Businessmodel of Lyft

Customer Segments

Lyft has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:  consumers who need to be driven and drivers who can transport them.

Value Proposition

Lyft offers four primary value propositions: accessibility, convenience, risk reduction, and brand/status.

The company creates accessibility by offering a broad range of options. It is available in 68 cities across the U.S., as well as in Indonesia, Malaysia, Singapore, Thailand, The Philippines, and Vietnam. It also offers variety in terms of vehicle choices, which are as follows:

• Lyft Line – Shared rides in which riders have the same destination, enabling them to split the cost.
• Lyft – Personal rides that passengers can use individually or with a few of their acquaintances.
• Lyft Plus – Personal rides that utilize larger vehicles (six seats) for a high number of passengers.
• Lyft Premier – Personal rides that utilize high-end vehicles for occasions such as business trips. The company offers convenience by making its service easy to use. Customers can order a ride using a mobile app on their phone. Because the firm utilizes local drivers, they often arrive within minutes. After the ride, customers can pay for it using the app, preventing the need for cash or cards.

The company reduces risk by maintaining high standards through the following policies:

Critical Response Line – Lyft maintains this line, a 24/7 phone number that passengers/drivers can call if they feel their safety is threatened. Calls are handled by the Trust & Safety team.

DMV and Background Checks – Lyft screens all potential drivers through third-party criminal background and DMV checks. Background checks include county and national-level databases and records, and Lyft disqualifies anyone with crime, felony, drug-related, or sex offense convictions.

Vehicle Inspections – Lyft screens all cars of potential drivers through a 19-point inspection. Cars are not allowed on the road if they are older than 12 years.

Zero-Tolerance Policy – Lyft has a zero-tolerance alcohol and drug policy for its drivers. Passengers who suspect their drivers are under the influence are given a number and e-mail to contact.

Two-Way Ratings – Lyft enables passengers and drivers to give each other satisfaction ratings after each ride. If they rate someone at three stars or below, they will never be matched with them again.

Lyft Insurance Protection Plan – Lyft maintains an insurance plan that provides drivers with additonal coverages. It offers a $1 million liabiity and uninsured/underinsured policies apply as primary to a driver’s personal automobile insurance policy when matched with a rider.

The company has established a strong brand due to its success. It has overseen the sharing of over 10 million rides. It has been featured in prominent media  such as The New York Times, The Economist, and NBC’s “Today Show“. Lastly, in 2013 San Francisco Mayor Ed Lee proclaimed July 13th “Lyft Day“.

Channels

Lyft’s main channel is its mobile app. The company promotes its offering through its website, social media pages, online advertising, out-of-home advertising, and participation in conferences.

Customer Relationships

Lyft’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees.  The company’s website offers videos, tutorials, and answers to frequently asked questions. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

Lyft’s business model entails maintaining a robust common platform between two parties:  passengers and drivers. The platform includes its website and mobile app.

Key Partners

Lyft maintains the following types of partnerships:

• Business Partners – Companies can give their customers discounted or free Lyft rides for visiting their sites or store location, and earn side income for helping to promote Lyft.
• Non-Profit Partners – Non-profit associations can partner with Lyft for assistance in raising funds and mobilizing supporters.
• Student Group Partners – University student groups ranging from school newspapers to fraternities can partner with Lyft to receive affordable rides to important meetings and other events.
• Ambassadors – Lyft invites anyone to promote the company by acting as an Ambassador. These individuals receive marketing materials and represent the firm at events in major cities. They also earn $10 per passenger referral, as well as up to $750 for each driver referral, and earn swag and cash bonuses if they pass certain milestones. ### Key Resources

Lyft’s main resource is its proprietary software platform, which serves consumers in over 68 cities. It also depends on its human resources, namely the network of drivers it hires to transport consumers in their cars. Lastly, as a relatively new startup it has relied heavily on funding from outside parties, raising $2.01 billion from 34 investors as of December 2015.

Cost Structure

Lyft has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions.

Its biggest cost driver is likely transaction expenses, a fixed cost. Other major drivers are in the areas of sales/marketing and customer support/operations, both fixed costs.

Revenue Streams

Lyft has two revenue streams: revenues it earns from a rider fee and then a commission fee it charges drivers for each completed ride. It currently charges a commission fee of 25%.