Monday, November 11, 2013

Uber Can Save the Limo Industry...Really.



Rogue apps are a serious threat to our industry, but they have also exposed luxury transportation to consumers who otherwise may have never considered it. The apps have done this at high prices, proving that customers are willing to pay a premium for convenience. If done intelligently, we can convert this threat into a series of advantages.

By harnessing advanced technology, and by using innovative social media marketing, rogue apps have become a threat that our industry cannot stop talking about. Users can book trips on their smartphones anywhere, anytime—and automated dispatching allows low cost operation. Rogue apps have used social media to portray our industry as the bad guy, while painting themselves as heroically battling an overly bureaucratic industry that hides behind politicians. But despite their apparent threat, rogue apps may actually save the livery industry—we can turn their success in social media, pricing strategy and technological innovation against them.

Social Media: Strength in Numbers 

Rogue apps, particularly Uber, move from city to city, quietly building their businesses. This divide-and-conquer tactic has allowed them to fly under the radar while expanding. When the livery industry finally noticed, it pushed back the only way it knew how: by flexing its political muscle. Anticipating this move, Uber triggered a massive backlash through social media. How did the livery industry respond? With silence. We continue to wait for failing political action, but we do not have to—we can use social media, too.

Social media requires a large audience to be effective. It may be an insurmountable task to run your own social media campaign; these efforts will be more successful if companies pool their resources. Think of the famous “Got Milk?” campaign created by the Dairy Farmers of America. Limousine associations are perfect places for these types of campaigns to start at both the regional and national levels.

However, be aware that social media can seriously backfire. A social media campaign should highlight your benefits, not your competitor’s faults. While it is acceptable to use a competitor’s failure as a comparison point, it should not be the focus. Social media gone awry can drive consumers away, cast your company in a negative light and even evangelize consumers in defense of your competitor. Be prepared for unexpected responses and act quickly to stop or redirect failing social media attempts before they spin out of control.

And let’s never forget that we are not the bad guys. As a collective industry we are very large, but Uber, after recent investment rounds, has been valued at over $3.5 billion, far outweighing any single company in our industry. Uber is known to engage in some shady practices, such as gouging prices by raising rates at their own discretion during busy times, automatically billing the consumer and leaving no recourse. I do not, however, recommend attempting a smear campaign.

A better approach is to highlight our positive attributes, such as advanced bookings, which Uber does not allow. We can even extend the advanced booking capability to book anywhere in the world through affiliate networks. Advanced booking provides the peace of mind that the car will be there at the desired time. A savvy marketer can focus on these and the other differentiations discussed below to demonstrate why your company is the superior option.

Rethink Your Existing Pricing

Many consumers view rogue apps as low-priced alternatives to black cars. Uber’s marketing team intelligently twisted the pricing models of two different markets by using taxi-style rates in the black car industry. The result? Existing black car consumers perceived the taxi-style distance/time rates as bargains, while existing taxi consumers perceived the rates as only a small premium to upgrade to a better alternative. In reality, Uber’s rates tend to be competitive or more expensive. For example, Perfect Limo Service’s all inclusive rate from my house to JFK Airport is $165; Uber’s rate is “$179-$238.” Although Uber’s rate seems like a bargain at only $3.90/mile (Uber’s rate/mile for the NYC region as of Sept. 2013), its calculation tells a different story.

However, I strongly oppose using price competition as a selling tool. It is the cause of many problems we face as operators. Many operators see no alternative, but Uber teaches us that, for certain consumers, price is not as important as convenience. It is far easier to use a rogue app than it is to calculate a rate and call multiple companies for price quotes—a convenience premium consumers are happily paying for. In the case of my house to JFK airport, that premium is 45 percent.

While corporations have become more savvy at negotiating low rates, individuals lack corporate buying power and are becoming lazier in their purchasing, a trend that will continue as the economy improves. With improved customer apps we can catch and exceed rogue apps’ convenience. In addition to mobile booking, new dispatching technology will allow us to compete with their ASAP response times. Combine these changes with our unique ability to provide future and affiliate booking, and you have a recipe for a lot of new revenue.

Uber also demonstrates that customers are not only willing to pay a premium for convenience, but for rapid service as well. It may be time to consider adding a surcharge for ASAPs, explaining to customers that the growing volume of ASAPs is driving up costs. Rather than increasing prices for everybody, the surcharge only increases rates when absolutely necessary.

The other option—completely changing your rates— is a huge hassle. You need to generate new rate tables (unless your reservation system can auto-calculate rates), create new rate policies and train employees to communicate the new rates. It may be easier to modify how you frame your rates. Go back to the rate I mentioned earlier, from my house to JFK airport. If I framed my price in Uber’s terms, it would look something like this: $7 (base charge) + $2.31/mile + surcharges + gratuity. Some companies may feel uncomfortable quoting prices this way. It seems shady—probably because it is.

The problem lies in what behavioral economists refer to as the “reference value.” Regardless of how the price is framed or if certain charges are left out, the first price that the consumer sees becomes the reference value. Repeated exposure to other rates can cause slight deviation in the reference value, but it has surprising staying power. The first price the consumer sees is the price the consumer will use to decide if a rate is high, low or neutral, regardless of whether the rates came from entirely different metrics (per mile vs. flat, for example).

Price can be the difference between huge profits and going out of business. Price changes need a detailed strategy for implementation and communication. Employees need to be trained to communicate prices and be prepared to field questions from consumers about the new rates and policies.

Technology: Join the Frontier 

Browsers and mobile devices have evolved to the point where they can run programs just as powerful and complex as computer programs. New web services that can be used to enhance your company are created all the time. Besides flight verification and tracking, mapping services can be used to ensure accurate addresses as well as search for points of interest. Affiliate networks, such as RateButler, have web services that can be integrated to provide more rapid access to affiliate rates. Finally, reservation systems can create tools that allow consumers to automatically integrate trips into their calendars and travel itineraries, keeping everything in one place. On the dispatching end, most GPS providers offer web services that fully integrate their data into reservations systems, allowing for self-monitoring trips. This data can also be used to ensure fast, accurate billing.

Countless tools are also available to track and improve marketing, which reservation systems can integrate. Social media tracking and web search tracking, such as Google Analytics, provide tools you can use to monitor marketing campaigns and identify how to better spend limited marketing dollars. Integrating these tools to track booking sources will allow accurate identification of which marketing channels are most effective.

It may also be time to update your reservations system— but keep in mind that switching reservation systems is expensive and time-consuming, and all too often that money and time are wasted when data is just copied from the old system to the new. A system change is an opportunity to clean out junk data and remove/merge duplicate items. Either you or your software provider needs to do this to ensure a smooth transition. To maintain service levels, you need to ensure that the software company properly trains you and your staff and provides easy access to customer support. If you use a third party answering service, you need to ensure they can access the new system and that they are properly trained on it as well.

By using social media, pricing and technology more effectively, and combining them with the advantages our industry already has over rogue apps, we can learn from their achievements and turn their strategies into our own successes.

Our diverse fleets allow us to provide more booking options than rogue apps. Uber has limited itself to handling only ASAPs. We have no such limitations and can harness affiliate networks to book transportation globally. Using a base of operations, we have ways to regularly check the quality of vehicles and chauffeurs, allowing us to deliver a higher quality product. The rogue app’s only true advantage is its technology, which is easily replicated.

There are already web services that do what rogue apps do. GPS data can be sourced from in-car units or smartphones, flight verification and tracking are already ubiquitous, and there are many quality mapping options. Browsers have evolved to be just as effective as installed systems, while internet speed and uptime are now at a high enough level to confidently run an entirely web-based system. Expect to see reservation systems that solve most or all of these problems debuting this fall.

Once the technology is in place, we can turn the rogue app business model against itself. We can provide more options and convenience, and we can be comfortable modifying our prices to profit from that added convenience. A kick in the butt from rogue apps may have been just what our industry needed. //LD

Contributed by Daniel Sutich


After graduating with a mechanical engineering degree from Northwestern University, Daniel Sutich returned to his family’s business, Perfect Limo. Dan left Perfect Limo to launch a software company, Perfect Chauffeur, which will be debuting its revolutionary new reservation system for the luxury ground transportation industry, NS-1, at this fall’s shows. He can be reached at dsutich@perfectchauffeur.com.


5 comments:

  1. This is really astonishing to me. Doesn't car service industry understand that if they don’t do something, they are done? Ubar just got 1. 2 billion, yes billion founding and what do you think Uber is going to do with that cash? They are going after you, there is no if or buts about it. There are entire countries that don't have that kind of funding. And there is a solution right before you travel/hospitality industry figure out long time ago and they are still competing between each other and car guys just siding there with thumbs up their you know what and complaining. Ubar is now operating in 128 cities and 37 countries around the world and if you hoping that some legality mumbo jumbo is going to stop them, then good luck and you deserve what’s coming. It only took uber 4 years to do it. That alone says something about car service industry that’s been around for 100 years and still can get their act together. ..Anyway, if you want solutions: jk10128@outlook.com

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  2. I have been speaking with many owners, operators, and drivers, the conversation usually ends up with them complaining about what Uber is doing to their industry.
    What is surprising to me is that there is a solution that has been around for many years and works miracles for hotels and the hospitality industry, it can be implemented into the car service industry; which has these complex reservation systems, there is no centralized information/reservation source, limited selection for corporate users, no integration between buyers and sellers globally, very limited asset utilization, no centralized market exchange between buyers and sellers - I can go on and on. So, if anyone is looking for a solution it is here. jk10128@outlook.com

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  3. This comment has been removed by the author.

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  4. pretty pathetic state of affairs when Limo Digest hasnt published a single story about the predatory nature and business practices of uber since this one was in Nov 2013 in light of all the fast moving news from coast to coast which tells me that Lomo Digest is asleep at the wheel on this one.

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  5. Thanks, anonymous.. I will relay your message to Lomo Digest and tell them to wake up and drive.

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