Businessmodel of Uber

Customer Segments

The passengers comprise the most immediately obvious customer segment. Like many traditional taxi companies, Uber offers cheaper rides to appeal to a mass market, but also premium rides for wealthier consumers.

However, unlike in traditional taxi companies, Uber’s driver-partners may also be regarded as customers, rather than employees. Rather than taking a salary, Uber keeps a commission from their takings in exchange for granting them the privilege of using their platform. Being a driver-partner is an attractive prospect for a wide range of people, including those seeking full-time employment, but also those who happen to already have a car and a smart-phone and are looking to earn some extra money in their spare time. This ease of use helps to ensure a regular supply of driver-partners is available.

Value Proposition

Uber’s value derives in large part from the fact that it is able to offer cheaper rides than traditional taxi companies. Uber’s sophisticated algorithmic infrastructure also ensures that Uber drivers often arrive quicker than their traditional rivals.

For drivers, Uber’s value proposition is rooted in their ability to provide anyone with a car and a smart-phone the opportunity to earn money while working to their own schedule.

By using sophisticated algorithms, Uber is able to match consumers’ demand for lifts to drivers’ demand for work. When demand is high, prices surge, encouraging more driver partners to get out and work while the inverse happens outside of peak hours. Enabled by modern smart-phone technology, Uber have essentially invented a system that enables the personal transport market to operate more efficiently. This concept is absolutely vital to Uber’s value proposition and also key to understanding why its business model is so radically disruptive.

Channels

The channel through which drivers and passengers use Uber’s services is through its smart-phone apps. Separate apps exist for drivers and passengers, and versions are offered for all the main mobile operating systems.

Uber has proved adept at social-media marketing and public relations. Sophisticated campaigns are run before Uber opens in new cities to get the public excited about the services they offer. Uber also regularly makes headlines for its rapid growth and its consistently impressive ability to secure massive investment, which also provides it with an additional advertising channel.

Customer Relationship

Customers’ relationships with Uber are highly automated, occurring mostly through the Uber smart-phone app. The app allows passengers to review drivers and vice-versa, providing a safer experience for both parties.

Drivers undergo a vetting-process to ensure that they are suitable for the role and are not, for example, sex-offenders who may jeopardize the safety of passengers.

To further ensure a smooth relationship with both passengers and drivers, Uber provides extensive online guides to their services for both types of customer, as well as offering customer service phone lines and web chat facilities.

Key Activities

Despite appearances, Uber is not a transport provider like its traditional taxi-cab rivals. Rather, Uber provides a platform on which registered freelance drivers are able to sell their transport services to consumers.

Uber’s main activities are therefore developing and marketing their mobile app. Uber continually works on the app’s algorithms to ensure the most efficient experience possible for drivers and passengers.

Uber’s other main activity is their driver on-boarding process, where potential driver-partners’ suitability for the role is assessed.

Key Partners

Uber’s drivers are key partners. In Uber’s business model, it is important that these are partners, rather than employees as this substantially decreases Uber’s running costs.

Payment processors are another key partner, since Uber drivers may not take cash in nearly all regions. Uber uses two main payment processors, Braintree and Stripe.

The Uber app is dependent on mapping data and GPS networks to efficiently connect drivers with passengers. This is achieved through a partnership with GoogleMaps.

In many jurisdictions, including the UK, all Uber employees must register as licensed cab-drivers. This means that Uber must maintain partnerships with local authorities to ensure that their business does not violate the laws of the areas they operate in and that all driver-partners are acting legitimately.

In many cases, Uber expends substantial resources on lobbying and maintaining good relationships with local authorities to ensure that their business can continue to operate in as many cities as possible.

Key Resources

Uber’s greatest resource is the platform it has created that connects passengers to drivers based on proximity. Algorithms are also key resources for Uber.

Their highly developed routing and pricing algorithms are an invaluable resource that enables Uber to typically provide a more efficient service than traditional taxi-firms.

Cost-Structure

Uber expends a huge amount on making sure their app runs smoothly, hiring a large number of world-class software engineers to ensure the optimum functioning of the platform.

It also employs city managers and a number of marketing teams in various locales.

Paying driver-partners for their services is another key expenditure. Here, Uber incurs lower running costs than traditional taxi companies because, as self-employed contractors, driver-partners are not entitled to all the perks associated with employment in many jurisdictions and must own and maintain their own cars.

Uber has also been known to invest heavily in political lobbyists to convince governmental authorities of Uber’s positive effect on local economies and to persuade legislators not to enact laws that would prevent Uber operating in certain areas.

Revenue Streams

Uber’s revenue stream is very simple. The app bills passengers based on number of miles travelled plus any surcharges that may be incurred, for example during peak hours. Some premium rides in more expensive cars are also offered at higher prices.