Uber Pricing Strategies and Marketing Communications

15 Pages Posted: 30 May 2017

See all articles by Paul Farris

Paul Farris

University of Virginia - Darden School of Business

Gerry Yemen

University of Virginia - Darden School of Business

Virginia Weiler

University of Southern Indiana

Kusum L. Ailawadi

Dartmouth College - Tuck School of Business

Abstract

By late March 2014, the ridesharing company Uber was on a roll, rapidly expanding service to untapped markets and gaining new, enthusiastic customers, as well as a few vocal and visible detractors. Uber's innovative organization of the supply-demand matching process produced eager customers who recruited others. Buzz marketing and aggressive recruitment of drivers augmented growth. This case presents Uber as an example of a middleman adding real value for consumers and upstream suppliers (limo drivers). Unlike Tesla, which battled to sell cars directly to the public, Uber created value by adding a layer between limos and prospective riders, organizing the market for convenience and transparency for both sides. Where Uber stirred up the competitive equivalent of a hornet's nest was with expansion from the livery car market into the taxi service market with UberX. The material allows for a lively discussion around disruptive digital technology and the firm's business model.

Excerpt

UVA-M-0871

Rev. May 2, 2016

Uber Pricing Strategies and Marketing Communications

By late March 2016, Uber Technologies, Inc., an e-hail ride-sharing company, was on a roll, rapidly expanding service to untapped markets worldwide and gaining new, enthusiastic customers, as well as a few vocal and visible detractors. Some of its critics were focused on Uber's practice of “surge pricing,” a tactic that increased rates sharply in times of higher demand for car service. Other groups that disliked the company included competing taxi and limo services, which argued that inadequate driver screening and training endangered consumers and made for unfair competition in the highly regulated industry. In addition, some city governments enacted regulations to limit the number of cars on the road that ride-sharing companies could offer, and others completely banned the service.

Aside from monetizing private cars into ride-sharing services offered around the globe, Uber slowly added a delivery service (UberRUSH) and eventually created an application program interface (API) enabling an Uber button to be added to other organizations' apps (e.g., Facebook, retailers, florists) for delivery options through UberRUSH and UberEATS for food products.

While Uber explored growth in new markets, competitors in its core space were working hard to take market share. Lyft, Uber's major U.S. ride-share rival, had raised $ 1billion in capital and was investing some of it toward discounts and increased marketing efforts while expanding in major cities across the country.

. . .

Keywords: Lean startup, innovation, supply demand, government, regulation, transportation

Suggested Citation

Farris, Paul and Yemen, Gerry and Weiler, Virginia and Ailawadi, Kusum L., Uber Pricing Strategies and Marketing Communications. Darden Case No. UVA-M-0871. Available at SSRN: https://ssrn.com/abstract=2974731

Paul Farris (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-0524 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/farris.htm

Gerry Yemen

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Virginia Weiler

University of Southern Indiana

8600 University Boulevard
Evansville, IN 47712
United States

Kusum L. Ailawadi

Dartmouth College - Tuck School of Business ( email )

100 Tuck Hall
Hanover, NH 03755
United States
603-646-2845 (Phone)
603-646-1308 (Fax)

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