Ever popular transportation service Uber is coming under fire for what some say is an exploitative business practice. Uber tends to be a convenient and economical way to get around town – especially for inner city dwellers that don’t own vehicles and travelers who don’t necessarily need a rental car.
In an effort to encourage drivers to work during busy times to ensure that Uber customers don’t receive a “No cars available” notice, Uber instituted surge pricing. In essence, surge pricing is a multiplying factor based on demand. Let’s say you need a ride home from downtown New York City on New Year’s Eve, after watching the ball drop. Chances are great that with 2 million people trying to get home, there won’t be many taxis or Ubers available. In these cases, Uber surge pricing has been known to grow upwards of 9 times the normal fare. Revelers found this out this past New Year’s Eve when they woke up to find they had paid $205 for an 8 mile ride. Or, in one man’s case, $1,100 for a trip that would normally cost $125.
While these fare increases typically only occur during really busy times, in an effort to entice drivers to work, these price increases are irritating customers worldwide. Uber may be a giant that has arisen quickly. However, the company must ask itself what would cause a customer to discontinue using its service faster – lack of available cars or the perception of price gouging?
Uber has enjoyed a rise in popularity due to the simple fact that consumers have embraced it’s convenience and lowered transportation costs. Uber drivers are held to certain standard for the type and age of the vehicle they drive. And many users state that Uber vehicles are much nicer than many of the aging taxis that exist. However, while taxis are regulated, along with the fares they can charge so as to avoid price gouging, Uber is not.
There was also the Australian hostage crisis which saw an armed gunman take hostages in downtown Sydney forcing evacuations. Well …. Uber’s surge pricing took effect causing fares to rise to a minimum of $100 for people to evacuate. Enraged Australians quickly took to social media denouncing Uber’s actions as exploitive. To their credit, Uber quickly refunded everyone that had paid for a ride and made additional rides available free for anyone else fleeing downtown.
While Uber’s surge pricing makes sense from a business standpoint, in our supply and demand driven market, every consumer forced to pay hundreds of dollars for five minute rides that should in fact cost just $10, is a customer who is at-risk to discontinue use of the service. That customer could also be a megaphone for bad publicity through social media and word of mouth. This could backfire on Uber and the company may find that users forgo using their services on nights when they estimate it to be busy. They could then end up with drivers that have no customers.
Customer loyalty is a fragile creature. Uber has enjoyed success by creating an excellent customer experience. And the customer experience is usually king. In today’s economy, consumers have more options than ever–and they know it. With the growth of the Internet, they can get almost anything they want, whenever they want it. As a result, they increasingly value excellent experiences.
This is a different game, with different rules. Companies win or lose because of the feeling they give customers, not necessarily because of features or prices.
At the North American International Auto Show, Ford unveiled an interesting new program to the world – FordPass. According to The Detroit News, Ford’s goal with this app is to create a centralized hub which allows Ford owners to utilize some unique services related to ride-sharing and mobility. Some of the planned features include FordGuides, which allow Ford owners to ask questions and get answers via text or phone 24 hours per day; and FordHubs, which are actual buildings Ford owners can visit to learn more about Ford technology. Additionally, Ford owners will be able to utilize the app to obtain free parking at airports. These parking lots then rent out the owner’s vehicle while they are away. Ford owners will be able to use the app to locate and reserve parking spaces as well. According to Ford, it is seeking to expand the app to include ride and car sharing as well. The app also introduces a new loyalty program which will reward app users with points that they can redeem for prizes.
While I can certainly see the value of utilizing some of these services should an owner live in a dense market with limited parking like New York or Los Angeles, it would seem as if the initiative seeks to keep Ford owners “in-house,” so to speak. Most of these services already exist. And the offerings are via partnerships with existing companies. Consumers could easily download free apps from the companies whose services they desire already — without a Ford branded app. It’s also not clear whether a consumer would be willing to allow a parking garage to rent out their vehicle in exchange for free parking at an airport. Trading a small daily parking charge in a long-term parking lot, for some stranger driving around in your vehicle, seems perhaps a bit of a stretch. So, what’s motivating Ford to provide this app. And, how will they get consumers to use it? The integrated loyalty program is the key.
Ford is piggybacking, if you will, on the more popular services that are rising in the peer-to-peer economy. I would not be surprised to see Ford launch an Uber-like service in the future. Wait. It just did. Ford also announced its Dynamic Shuttle Service, which is an Uber-type service currently used exclusively by employees. This service, in partnership with IBM, is also being used to test their Smart Mobility Experimentation Platform, which “will aggregate data every 10 to 15 seconds to provide drivers with information like the route with the least amount of traffic and areas with open parking spots.”
Only time will tell if Ford is making the right move. It would seem that trends such as ride and car sharing, along with the explosion of Uber (worth $60 billion after only 5 years) may indicate that it is. However, remember that while these services may be popular for consumers that live in densely populated markets, it’s hard to fathom rural owners taking advantage of or needing most of these. While the loyalty program may attract Ford owners to access these services through their centralized app, we’ll just have to wait and see how owners actually respond once it is launched in the Spring.
Competition for air travel is fierce. Especially when it comes to wooing business travelers. An interesting fact that recently came to light is that the most desirable customers are not necessarily those that have flown the most miles. Airlines have realized this and have changed how rewards and statuses are earned. You see, flying longer distances doesn’t necessarily equate to more revenue. The airlines want to capture those lucrative business travelers that book last minute and end up paying full fare, rather than those that book months in advance and capture sale-priced fares. These last minute bookers bring the most revenue.
In the past, status was rewarded by miles travelled. However, this has now changed. In fact, American Airlines just became the last of the three major airlines to revise the way status and perks are awarded. It is now based on how much money is spent, rather than miles flown.
This recent article on Yahoo Travel relays a viewpoint that airlines have inadvertently created an elitist group of travelers. The thought process is that this is due to loyalty program promises that the airlines sometimes cannot quite live up to. Despite all of the red carpet treatment – Luxury Porsches to shuttle fliers to connecting flights; swanky exclusive airport clubs; etc., there are times when there just isn’t an open first class seat available for a customer upgrade. When that situation happens, airlines have found that this sub-group of elitist travelers attacks with their loyalty cards. They try to out trump each other with status level or threats. The article is quite interesting in how it explains the mentality that the airline’s loyalty programs have created, simply based on how it has been structured and presented to customers. There are certainly a few loyalty program inspired horror stories contained in it.
Loyalty programs have become an expected norm by consumers due to their mass adoption by most major retailers. As such, in many cases they have lost the very essence with which they were intended – to make that loyal customer feel special and appreciated. If we’re to take a lesson from the airline’s faux pas, what is the answer then? How, through our loyalty programs, do we show our customers that they matter to us, that they are important and that we value their loyalty?
Well, one thing that always works is to keep in those basics of customer service. I hear more and more these days about the importance of the customer experience. Show them that they matter by offering exceptional service. Offer meaningful and relevant rewards. And go the extra mile when you know it can transform someone’s experience into one that’s truly exceptional.