Travelling within busy cities can be a struggle if you are not familiar with transportation systems. Calling a cab is also not the easiest thing to do, especially when they simply don’t see you waving your hand like crazy in the middle of the street. That is why in 2009 Travis Kalanick created Uber, a genius app that lets you call a ride with your smartphone. But this system is not only fascinating because of reducing the risk of not finding a cab, it is also engaging because of many other aspects. With a one-time-only app configuration, Uber conquered in 2017 a 77% share of the United States ride hailing market.
But what else is behind this success? What does it take to reach 40 million rides monthly, spread in 83 countries and over 674 cities worldwide? Through an analysis of Uber’s service business, we will understand why Service Excellence is not only a competitive advantage but is also this company winning edge.
“Information Society Service”: how Uber labels itself
“Uber is evolving the way the world moves. By seamlessly connecting riders to drivers through our apps, we make cities more accessible, opening up more possibilities for riders and more business for drivers. From our founding in 2009 to our launches in hundreds of cities today, Uber’s rapidly expanding global presence continues to bring people and their cities closer.” — From the Uber website, November 2015
Uber considers itself an “information society service” that connects drivers and passengers by the intermediation of their app. In this sense, within the non-ownership framework, meaning that the consumer doesn’t possess any of the physical elements involved (in this case the car), Uber belongs to the category of Systems and Networks since it supposes the access and usage of an existing structure. The customer, more specifically the rider, is then able to benefit from the huge existing supply of qualified services across 674 cities worldwide in exchange of the payment of the ride.
Principles of Service Excellence – How Uber delivers uncommon service?
Even though Uber was able to disrupt the current taxi business by seamlessly connecting drivers with passengers, delivering a great service to customers is key to build a profitable business. Accordingly, the company must be able to pierce excellence in every single activity. Four critical elements allow for an outstanding of the organization: create the right offering, fund that strategy, train your employees and manage your customers.
“Uber should feel magical to the customer. They just push the button and the car comes. But there’s a lot going on under the hood to make it happen.” — CEO Travis Kalanick
The Offering: What is Uber good at?
First of all, since it is impossible to deliver outstanding service in all areas Uber must be able to distinguish the most important and least important dimensions of its service to the target market. What are the main pain points that are relieved thanks to Uber?
– Convenience, Spontaneity & Efficiency
First launched in 2010 as a private luxury car service that would only transport executives in San Francisco and Silicon Valley areas, Uber evolved to a broader transportation network company. It all starts with the filling of the app with personal and credit card information to then automatically withdraw the cost of the ride, so that customers can then request a private car just from pressing a button. Activating the phone’s GPS allows for the recognition of the customer’s current location as well as to input the destination (to further guide the driver) and search for nearby drivers. In a matter of seconds, a driver is attributed to the customer and he’s able to see the remaining time until he is picked up. This service can then solve the struggle of hailing for several minutes on the street until a taxi stops for you and also having to explain to the driver where you want to go. Spontaneity is one of the main characteristics of Uber service.
Moreover, as of the 2017 version, Uber offers other types of car service, not only luxury level (UberBlack: Mercedes, BMW, Audi, etc.) but also less premium options like UberX (Toyota, Volkswagen, Renault, etc.), UberPool (share ride with random customers that have a similar final destination) or UberXL (a van that can take up to 6 people). There is even a UberGreen category, if you prefer taking an electric car. Offering different products to different targets, allows Uber to be convenient for every situation and every customer.
Additionally, Uber added some extra functionalities since its first launch. Actually, customers are able to split the costs of the ride by adding other customers (if they have the app) to the trip. Super convenient way to immediately share costs. No need to carry cash and worry about not having enough money to pay for the trip.
According to 2017 results, Uber is present in over 674 cities worldwide. In this sense, geographical coverage is a huge competitive advantage since customers immediately assume that they will be able to get an Uber almost anywhere in the world and don’t even look for other alternatives. Uber becomes then a super convenient way to travel within cities you are not familiar with.
Another point of difference of Uber is its 24h service. In accordance, you can open your app and request a ride any time of the day, and even if you have less drivers available than at very requested hours, you will always have one. Apart from this, Uber also lets you book a ride in advance, defining the pick-up place, date and time which can be very useful if you have an appointment and you can’t risk having to wait for an available car.
The last Uber update is UberEats. The company understood that the food delivery business could be interesting, especially since they already benefit from a huge network of drivers and also an enormous quantity of users. UberEats allows you to order food from a variety of restaurants and to receive it at home! Again, no cash handled, just as convenient as calling for a ride.
– Transparency & Reliability
Just like Google, the brand Uber is already being used as a verb. For example, “I will uber over” means i will get an Uber to meet you. This phenomenon can be seen as an extreme level of brand’s infiltration into customers’ daily habits. But how did they achieve such market reliability?
First of all, Uber is based on full transparency. In this sense, as soon as the app gets the customer’s current location and the final destination is given, the estimated price will be shown, generally as a range of possible prices. This functionality avoids customers being charged more than they should have been. This estimated price can then be used to check if the final payment was somehow related to the expected amount.
Moreover, transparency is also evident because once the customers gets a driver, he is able to know his name, how he looks like, what car he is driving, the plate number and also have access to his phone number in case there is the need to call the driver. In addition, the rating of the driver and the number of rides he has already done is also visible. All these elements bring confidence to the customers as they rely on the service thanks to all the information provided. As a personal example, my mother started letting my little brother come home alone without her picking him up, just because he uses Uber and she is able to know who is taking him, what time he is supposed to arrive and check if they are on their way or not.
Secondly, Uber has also a very effective complaint policy. Whereas when taking a normal taxi, you can’t complain about the price and simply have to pay for it, even if the driver fooled you and took a longer road, Uber immediately deals with several issues. For example, if the driver didn’t take the GPS suggested road and from there you paid more than expected, you can report that in the app and they will immediately refund you with the difference. The same will happen if the driver doesn’t finish the trip where you stopped. This concern menu is also useful if you forgot something in the car and need to have it back.
– Customer Interaction
Even though the whole Uber phenomenon is mainly about the usability and functionalities of the app, the success is also based on customer and people interaction. In this sense, Uber can be described as a high-contact service since it is built on a peer-to-peer ridesharing that connects riders with drivers.
Firstly, once you get in the Uber the driver will ask you if the temperature is comfortable for you, if you would like to change the radio station, and even offer you water and candies. In this sense, drivers are trained to provide the best experience ever, making sure you enjoy your ride. Plus, drivers are asked to always have their cars perfectly clean, which is very satisfying when using the service.
As a second argument for the quality of customer interaction, Uber developed a very efficient review system. In accordance, after your ride you are asked to rate the driver and the driver is asked to do the same about you. This two-way evaluation leads to good behavior and even conversation between peers, since they both know they will be evaluated.
The Funding Mechanism: How is excellence being funded at Uber?
Unlike traditional transportation logistics companies like FedEx, Uber is characterized by having an extreme light infrastructure. This company owns no vehicles, employs zero drivers and pays no vehicle maintenance costs. The only thing Uber assures is a right peer-to-peer coordination, helped by a sophisticated software and a grounded review system.
Just like any regular cab company, price is determined by time and distance of the trip and users pay at the end of the ride. Uber keeps 20% of the gross fare as commission and the driver keeps the rest. Even if the majority are small trips, Uber gets 1 million rides everyday.
Apart from this simple revenue model, Uber uses other strategies to make money:
– Surging Pricing Technology
Uber developed a technology that allows for estimated prices to variate according to changes in supply and demand. Whenever the demand increases, prices are automatically increased. They use multipliers that shows by how much your price will be multiplied.
– Different Uber model, different prices
Just like stated before, Uber offers different types of vehicles according to consumers’ preferences. Within the 5 categories prices grow consistently: UberPool (cheapest), UberX, UberGreen, UberXL and UberBlack (most expensive).
Employee Management System: How does Uber train its employees?
Criticized for using a subjective stack ranking system in order to evaluate an employee’s individual performance, meaning that managers ranked their employees twice a year on a scale from 1 (low) to 5 (high) and it would influence compensation and raises, Uber changed its performance appraisal system. Developed by Uber SVP of Leadership & Strategy Frances Frei, the company converted to a 360º appraisal system accessible by employees, managers and senior leaders where concrete goals are entered.
– Individual Performance & Instant Feedback
The driver’s performance is consistently being assessed because after each trip the customer is asked to rate from 1 to 5 the quality of the trip. In this situation, Uber gets customers to do some of the work for them, since they are the ones dealing directly with drivers. Uber introduced a new functionality: the customer is able to give a compliment to the driver when a 5* rate is given (ex: nice conversation, quality car, good driving, etc) or to reprimand when a lower grade is given (ex: poor route, driving, etc). Getting a rate from each customer they serve, drivers are then given an average rate. This rate will determine whether they are doing a good job or not. This scaling system allows to understand how well the driver is performing (<4,6: at risk of being deactivated; <4,8: below average, need to improve; >4,8: above average, keep up the good work!).
– Citizenship goal
Uber decided to introduce the citizenship goal, where the purpose is all about contributing in some way to the community, meaning doing good for someone else either within the company or outside the company. For example, it could be doing pro bono work, help fellow co-workers, drivers, customers, etc. On the new performance review system, managers already take all of that into account, not only individual performance.
– Feedback from Management Teams
According to Frances Frei “So the entirety of feedback is improvement. It’s an irresponsible act for me to give feedback to someone if I’m not trying to have them improve.” In this sense, Frances defines two types of effective feedback that help achieve individual results: positive reinforcement and constructive advice. Her main goal is to see improvement across the company.
Positive reinforcement refers to the enhancement of behavior, that aims to make the behavior occur again in the future. Constructive advice is about giving a critic that is useful and with the purpose of helping or improving something. In accordance, in order to promote an environment where positive reinforcement can prosper: Employees need to learn how to receive feedback; Managers have to be specific, sincere and also willing to help employees improve, arranging performance review sessions.
Customer Management System: How does Uber manage its “Fregueses”?
Service excellence is also about involving your customers in the creation of the service experience. In this sense, loyal customers are those who can relate to the experience and desire to routinely use your service.
Just like explained before, riders are a critical part of the whole experience since they are able to influence the future of a driver. Additionally, riders are also evaluated by drivers, meaning that their job as a user is also taken into account. Personally speaking, I am an Uber loyal customer because I believe that from the two-rating rating system I am able to influence the future performance of the driver and the driver is able to evaluate me as a citizen and user of the service. This rating of riders is extremely important in order to try to avoid situations of problematic behaviors. Ultimately, these behaviors and consequent grading might lead to banning the customer from using the service. According to Uber’s new community guidelines, damaging drivers’ or other passengers’ property is one of the reasons that can lead to being banned from the app.
Managing customers is thus crucial to assure service excellence, since Uber’s service is not only influenced by drivers but also by customers. Customer are partly responsible for the cost and quality of service delivered because Uber’s service design call for customers to perform important tasks, like reviewing their drivers.
Conclusion
After analyzing the key factors for Uber success, we can conclude that it is the effective integration of all these four elements that is distinctive rather than the elements isolated. Even if Uber brought up something never seen before, they still have to keep their focus on service excellence, because if they fail at it, customers will change to already existing competitors (Cabify, Taxify, etc.). In this sense, the purpose always has to be providing customer excellence, seen as the difference between customer perception and customer expectation.