Jose Palomino

Ride Sharing and Hailing: the Importance of Differentiation

November 15, 2016


Uber and Lyft, services which allow users to get a quick car ride through an app on their phones, have quickly become commonplace across the nation (and the world). As of October 2016, more travelers are choosing Uber and Lyft than taxis and rental cars combined.

Uber and Lyft

The popularity of these ride-hailing services is undeniable, and yet still, there are only two companies which have really managed to make a name for themselves in the industry. And even with such limited competition, Uber far outpaces Lyft. The issue is this, while Uber and Lyft offer virtually the same service, Uber successfully launched three years before Lyft.

Lyft has, so far, failed to really differentiate itself from its chief competitor. From a cross-section of 10 million receipts for ground transportation processed by Certify, Uber accounted for 48%, and Lyft for only 4%. While ride hailers (or “tap-and-ride” users) have two options, they’re really only choosing one, because they have no good reason to choose the other.

So, is first the market the only way to win? Of course not. However, if coupled with really tight execution and good word of mouth, it does afford a company a “cushion” in the market. The key is to always drive forward with a fair amount of competitive paranoia.

Self-Service Differentiation

Recently, automobile industry titans BMW and Toyota are looking to challenge the monopoly that Uber holds with services of their own. BMW’s ReachNow and Toyota’s pet investment Getaround — operating in Seattle and San Francisco respectively — offer users the ability to unlock and drive cars with an app or keycard.

This self-service element may be a great way to differentiate from Uber. Many people prefer to have their transportation, and schedule, in their own hands, and these services allow them that (I recently waited 30 minutes for an Uber at an airport. I was tempted to just rent a car!)

What’s more, they each have individual plans for differentiation. Getaround allows users to borrow and use other users’ cars, for a fee as low as $5 an hour, part of which goes to the owner. BMW envisions “a completely different level of quality,” in keeping with their luxury brand reputation and established clientele.

The Future of Car Usage

For people living in the city, Uber and Lyft are indispensable services, nicer than public transit and cheaper than owning a car. Most importantly, they have really improved the whole taxi thing. It’s just superior to a disheveled, beat up taxi with a surly driver. Uber does have “”taxi-alternative” competitors in other ride-sharing services, such as Zipcar (which has been around for a surprising 17 years) and the fledgling Getaround and ReachNow.

In the future, as more and more ride sharing services pop up, differentiation is going to be even more important than it is now. A clear leader may emerge, like in the area of ride hailing, but as in every industry, ride sharing companies are going to have to prove their uniqueness in how they solve their customer’s’ problems.

Bottom line:

Even in niche industries – where you think you’re already different – differentiation is essential to continued success. If you’re going up against a more established competitor, you need to discover or develop something unique that only you offer that can be added to your value proposition.

  • How much effort do you put into differentiating your business’ offering and message?
  • Is ride sharing going to succeed as much as ride-hailing has?
  • What are the dangers of not setting your business apart from others in your industry?

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