“Uber prices surge on New Year's Eve”; “Is it over for Uber in Germany?”; “France wants to ban uberPOP from January 1”; “Opinion: Four other ways Uber is ethically challenged”; “India urges states to block Web-based taxi services after Uber rape case”.
In the Beginning
Uber launched its taxi hailing service in June 2010. Customers were able to get lower-cost cars at the touch of a button on their app. As at February 2015 it operates in over 50 countries and 200 cities. It has indeed revolutionized customer experience in the taxi business. Uber has added a courier and drugstore delivery service. This involves an Uber driver calling the customer to take his/her order. Upon delivery, the purchase is charged to the customer’s Uber account. In the words of Uber founder, Travis Kalanick "we're in the business of delivering cars in five minutes. And once you can deliver cars in five minutes, there's a lot of things you can deliver in five minutes,"
Numbers Don’t Lie
Uber is growing at an alarming rate, quadrupling its annual sales. With investors such as Amazon’s Jeff Bezos, Google, it is now worth $18 Billion. Uber recently closed a $1.2 billion round of funding. It has just partnered with China's leading search engine Baidu to use Baidu's mapping and mobile technology to reach Baidu’s estimated 500 million active monthly user base. Interestingly, Baidu says it will invest an undisclosed amount in Uber.
However Uber has faced numerous reputational challenges. Its attempts to address them hold some important lessons for businesses.
Uber has a surge pricing system whereby fares can rise when there is a demand for cabs. For instance in the early hours of 1st January 2015, Uber rates increased by up to 9 times its normal rate in some locations in the United States of America. UberX was unavailable during this period. In December 2014, Uber came under unprecedented social media backlash over its attempt to charge passengers up to four times the normal price to leave central Sydney as the hostage crisis unfolded in the city. In a quick about turn, Uber offered free rides in Sydney and agreed to refund users up to $200 Australian dollars ($165). Uber has announced a suspension of surge pricing during disasters and emergencies in the United States. Furthermore, Uber has recently introduced UberPool, which allows customers traveling in the same direction to share rides and split the cost. Time will tell if these measures go far enough.
Poor Engagement of Regulators
Uber has suffered temporary bans in many countries. One ban affected the use of taxi apps during traffic peak hours to allow for "fairness within the taxi industry." In France, authorities banned UberPOP, a service that gives passengers a cheaper alternative to traditional taxis by letting unlicensed private drivers offer rides. The drivers were said to have insufficient accident insurance cover. Taxi Deutschland (Germany) also dragged the UberPOP service to courts on account of breaking the law by making unlicensed drivers charge more than the cost of making the journey. After tweaking its service to address the issues raised, Uber has been allowed to resume operations.
Uber recently signed a traffic data-sharing partnership with the city of Boston that will support traffic planning. It claims to be able to help European governments "take 400,000 cars off the road and create 50,000 jobs in 2015”. It also offers to partner cities to manage growth, reduce lost productivity at work, congestion and greenhouse gas emissions and expand public transportation.
Inadequate Background Checks
Given the Uber’s high number of unlicensed drivers, opponents have accused it of not doing enough to vet the background of its drivers. The recent rape allegation involving one of its drivers in India was a pointer to this. Uber says it will toughen background checks and introduce polygraphs, biometric and voice verification. It has also introduced an in-app panic button for its Indian customers. When activated it will alert the local Police at the push of a button in case of an emergency. Also Uber’s users will be able to easily share their trip details and real-time location with up to 5 friends and family members."
Uber has been accused of threatening drivers that New York laws forbid drivers from working for both Uber and competing taxi app firms – a false claim. Uber has since recanted. Competitors claim Uber has a pattern of aggressive and questionable tactics aimed at controlling the cab-on-demand market. Upstart taxi app, Lyft claims 177 Uber employees in the United Sates booked and canceled over 5,500 rides all around the country between late 2013 and 2014. With such fake ride requests, Lyft and other competitors’ cabs become less available. Drivers for such cancelled rides would have lost income, time and money on wasted fuel. The next passenger is often delayed while waiting for a ride. Moreover Lyft drivers have complained of being lured by Uber’s phantom callers to take short, low-profit rides aimed at increasing the drivers’ frustration with Lyft. Lyft accused two phantom Uber callers (whose phone numbers were linked to 36 Lyft accounts) of cancelling 2,204 rides between them. In early 2014, an Uber agent was accused of cancelling over 100 ride requests in three days with another taxi app, Gett. Uber responded with a promise to "tone down its sales tactics."
Life isn’t fair. These tactics by a larger competitor are enough to destroy customer confidence, employee motivation, profitability, responsiveness and reliability of service in smaller competitors.
That however is not an excuse for failure. The challenge therefore is how do you compete against a brand that has more funds than yours and will throw anything in your way to win?