Consumer Behaviour in the Taxi and Limousine Sector - Uber - Case Study Example

CONSUMER BEHAVIOUR By Name Course Instructor Institution City/State Date Table of Contents Consumer Behaviour in the Taxi and Limousine Sector (Uber) 1.0 Market 1.1 Size of market The Taxi and Limousine Services industry, as mentioned by IBISWorld (2017), grown and consumers are currently more willing to pay more for small luxuries like limousine and taxi rides. This industry is typified by a low concentration level, since the four largest players in the industry accounted for merely 2 per cent of industry’s revenue in 2016. Besides that, the industry is extremely fragmented, since many operators are self-employed. As a result, only a few operators have been able to dominate the market through the realisation of economies of scale, and there is no firm that has generated over 1 percent of total industry revenue. Besides being highly fragmented, the industry’s practices and service levels enormously vary from one country to another. Revenue and activity are largely concentrated in the world’s major cities. In their study, Frost & Sullivan observed that the global taxi market would grow to over 5 million cars by 2020 (Magner, 2016). In the taxi and Limousine Services industry, taxi segment is very productive but highly regulated; thus, it limits how the industry reacts to variations in demand. According to Magner (2016), the industry revenue will increase by 1.6 per cent annually over the next five years, 1.2 Market Share Uber, according to Said (2016) has large market share in the United States but other companies like Lyft are progressively gaining the market share. Uber dominates all cities in the U.S.: for instance, Uber market share in San Francisco, Denver, and Portland is 71%, 62%, and 64%, respectively (Said, 2016). In Brazil, Uber has 21.4% market share; thus, outshining EasyTaxi, which is the local rival. In China, Uber experienced enormous challenge from Didi Chuxing, which consequently forced the company to sell its Chinese business to Didi. As evidenced in figure one, Uber has the largest market share in the United States as compared to other competitors. Figure One: Uber Market Share in U.S. (Hagan, 2017) As evidenced by figure two, Uber has expanded its operations globally to become a dominant player in North America and in most European, South American, and African countries. In India, Ola outshined Uber despite the latter spending approximately $1 billion to gain its footing in India’s market (Zaleski & Tartar, 2016). In Australia, approximately 5.1 per cent of people aged above 14 years has travelled by Uber at least once in every 90 days. Almost 5.3 per cent Australians have the Uber application, especially the young people (Roy Morgan Research, 2016) Figure Two: Uber’s Global Reach (Zaleski & Tartar, 2016) 1.3 Market Position, Depth and Breadth of Service Range The Taxi and Limousine Services industry operations are grouped into four key areas: taxis, silver service and luxury sedans, wheelchair-accessible taxis, as well as limousines and wedding cars (see figure three). The taxi segment can be divided into booked and non-booked segments. In this case, the non-booked taxi services account for the largest industry revenue share. This type of taxis is available throughout and normally uses taxi ranks to pick up passengers, particularly in busy CBD areas and at airports. In the booked taxi services, the drivers and the customers are connected directly through depots or network service providers (Magner, 2016). This type of taxi is highly popular in areas that are less populated. The silver service, as well as luxury sedan services, account for a small share of revenue generated in this industry. UberBLACK is part of this segment, where passengers book using the Uber application software. In this type of segment, passengers are not picked up at ranks and support booking at short notice. The wheelchair-accessible taxi services involve modified automobiles that can accommodate at least one mobility device or wheelchair. Drivers in this type of segment must have specific WAT licenses but can operate as the maxi or standard taxis when the disabled service is inaccessible. Normally, the WATs transfer immobilised passengers from their homes, instead of moving around the highly populated urban areas. Lastly, limousine and wedding car services are increasingly popular in the wedding as well as party market. They are normally used during graduations, debutante balls and celebratory occasions (Magner, 2016). Figure 3: Products and services segmentation (Magner, 2016) 2.0 Competitors As pointed out by First Research (2017), revenue in the taxi and limousine industry are normally driven by leisure and business travel. The individual companies’ profitability relies heavily on good marketing. Besides that, few economies of scale associated with the industry’s operations make it possible for small companies to compete effectively with top players such as Uber and Lyft (First Research, 2017). Uber main competitors include Lyft, which was launched in 2012 and operates it a similar way as Uber. Lyft offers different types of services; Lyft line allows users to save approximately 60 per cent on fare and Plain Lyft allows passengers to travel alone or as a group of not more than four people. Lyft is present in almost 220 cities in United State, Thailand, Malaysia, Indonesia, Singapore, Vietnam, and The Philippines. Another major competitor is Curb, which normally connects individuals with reliable and safe rides from fully licensed, insured, and professional taxi as well as other for-hire drivers. The company is present in nearly 60 cities across U.S. and has partnered with 90 other cab companies. At the international level, Uber face serious competition from Didi Chuxing, which owns nearly all of China’s taxi-hailing market. The company operates in approximately 400 cities across Asia. The company is funded by technology giants like Alibaba, Tencent Holdings, and Apple Inc (Johnson, 2017). Grab is also a major competitor that operates in Southeast Asia, mainly in the Philippines, Singapore, Malaysia, Vietnam, Thailand, and Indonesia. With over 40,000 cars, Ola is an app-based company that offers transportation services across 22 cities and is presently the fastest growing company in India (Johnson, 2017). In Australia, Uber face competition from companies like Cabcharge Australia Limited (with a 4% market share), and St George Cabs Co-operative Limited, Silver Top Taxi Service Limited as well as Premier Cabs Pty Limited (each having less than 1% market share) (Magner, 2016). 3.0 Identification of Target Market(s) 3.1.0 The primary target market(s) 3.1.1 Geographic Segmentation Currently, Uber is actively operating in approximately 43 countries. It plans on continual global expansion; however, it has met a lot of challenges. Foremost, Uber has experienced some restrictions in how it carries out its business in different cities. Even though is currently operating in various cities across Australia, Asia as well as New Zealand, it still faces numerous problems such as increased number of competitors that utilise the same technology. China, for instance, has a number of taxi-hailing applications, with a record of approximately 6 million transactions every day. Uber is also facing competition in India has from Ola Cabs, Meru Cabs and other taxi-app companies. Such domestic competitors have turned out to be serious obstacles for Uber global expansion. 3.1.2 Demographic segmentation Uber’s consumer market could also be segmented through variables like occupation, income, education, gender, the size of the family, and age. In many countries, a significant percentage of adults with Smartphones are utilising taxi-app, such as Uber at least once every month. The majority of enthusiastic Uber adopters are aged between 16 years and 34 years. They account for 75% of Uber’s customer base in the United States, while the minority customers are aged between 45 years and 64 years. Predictably, urbanites make up the largest portion of Uber users with only 5 per cent living in the suburban and rural areas. More than 25% of Uber users are from the top income quartile. As mentioned by Ipsos (2015), Uber offers services for all people regardless their income levels. The company services range from the luxurious UberLUX to the low-cost Uber X. Uber is normally utilised by the younger people while the older people are more inclined to use the limo. As pointed out by Ipsos (2015), female residents use Uber more often because of cost while the male residents are inclined to utilise the UberBlack services. 3.1.3 Behavioural Segmentation The behavioural segmentation connotes segmenting the market into groups according to the customer’s’ attitude, knowledge, or product use. Uber customers can be segmented by loyalty whereby the company offers the best service with the aim of providing an unparalleled experience that would lead to retention of the customers. Uber’s service differentiates it from the competitors. The company has recently begun offering loyalty programmes to improve customer’s loyalty and retention. As mentioned by Bolton (2016), Uber’s customers prefer a clean car, a courteous driver, and a quick pickup. These are the fundamental blocks for building customer experience as well as brand loyalty. 3.2 Potential market segments for Uber that is currently not being catered for Currently, Uber does not cater for Rank/stand segment, which is a place where taxis drivers wait for customers. According to Aarhaug and Skolleruda (2014), such ranks are normally situated outside main transport hubs like railway stations and airports, government buildings and hotels as well as in central business districts. In the rank, Uber driver would wait for passengers. More importantly, entry barriers are exceedingly low, but since the market is unregulated, the number of taxis is exceedingly high leading to low profits and low wages for drivers. If Uber deems Rank/stand segment unfeasible, it should focus the High-Earners Not Rich Yet (HENRYs), which is an emerging segment but highly-profitable. Basically, this segment is sandwiched between the middle class and the wealthy people, and they prefer luxurious services. Even though HENRYs is an emerging segment, nearly all companies are feeling its impact. Given that they earn more as compared to the middle class, HENRYs have high spending power and would most likely purchase expensive services and products. The HENRYs would enable Uber’s to access the ultra rich, but first, the company should build a reliable relationship (Rushton, 2015). 4.0 Internal Influences 4.1 Needs and Motives According to the Maslow’s Hierarchy of Needs, customers have Physiological needs lowest order but most basic such as water, food, air, as well as shelter. Another need is the safety needs, which are normally activated after the physiological needs have been met. They include a secure environment that has no harms or threats. Social needs are normally activated after meeting the safety needs and they include the need for affiliation, being accepted and loved. After meeting the social needs, esteem needs is activated and they include the need for approval as well as self-respect. The last level of Maslow’s Hierarchy of Needs is Self-actualisation, which is the ability to develop one’s fullest potential (Kaur, 2013). The HENRYs have different needs and motives; for instance, they desire for Prestige and pride: Admiration, social acceptance, and good public image. Their self-image is related positively to their personal luxury value perception. They prefer luxurious services that would make positive statements towards them. As mentioned by Knag (2012), many people Purchase luxury products or services in order to get the additional emotional benefit of prestige, esteem, as well as the sense of higher status. 4.2 Perception: The Strategic Implications of the Process of Perception for Marketers? Based on the Beccaria’s theory of luxury, as cited by Gofman and Moskowitz (2010), many people normally try to emulate individuals with high social class. That is to say, when luxury consumption in one class is adopted by the other lower classes, it promotes proliferation of luxury services and products. Many consumers on various social levels are aspiring for higher living standards and are more inclined to search for luxury as well as attributes that are close to luxury. Therefore, the commercial proposition success is attributed to a deeper and better knowledge into the customers’ preferences, their perceptions, mind, and tendencies. 4.3 Learning: Learning Theories That Are More Relevant To Use in Promoting Uber to the HENRYs Without a doubt, understanding the mechanism behind the behaviour of the customers is very important and can only be achieved through learning. Learning is the foundation of the perception mechanism as well as consumer’s motivation to purchase or not to purchase. To promote to the HENRYs, Uber’s marketers should utilise operant conditioning, whereby the habits would be forced because of positive experiences (reinforcement) that result from certain behaviours or responses (Carmen, 2008). In this learning theory, a link between a response and stimulus is needed. Through this theory, the marketers can teach the HENRYs a favourable experience in order to repeat a specific behaviour. 4.4 Lifestyle- Appeal to a Particular Lifestyle Uber services appeal to high-end customers, and they are mostly loyal as long as the company understands their priorities and values. Uber should utilise HENRYs social media information to gain their consumer values that would help the company build a connection by means of branding and marketing messages 5.0 Consumer decision-making processes 5.1 Type and Amount of information about Uber used by the HENRYs. Akin to other customers, the HENRYs use the 5 stages decision-making process: at first, they realise that a certain need has not yet been satisfied. Then they search for the information that will eventually result in the fulfilment of the need. After the information search, the customers start evaluating the alternatives and then comparing them with the aim of finding one that will satisfy their needs satisfactorily. After they have examined the alternatives, the HENRYs can now make an actual purchase decision, where they decide whether to use Uber or other taxis. The last stage of their decision-making process is the post-purchase evaluation, which happens when the customer evaluates the services they have purchased. At this stage, the customer can determine if the service met his/her expectations or not. 5.2 How Consumers Evaluate Different Brands in This Service Category The objective of the brand evaluation is to quantify the brand’s overall impact with the aim of converting it into monetary terms. Customers in taxi and Limousine Services industry normally evaluate different brands in terms of finance-oriented philosophies, where the brand value is considered brand from the sales or profits perspective. The main indicators of brand evaluation in this industry include; brand image, stability and income. 5.3 How Consumers Go About ‘Shopping’ For This Service To access the Uber services, the customer must first download the Uber app, which they use to request a ride. When the request is accepted by a nearby driver-partner, the customer’s app shows the estimated time that the driver-partner would arrive. The app also notifies the customer when the driver-partner arrives. Besides that, the Uber app offers the customers information regarding the driver-partner that is providing Uber services, which includes the vehicle type, first name, as well as the number of the license plate. This information is important because it enables the customer and the driver to connect at the pickup location. The customer enters their preferred destination prior to or at the time of the ride. The trip ends after the customer arrives at his/her destination. 5.4 How Likelihood of Post Purchase Behaviour Happening As mentioned by Jain and Schultz (2016), the post-purchase behaviour is the consumer’s behaviour after buying the product or service. The post-purchase behaviour for Uber customers can happen if the customers are satisfied with Uber services and reuse it again. 5.5 Loyalty- How the concept of loyalty promoted to the service offerings Uber has recently introduced a loyalty programme that would benefit the regular Uber riders. The programme would involve offering the riders’ loyalty credits, per ride and such loyalty credits could be utilised for future rides (Joshi, 2017). The objective of the loyalty programme is to attract more customers. 6.0 Marketing Strategy 6.1 How Uber service is positioned in the mind of the consumer At first, Uber started as a luxury brand, commonly known as UberBlack where professional drivers would drive high end ‘black’ cars. Through their marketing slogan “everyone’s private driver”, Uber has successfully positioned itself and continues to offer its customers with transportation service which are customer-focused and convenient. The customers mostly recognise Uber through its digitalised products, whereby they have to download the Uber’s app in order to access its services. The app enables the customers to track the car’s location and also alerts after the car arrives. 6.2 Marketing Mix Products Uber, as mentioned earlier, offers different services that are booked through the desktop website or mobile apps. The company offer services such as Uber-Moto, which enable people to book bike rides at an economical rate possible. Another service is Uber Go, which is the most utilised Uber service where the customers book their own car and move to different places while gaining access to Wi-Fi. The third service is the Uber Pool, which is a car-pooling facility which enables the customers to travel as a group with people moving in the same direction. This service is considered to be very cheap and help reduce the number of car users. The last product is Uber X where customers can book expensive cars and are offered access to the best of style as well as comfort. Places Currently, Uber is operating in more than 58 countries as well as over 300 cities across the globe. Uber has progressively expanded globally and it is currently in nearly all continents. The company’s rapid expansion is attributed to its services that are comfortable, affordable, as well as safer as compared to other means of transport. Still, Uber should try to penetrate the Chine market since it is one of the most promising markets in the world. Pricing Uber utilises the penetration pricing strategy, which has played an integral part in Uber’s popularity across the globe. Currently, the company is offering the cheap and comfortable rides across the world. Many people are satisfied with Uber’s pricing strategy. The company has also been using the Surge Pricing algorithm, which has recently become Uber’s business model offering the company with a competitive edge in taking advantage of the dynamic relationship between willingness to pay as well as supply and demand. Promotions Uber employs a different marketing approach with the aim of retaining its customers. For instance, Uber utilises discounted rides, free rides, as well as referral benefits to allure customers. Besides that, Uber rely on word of mouth marketing, reviews, and partnership to market its services. 7. Evaluation and Recommendations Uber should improve its services by customising the experience. Basically, the level of interaction would undoubtedly be the easiest customisation that would have an enormous impact on the business. Besides that, Uber should improve its marketing communications by using social media in order to drive public relations. Uber should ensure that all its sources are connected to the targeted customers. The purchase experience can be improved by proactive and open communication. Social media sites like Facebook and Twitter could enable Uber to get personal and interactive feedback which also offers information to the wider audience. A more proactive approach as well as Sharing information would allow Uber to foster creativity and leverage communication activities; thus, resulting in richer customers’ experiences for transit customers. To identify potential new customers, Uber should leverage industry-specific networks such as Quora and LinkedIn that offer a big opportunity for engaging and listening. These networks would enable the company to effectively understand the daily successes or challenges its prospects experience. To improve customer satisfaction, Uber should study compliments and complaints and set up a customer hotline. 8.0 Conclusion In conclusion, it has been demonstrated that the taxi and Limousine Services industry, taxi segment is very productive but highly regulated; thus, it limits how the industry reacts to variations in demand. Uber should focus on High-Earners Not Rich Yet (HENRYs), which is an emerging segment but highly-profitable. Basically, this segment is sandwiched between the middle class and the wealthy people, and they prefer luxurious services. Clearly, many people purchase luxury products or services in order to get the additional emotional benefit of prestige, esteem, as well as a sense of higher status. Through their marketing slogan “everyone’s private driver”, Uber has successfully positioned itself and continues to offer its customers with transportation service which are customer-focused and convenient. 9.0 References Aarhaug, J. & Skolleruda, K., 2014. 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