When a new business sees success, other entrepreneurs and companies try to replicate that idea and create their own success story. Uber has become one such success - with the phenomenal popularity and growth they saw, numerous businesses emerged in the on-demand service field. Uber has revolutionized the on-demand economy in such a way that a startup idea can be easily explained as “Uber for X” where X is any service you provide using the Uber model.
Do you also aspire to create an Uber for X?
Lets first try and define the basic principles on which Uber has defined its business model
- Two separate mobile apps - one for customers and one for service providers
- Customers request the service online and receive it offline (in case of Uber) or online (in case of Uber for X)
- Service providers choose whether they will provide the service or not to a specific customer
Here comes the fun part for you - figuring out if your idea can follow this business model and achieve success. First, lets see what category your idea falls in. Uber for X ideas can be divided into some major categories
- Uber for Delivery - deliveries from restaurants, courier services etc. Probably the widest category following the Uber model apart from the one below
- Uber for Home - home care (cleaning, laundry, you get it), repair services, babysitting, dog walking and the likes
- Uber for Health - a lot of apps have come up in this sector - specifically doctor appointments and remote consultations
- Uber for Accommodation - the biggest example for this is AirBnb
- Uber for Others - any other service industry (anything we missed)
Lets explore the business model Uber followed and how Uber of X businesses can use it. We personally like the Strategyzer Business Model Canvas to easily identify the key areas of a company’s business model. If you look at the canvas below, you can see how Uber’s business model combined an amazing product, with great value in a market ripe for disruption to become a huge success.
We’ll tackle all these sections to identify what you should take into consideration for building a successful Uber-like business
1. Value Proposition
Any business can only be successful if it gives benefits to its customers. Uber has two markets of customers - the service consumers (passengers) and providers (drivers). An Uber-for-X business should also concentrate on both sides of the spectrum - and ensure it provides enough value to both parties to generate demand and corresponding supply.
For instance Uber gives customers easy and fast taxi rides, cashless service, luxury cars and at the same time gives drivers additional income and the option to accept or decline a service call.
2. Customer segments
Uber has two groups of users - passengers and drivers. When building an Uber-like business, do ensure that your product provides value to all its user segments. Engage customers to use your product but do ensure you provide appropriate value to each segment. That is why Uber has two apps - one for passengers and one for drivers.
Identifying customers who may want to use your app (and why) will help with categorizing them into segments and also defining your value proposition.
3. Distribution channels
The next step is to identify how you will reach out to customers, attract them and retain them so they keep coming back to your product.
Uber used multiple channels as it grew. A lot of it was traditional methods like website, mobile app, word-of-mouth, social media marketing. One advantage they had was the amount of money they raised - it gave them a lot of media attention which in turn attracted passengers and drivers.
When defining your distribution channels, make sure you take your customer segments into consideration. Each segment might require different channels.
4. Customer relationship
It is important to decide how you would interact with the customer - since this will determine your cost and infrastructure setup to a large extent. Uber has automated the entire process. Passengers don’t need to interact with a physical entity to get a ride, make payment, give feedback - it is all automated through the app or website.
Having a call center where customers can talk to an actual human being is costly and so if you are a start-up, it is best to avoid such a set up. But there might be certain cases where this is unavoidable and an integral part of the platform.
5. Revenue streams
Uber has clearly defined revenue streams - first it charges based on the distance traveled (calculated using GPS). They also have different pricing policies for different levels of service (UberX, Premium Uber etc). Next it also takes surge pricing into consideration - anything that increases the demand for taxis - sporting events, bad weather.
The pricing policies that you use for your business depend on the service it provides - there is no rule of thumb here. But certain principles applied by Uber can be used by your business to drive in revenue - different levels of service, surge pricing, add-ons.
You may also want to offer discounts, coupon codes, initial-customer advantage to drive in more sales.
6. Key activities
Key activities of any business take a little time to define. Considering for how long Uber has been in business, they have streamlined their key activities. And the good thing is this holds true for any Uber-like business. The key activities of such a business would include
- Platform development & maintenance - probably the most cost intensive and important part of the business
- Sales & marketing (including customer acquisition)
- Getting services providers
7. Key resources
The major key resources any Uber-like business would need is the platform to connect consumers and providers and the actual providers themselves. Do bear in mind that the quality of providers your platform provides are key to your success.
Uber also has in place various algorithms like their pricing algorithm or routing algorithm which are also key to their operations.
Apart from these resources, others will vary depending on your business’ value proposition.
Your partners are those entities which will help you perform activities. For Uber, the key partners would include
- the drivers (or service providers for Uber-like businesses)
- various third-party service providers they use - mapping data provider, payment gateways...
- local authorities
9. Cost structure
The final thing to consider is what the business will cost you. There are various costs associated with running an Uber-like business. The major areas of expense you should be prepared for include
- Platform development and maintenance (app, website)
- Sales & marketing
- Salaries (for permanent employees)
- Payments to service providers
- Other overheads (dependent on the business) - legal, administrative etc
On-demand services like Uber can be expensive to build, there are quite a few movable parts involved. It is always a good idea to start with an MVP rolled out to just one geography/locality and then scaling after the model has been validated.
We hope this information was helpful for you to take a step towards creating your own Uber-like service business. If you need a trusted technology partner with considerable experience in developing Uber for X apps, get in touch and lets get started!