If you use ridesharing, you're obviously not alone. According to market research, the rideshare market in the U.S. will be $17 billion in 2018 and will almost double to $30 billion within four years. And that's a lot of people moving.

Ridesharing is already a sweet deal (compared to taxis or owning your own car) but it's about to get sweeter because a price war is now inevitable. The price war will manifest as both lower prices per ride and more perks, especially for frequent riders.

The rideshare companies are now launching "rewards programs" to secure customer loyalty, which means the best deals will go to customers who commit to, and stick with, a specific provider. The question you should be asking now is: which provider should I choose?

Personally, I haven't used Uber since the scandals of two years ago, but if I did a lot of ridesharing, I'd be revisiting that decision. Why? Uber MUST offer the best loyalty program because its future existence depends upon it.

To understand why, let's review how Uber got where it is today.

The Holy Grail of Branding

As branding goes, the brand name "Uber" was a stroke of marketing brilliance. While most companies would have gone with a brand name that had something that sounded transportation-y (think "Lyft"), "Uber" built upon pre-existing business lingo that connoted Nietzchean superiority (as in "Uber-guru Tony Robbins...").

The combination of a positive emotional association with no pre-existing meaning for transportation helped the Uber brand morph into a uniquely-identifiable noun and verb as in "Let's get an uber!" and "We can uber to the party." Having your brand name represent your product category (e.g. Kleenex, Kool-Aid, Xerox) is the holy grail of branding.

That brand success would never have been possible for Uber's main competitor Lyft, because"Lyft" sounds exactly like "lift," which already has a specific meaning for transportation. Getting customers to say "Let's get a Lyft" has little brand value because it sounds like you're saying "Let's get a lift." In short, "Lyft" is just too on the nose.

Rebrand Not an Option

Unfortunately for Uber and its brand, the past couple of years have been full of bad publicity. The company has been credibly accused of lawbreaking, its management culture outed as sexist, and its business model criticized as exploitive.

The usual marketing response to that kind of overwhelming negative publicity is a rebrand. For example, the mercenary army known as Blackwater has rebranded twice (to "Xe Services" and then "Academi") in an obvious attempt to distance itself from the time when several Blackwater employees were convicted of killing Iraqi civilians.

Uber, however, can't rebrand without losing the close association between its brand name and the product category and must therefore continue to carry the negative baggage from its bad publicity. As a result, Lyft (despite having a weaker brand name) has grown from a market share blip to fully 35% of the U.S. ridesharing market.

Price War Inevitable

Ridesharing is a fully commoditized market, in the sense that the market players are providing nearly identical services. Assuming you're in an area where multiple firms have coverage and, there's no practical reason to take an Uber rather than any other service.

There are only two ways to grow share in a fully-commoditized market.

The first is to create brand preference through image management. Unfortunately for Uber, its brand is too tainted to pursue that strategy.

The second way to grow share in a fully commoditized market is to drop your prices or, alternatively, provide more product or service for the same price (which is much the same thing).

Earlier this week both Uber and Lyft announced rewards programs, which is clearly the opening salvo of a price war. At first glance, Uber's program (which is built around Uber's products) seems less attractive than Lyft's program (which can convert into several popular frequent flyer miles.)

However, Uber is in a real bind. Their brand is tainted, their main competitor is capturing market share, but they can neither rebrand nor lower prices to overcome the negative brand perceptions. Because Uber's marketing options are so narrow, it MUST win this price war, which means that whatever Lyft offers, Uber will have to beat.

Thus if can stomach Uber's history, now is the time to commit to being a long-term Uber customer, sign up for their rewards program and do the bulk of your ridesharing with Uber.

Published on: Nov 17, 2018
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