the spread of these epidemics are sensitive to the conditions and circumstances of the times and places for which they occur. Gladwell gives the reader three rules for the tipping point: contagiousness; the fact that little causes can have big effects; and change happens in one moment. Moreover, the spread of a ‘social epidemic’ relies heavily upon the Power of Context that The Law of a Few deliver. The subconscious roles of the Mavens, Connectors, and Sales People help enforce the Stickiness and Repetitiveness Factors relating to the success of the product or service.
The world has become complex and with all of the different technological advances that have taken the globe by storm, people want simplicity; they appreciate it. This paper will argue how Uber will change the world of logistics and cause a tipping point toward more efficient transportation.
Background
Uber launched in 2009. This innovative San Francisco start-up identified a way to capitalize on the integration of lifestyle and logistics. Uber connects riders with safe, reliable, convenient transportation providers at a variety of price points in cities around the world. Customers use Uber’s own smartphone app to request rides and track their reserved vehicle's location. As of September 16, 2014, the service was available in 45 countries and more than 100 cities worldwide, and was valued at more than US$15 billion.
Uber's pricing is competitive and has said its high prices are the premium that the customers pay for a cab service that is not only reliable, but also punctual and comfortable. Uber is completely changing the way getting private transportation is done in several key ways. First, its smartphone app is integrated with Google maps allowing the user to see how far away the nearest cars are, to set a meeting point on the screen, and to hail a car to meet them there. A user can even see the driver’s information as they view the car getting closer to the location.
Uber drivers call or text to confirm that they’re on the way, arrive within a few minutes, and greet the customer by name. The cars range in status including black cars, SUVs or Uber Xs (a lower cost sedan version of the service.)
Once an individual arrives at their destination, the app charges the card, removing the need to deal with cash, change, tips, or receipts. Uber has removed the friction from the typical taxi cab transaction, and made it highly enjoyable in the process.
The Problem
In the past, when one needed to get somewhere, hailing a cab was a nightmare. A person either stood outside—wind, rain, sleet, snow, or shine—waving a hand in the air until one could hail a cab, or a person had to call a taxi dispatch and wait 20 minutes until the car arrived.
“In the beginning, it was a lifestyle company. You push a button and a black car comes up. Who’s the baller? It was a baller move to get a black car to arrive in 8 minutes.”
- Uber Co-Founder and CEO Travis Kalanick
Once arriving at a destination, a person fumbled to count out the right amount of cash plus a tip, negotiate with the driver who never had the right change, or who “forgot” to start their meter, or whose credit card machine was “broken”.
All told, very few people viewed finding and using taxi service as something enjoyable—it was simply something that they dealt with due to the lack of an alternative. Before Uber, individuals were beholden to an entrenched, monopolistic entity, whose sloppy execution and lack of regard for the customer experience was evident at every touch point.
This poor experience and a perceived lack of ability to change anything about it created pent up frustration and demand from consumers who were eager to find anything better. Uber tapped into that frustration and demand exceptionally well.
Uber’s key to growth is a simple one: Uber offers a great product that doesn’t spend hundreds of thousands of dollars on marketing. While this is certainly the case, it isn’t the only factor driving growth at Uber. First, let’s go back to the beginning and look at some of Uber’s early tipping points.
The Power of Context
Uber provides a solution to a real problem that impacts millions of people. In all sense of the name, it has disrupted the monopoly of taxi cab transportation that exists in many cities and reinvented the experience from top to bottom. "Once we are part of a group, we are all susceptible to peer pressure and social norms and any number of other kinds of influence that can play a critical role in sweeping us up in the beginnings of an epidemic" (Gladwell 171.)
Uber is tackling a number of problems: poor cab infrastructure in some cities, poor service and fulfillment–including dirty cabs, poor customer experience, late cars, drivers unwilling to accept credit cards, and more.
Uber set out to reimagine the entire experience to make it seamless and enjoyable across the board. They didn’t fix one aspect of the system (e.g. mobile payments for the existing taxi infrastructure), they tackled the whole experience from mobile hailing, seamless payments, better cars, no tips, and driver ratings. Gladwell would describe this activation as a Band-Aid to the taxi problem: “an inexpensive, convenient, and remarkably versatile solution to an astonishing array of problems. In their history, Band-Aids have probably allowed millions of people to keep working or playing tennis or cooking or walking when they would otherwise have had to stop. The Band-Aid solution is actually the best kind of solution because it involves solving a problem with the minimum amount of effort and time and cost.” (Gladwell i$6)
By avoiding the trap of smaller thinking, they were able to create a wow experience that has totally redefined what it means to use a car service, sparking an avalanche of word of mouth and press. "The lesson of the Power of Context is that we are more than just sensitive to changes in context. We're exquisitely sensitive to them" (Gladwell 140).
Law of the Few
“The Law of the Few says that there are exceptional people out there who are capable of starting epidemics. All you have to do is find them. The lesson of stickiness is the same. There is a simple way to package information that, under the right circumstances, can make it irresistible. All you have to do is find it” (Galdwell 132.) If a product were to leap around people who are not well connected in the world or who are not very extroverted, the product has a small chance of making its way out of that community. But if it sparks the eyes and ears of someone who truly cares about the concept and who has the aptitude to make others aware, this greatly increases its chances of tipping.
Uber knew that launching in San Francisco meant that it would be interacting regularly with the tech community, whom of which are continually looking for new tools and services that improve their quality of life. Uber took aim at those people by sponsoring tech events, providing free rides, and in general driving awareness among this audience. This strategy follows Gladwell’s explanation of the 80/20 Principle, meaning that 80% of the work is completed by 20% of the population. Moreover, Gladwell points out, "When it comes to epidemics, though, this disproportionality becomes even more extreme: a tiny percentage of people do the majority of the work" (Gladwell 19).
By this point, we should all understand how important social is to any good marketing strategy. However, when it comes to mobile, social is just what we do as humans. We text and email like crazy. We ride the bus and check Facebook. We Instagram our lunches and Tweet our random observations while standing in line at Starbucks. What happens in Vegas ends up on YouTube! Your best form of advertising is from the recommendations of those we trust. When we take a look at our phone in a meeting or open it at dinner, we’re around others−introducing them to apps we love. Let’s not forget about the Microsoft ad from a few years ago, uncomfortably reminding us that we’re addicted to our phones.
Connectors
San Francisco, with its notoriously spotty cab service, served as the perfect foil for the launch. As the early adopters, whom of which were completely fed up with the taxi situation in the city, tried Uber, they took to blogs, social media, and any other way possible to tell their friends about this new way to ride.
Those individuals who possessed countless of connections via the social platforms initiated the awareness of the Uber solution. “Sprinkled among every walk of life, in other words, are a handful of people with a truly extraordinary knack of making friends and acquaintances. They are connectors” (Gladwell 41). The Uber experience became a vector for growth as early adopters in the know impressed their friends with the ability to call a black car from their phone with a couple taps. These new riders were immediately impressed by the experience and became new users and advocates within the span of a single car ride. Both the blog writers and Gladwell’s example, Paul Revere, are considered connectors because they are influential and are involved in many different activities and organizations. It is not surprising that Revere or the bloggers were the ones to receive information, “Nor is it surprising that when Revere sent out for Lexington that night, he would have known just how to spread the news as far and as wide as possible” (Gladwell 58).
Mavens
So how did Uber reach those early adopters? One distinct channel was event sponsorship. Uber was highly active at local-area tech and venture capital events, and provided free rides to attendees. Uber knew that these attendees were well connected and highly likely to share their experiences with friends, tech press, and social media audiences after trying Uber.
By seeding this audience, they were able to create a growth engine that hinged on the fact that these adopters would show their friends. Gladwell explains that these individuals would be titled Mavens because they are not persuaders. Their motivation is to educate, help, share and trade what they know; thus, leading to a growing network of passionate customers.
Much of Uber’s success can be attributed, as mentioned above, to the fact that when someone sees the ease of use, the fact that they press a button on their phone and in minutes, a car appears, they inevitably become a brand advocate.
Salesmen
The Last component of the Law of a Few is the salesman. Gladwell describes these individuals as those who have the ability to persuade others and who use this ability to their advantage. Uber has gotten attention from many celebrities and attained endorsements from the likes of comedian Dave Chappelle, actor Edward Norton, venture capitalist Marc Andreessen—who calls it a “killer experience,”—and AirBnB CEO Brian Chesky—who claims that “Uber makes it very easy to not own a car.” These are the Salesmen that Galdwell outlines because they “seem to have some kind of indefinable trait, something powerful and contagious and irresistible that goes beyond what comes out of their mouths, that makes people who meet them want to agree with them” (Gladwell 73).
This word of mouth is as much today’s growth engine as it was in early days. Uber doesn’t need to do traditional marketing to drive users, they simply find ways to fan the flame of that first trial to reach new people and grow their user base.
Strengths
First to the market; Uber has no established major competitors and has a significant head start in the areas of branding, infrastructure, and consumer trust.
Luxurious and exclusive; Uber has successfully identified and positioned its service to the correct target market based on a lifestyle and behavior. These individuals are trendy, tech savy, travel frequently, enjoy luxury, and place efficiency as a high priority.
Mobile app design is convenient and user-friendly; glitches are minimal and allows for a strong social listening capability.
Win-win for all parties; Uber doesn’t employ drivers. Instead, the service acts as a liaison between people who need rides to drivers who are in the area. The flexible operation arrangement improves employee loyalty and engagement.
Weaknesses
Legal regulations; established deals between cities and taxi companies, as well as union laws associated with these, have led Uber to be drawn into court repeatedly in just its three year history.
Monetizing the idea; while there is always a proven demand for cabs, the overhead and potential legal costs required offer significant limitations to potential market cap
Growth for Uber is dependent on the adaption of each new market; due to the politics, regulations, and interests that make up each city, Uber needs to adapt their launch plans to suit the unique topology of each new market and segment demographically.
Opportunities
Huge potential to disrupt transportation;Uber can take an established infrastructure and utilize it in a completely new way. Instead of relying on Amazon, users can turn to Uber to get durable goods, media, and products at the local level and on-demand.
Collaborative economy and building partnerships; the users can get what they want from each other, faster, cheaper, and in a more specialized way. People will get what they need from each other -- bypassing traditional business.
Expansion of fleet and rising rates of regular cabs; Uber can become the next giant supercomputer orchestrating the delivery of millions of people and items all over the world. Uber could develop different membership options to reach various class and status markets. By experimenting with creative marketing promotions for an assortment of products and services, the strategy will help test the market for demand and provide potential direction for growth.
Expansion to rural areas; Primary Target Audience: A group of hip, tech-savvy millennials that realize the value of time and convenience. Secondary Target Audience: Upper-class business professional. Both segments are looking for quality, convenience, innovation/uniqueness, personal connection, and brand purpose.
International opportunities; the expansion with seemingly boundless overseas markets for this service helps alleviate some of the legal and overhead limitations on market potential.
Threats
A city wins a lawsuit against Uber; the court precedent could be damning to Uber’s entire model. Liability costs and potential risks would severely limit further growth and expansion opportunities. Uber can take what could be seen as a massive business hurdle—litigation—and turned it into an asset that drives growth. The cries from supporters can influence law changes, pave the way for Uber in new cities, and help Uber reach more potential users through the national and local press coverage.
Competition is emerging; Lyft and other carpooling applications are just one of the many new apps attempting to carve into Uber’s domain. Also, quick-rent services like iGo and ZipCar offer potential competition as well.
Economy is still struggling; people are still watching their budgets; additionally, mass transportation is getting better.
Tipping Point
Most people consider Uber as just a new type of Taxi service, but those people would be wrong. Today’s society demands products and services instantaneously. I believe that Uber’s transportation may very well be the next big monopoly. Uber’s new software feature (API) will allow anyone to use its services to bring any item from point A to point B. If Uber can deliver cars in five minutes, people need to ask themselves, what else can be delivered in five minutes and in what vehicle?
Galdwell explains that The Stickiness Factor works when there is a subtle but significant change in presentation; a shift from an abstract lesson to a practical piece of information which makes it memorable. Uber’s simple logistics framework, connecting people with services, will make the service irresistible and will prompt people, businesses, and societies to take action.
Uber should set its sights on more than rides and plan to become an on-demand-everything company. Uber has a long way to go before it can both create a new monopoly and take that coveted position. It would have to subsume UPS, just as Amazon has begun subsuming local booksellers. Once the Uber phenomenon tips, it will need to accomplish three major objectives to maintain its dominance in the world: get more individuals to leverage Uber by expanding the platform add-ons and position the service into new locations; solidify relationships with Uber’s existing customer base by developing loyalty programs; and build overall awareness for Uber by implementing a variety of creative tactics that align to Uber’s unique brand image. “That is the paradox of the epidemic: that in order to create one contagious movement, you often have to create many small movements first.” (Gladwell 191)
References:
- Malcolm Gladwell, “The Tipping Point” (New York: Little, Brown and Company, 2000).