Uber Requires Twice the Lyft, But That Might be OK.
A few weeks ago I logged into my Uber App to update my credit card info and noticed “Uber Rewards” as a new menu option. I didn’t recall receiving a notification informing me that Uber’s loyalty program was available in my area, but what the hay, I like surprises. And to be sure, I had been anticipating launch of this type of a program, having discussed this in the context of switching costs between Uber and Lyft late last year in November. Anyway, I immediately activated the program and was pleasantly surprised I had already achieved “Gold status” – which means I had spent at least $500 on Uber Pool or Uber Eats, $250 on UberX, or $167 on Premium in the past 6 months. Thank you Uber for recognizing my recent loyalty!
Of course, I immediately began exploring the various tiers and benefits of the program. Everyone who rides with Uber and activates their Rewards Membership earns points for eligible rides and Uber Eats orders – 1 point for every $1 spent on Uber Pool or Eats, 2 points for every $1 spent on UberX, and 3 points for every $1 spent on Premium. And all Members receive $5 Uber Cash for every 500 points earned. I typically request an UberX and my average ride is about $18; thus, I have the potential to earn $5 Uber Cash after about 14 rides. Here, then, is the math:
UberX = 2 points for every $1 I spend;
My Average UberX ride is $18; so
My “Points Per Ride” = 36;
500 points = $5 Uber Cash; thus
I need to take 14 rides (i.e., 500 / 36 = 13.9 rides); and
Therefore, I earn $5 Uber Cash for spending $250 in rides; which
Works out to be $0.02 in rewards for each $1 spent.
The other benefits of achieving Gold status include “flexible cancellations,” which credits the $5 cancellation fee if I rebook within 15 minutes of cancellation, and “priority support”, which provides access to an exclusive 24/7 support hotline. To remain Gold status, I need to ride an average of 2.3 times per month for 6-months—for me, easy.
Moving up the rewards spectrum from Gold to Platinum requires a total of 2,500 points accumulated in 6 months. If my average trip is $18 and I continue to book an UberX every time I need a ride, it will take about 69 rides for me to unlock Platinum; an investment of $1,250. In addition to achieving Platinum status I would earn $25 in Uber Cash.
In the rarified air that is “Diamond” level, the highest Uber rewards level, I would need to rack up 7,500 points; that’s 208 UberX rides at an average of $18 per ride, or $3,750 spend commitment to Uber in six-months. For spending $3,750 Uber will also award me $75 in Uber Cash, enough to cover two average round trips to and from a business meeting or dinner for me. And, once a level is achieved, one remains at that level for the next 6-month period unless I spend enough to reach the next level. To be clear, once a status level is earned it is good for the balance of that existing six-month window and the following six-month cycle.
Thankfully, Uber does the magic of calculating my status for me. And the Uber Rewards user experience keeps me informed of:
How many points I have accumulated towards my next $5 Uber Cash Reward,
My progress towards unlocking the next reward level,
When the reward accumulation time period expires, and
When my Member Status expires.
So, will Uber’s rewards program truly vest my customer relationship?
Uber was smart to give everyone the ability to earn “Uber Cash,” and to make it easy to reach the 500-point threshold by booking an UberX or Premium ride. Most riders will most likely achieve, and keep, the 500-point Gold status, which only requires spending $10.50 on an UberX ride 4-times per month for six months consecutively. I believe this is achievable for even a casual rider – to and from dinner or a movie twice a month.
However, I’m not convinced that spending $250 to earn $5 in Uber Cash and a $0 cancellation policy is enough to keep the casual rider from occasionally opting to ride with the competition.
The challenge is, the jump from Gold to Platinum is no minor leap because it requires an additional 2,000 points (which in my case would mean my finding reasons to take another 56 rides in a six-month window.) Of course, there are several nuances to consider such as where I live (urban vs. suburban) or my principal means of transportation.
For both Platinum and Diamond members, priority pick-ups at select airports and price protection between two selected destinations are likely to engender more loyalty from business travelers. Similarly, complimentary upgrades, special access to highly rated drivers, premium support, and free delivery on three (3) Uber Eats orders (additional bonuses of Diamond level) may make it easier for the highly invested to stay vested.
Yet, when the rubber hits the road (you see what I did there) the spending threshold to reach Platinum or Diamond is a bit “rich” for your average rider, while easily achievable for the road warrior always traveling for business. And that may be OK, given that these rewards programs tend to be targeted at the most frequent (i.e., business) traveler (as we find in the airline business).
The Business of Loyalty for Business Travelers
Some business travelers may be enticed by the benefits of Platinum, especially priority pick-ups at select airports, and may opt to always book with Uber. That is, if they aren’t already using a Lyft Business Profile, which rewards riders with $5 in personal ride-credits for every 5 business rides they take. Let’s take a deeper look.
When I travel from home to the airport it is typically for business. An UberX from my home to my airport is $25, a similar price as a Lyft (yes, despite my Uber loyalty in order to truly understand this space I’ve ridden with competition including years with a traditional livery service). So, I would need to take 10 trips from my home to the airport to receive $5 Uber Cash (2 points for every $1 spent with UberX), spending a total of $250, versus only 5 trips with my Lyft Business Profile, spending a total of $125.
Wait, let’s read that together again:
Uber requires $250 (10 trips) to provide me one (1) $5 Uber Cash reward versus Lyft, which requires $125 (5 trips) to provide me one (1) $5 personal ride-credit
That’s half as much investment (!)
Similarly, if I was determined to become Uber Diamond and decided to only ride with Uber to and from the airport I would need to make 50 trips in an UberX (i.e., 50 trips X $25 per trip = $1,250; two (2) points per every $1 spent = 2,500 points), which would also reward me with $25 in Uber Cash. The same spend with my Lyft Business Profile would reward me with $50 in personal ride credits (i.e., total spend $1,250 / $25 per trip = 50 trips; one $5 reward for every 5 trips = 10 rewards, $50 in personal ride credits.)
In other words, as they are currently positioned, “Uber requires twice the Lyft” (sorry, I couldn’t resist). But that might be OK.
Why? Because depending on the rider experience (and all of the collateral services and support that goes with it — what I like to call “ease, convenience and delight”) the price (or in this case “spend”) required to achieve a certain “status” of loyalty or “membership” will not be noticeable. At the end of the day customer relationship management is brand management. Therefore, in order for Uber to successfully require twice as much spend as Lyft to obtain the same level of customer vesting, it will turn on the customer experience, which if done right will achieve the brand affinity Uber needs for the structure of their loyalty program targeted at the frequent business rider.
Are they doing it for me? So far, so good. Of course, now that I know about the Lyft business program under testing, I will be even more attuned.
We can spend another blog post (and probably should) considering how the rider experience for Uber at the Platinum and Diamond levels must deliver in order to sustain that loyalty. For instance, my husband uses Uber for his work in DC and New York. For him, what matters most is the perceived benefits of using Uber Black — such as the livery experience of the driver; their professionalism; knowing the traffic, back roads, and being truly a veteran of the streets (especially in the District of Columbia), etc. For his needs, Uber Black is essentially a more convenient version of town car services he might otherwise use. It is clearly a brand perception issue and level of service issue for him. Again, we can spend an entire article considering customer relationship management as essentially “brand management.” For now, here are a couple of immediate thoughts.
First, in today’s digital marketplace, where switching costs are considerably lower until a Brand can vest a customer, loyalty will most likely be influenced by a combination of factors –
The rider’s experience on any given trip;
Their personal connection with the Uber brand’s values;
The actual value they receive from the Brand’s partnerships—affinity and affiliate (e.g., American Express credits, airline miles, etc.);
The ease and efficiency of the App as well as customer service/support;
How the brand recognizes and remembers the rider at every touch point; and of course,
The actual demonstrative value received from the Brand’s loyalty programs.
Let’s set aside the loyalty program element, as we’ve already established that Uber requires “twice the Lyft for the same reward.” If the complete experience with the Brand is easy, convenient, and delightful, then it is less likely a rider will jump from Uber to Lyft (or vice versa). And notably, while most customers will say, “Of course I want to be rewarded for my loyalty,” a points-based program is only one of the contributing elements of loyalty to a brand.
While Uber has a wheel up on Lyft at the moment in terms of the U.S. rollout of their points-based loyalty program, I’m convinced Lyft’s broad rollout of its own loyalty program, in the works since last November, will soon launch full scale, beyond current evaluative efforts focused on frequent (business) riders.
Therefore, if I were leading Customer Engagement (or CRM) for Uber, I would immediately:
Map the entire customer journey by service offering for both riders and drivers;
Evaluate the Uber offering compared to the competition;
Identify opportunities to reduce any service friction through out all customer touch points;
Strive to improve service levels and strengthen partnerships to do so; and
Look for ways to delight the customer experience while creating emotive Brand connections (again a topic for another time, but I am a big believer in the philosophy that “People don’t buy what you make, they buy why you make it.”)
The key is recognizing that while a points-based loyalty program needs to provide aggressive achievement requirements, it should be tractable to do so, and for loyalty regardless, the Brand experience must encourage the commitment notwithstanding the cost. In short, vesting the customer must be mutually rewarding. If done right, Uber will be worth it, regardless of the “Lyft.”
One last point, I’d be remiss if I failed to mention that Uber also offers perks for its drivers. And that stands out to me as a Brand committed to vesting everyone—Uber recognizes that loyalty applies to both riders and drivers. Nice.