MARKETING UBER in the HIGHLY REGULATED BRITISH COLUMBIA MARKETPLACE March 2017

MARKETING UBER IN THE HIGHLY REGULATED BRITISH COLUMBIA MARKETPLACE March 2017 Roadblocks and Strategic Marketing Decisions by Uber in Vancouver, BC with Interviews from City Councillor Geoff Meggs, and Uber Public Policy Manager Michael van Hemmen. Authors: Al Leong, MBA and Jean Lachapelle, M.Eng., MBA March 2017 1 Uber’s Attempt To Disrupt Vancouver Stalls Uber’s global expansion met with resistance from taxicab Although the company companies in various cities around the world, including operates in the transportation industry, the folks at Uber Vancouver, Canada. Uber’s technology is innovative but would say that Uber is not a technically not disruptive, as it does not change the way transportation provider, nor does taxi services are provided, but it does create more efficiency. it employ cars and drivers. Uber By contrast, digital photography completely disrupted operates a system, or platform, and destroyed the film and photofinishing industry. And that connects passengers to drivers via smartphone. A ride sharing between cities has been around for at least mobile app sends an email to two decades. Uber’s disruption to the taxi industry may a car, based on the passenger’s come because it bypasses transportation and taxi bylaws, location. Transactions are regulations, and barriers to entry (such as training, fleet automatically billed to the rider, costs and insurance, plus the cost of medallions). who has a credit card on file with Uber, allowing for cashless transactions. The company’s BACKGROUND business model is simple. Uber recruits drivers and pays their Uber’s company story began in December 2008 when Travis Kalanick commercial taxi licence. It then and Garrett Camp went to Paris, France, to attend a LeWeb technology connects those drivers with local conference. When they decided to take a cab, they both realized how rental companies. Drivers receive difficult it was to get one. Shortly after they returned home, they developed passenger requests via the Uber an app for the iPhone that would help people get around. In January 2010, real-time app. Uber’s first prototype test ran in New York City and then San Francisco. For Uber, the strategic and March 2017 2 capital asset management advantages of this model and Bloomberg reported a study from Christopher are significant. The crowdsourced Uber driver bears Knittel, a professor at the MIT Sloan School of the burden of car ownership, maintenance and Management, which found racial discrimination costs. Moreover, Uber owns no fleet, which expands by Uber and Lyft drivers against black passengers and contracts based on supply and demand. Uber (pickup failure).The study found that Uber drivers is the world’s largest taxi company, but it owns no disproportionately cancelled on riders with “black- vehicles. sounding” names, even though the company The company has received billions in funding penalizes drivers who cancel frequently. from numerous investors and venture capitalists. Despite this tremendous success in raising money THE MARKET UNIQUENESS OF VANCOUVER, and its fast expansion plan, Uber has strong BRITISH COLUMBIA competitors in various geographical markets worldwide: Lyft and Curb in the USA, Grab in But what has happened in Vancouver? And, in fact, Southeast Asia (Malaysia, Singapore, Thailand, in the entire province of British Columbia? Vietnam, Indonesia and the Philippines), Ola in Vancouver city councillor Geoff Meggs describes India, and Didi Chuxing in China. the unique situation that Uber faces in B.C. and in the Greater Vancouver Regional District (GVRD). EFFICIENCY—BUT WITH RISKS A primary reason for Uber’s lack of adoption is legal and related to insurance for prospective Uber The Uber system is efficient and cost-effective. Rides drivers; he stated that Uber drivers can’t get insured are requested by customers on the app and drivers throughout B.C. because the Insurance Corporation are crowdsourced using their own personal vehicle. of British Columbia (ICBC), a Crown corporation, has Fares are set by the company, prepaid by customers a legal monopoly on auto insurance in the province. with a credit card or PayPal, and are typically 20% However, drivers can get an insurance policy on to 50% less expensive than those of a taxicab ride. the ICBC website—it just appears to be expensive, Cars are clean, if not cleaner, than taxicabs. Riders and it’s rated at the same class as limousine and cab can select from several types of transportation drivers. options available: cars, minivans and luxury cars Meggs stated, “Unlike Montreal, Ottawa, (“UberSELECT”). In communities with populations Toronto or Edmonton, the City of Vancouver has over 30,000, getting an Uber takes as little as three an overlapping jurisdiction with its provincial to five minutes, depending on the time of day. Fares counterpart. This means that both the city and the are pre-set and prepaid, and routes are mapped province have their rules and requirements, mostly with GPS. Passengers no longer have unscrupulous complementary but not always, in the transportation taxicab drivers who take the long route or drive in sector. For example, the provincial regulators set circles to increase the fare. Assaults on Uber drivers the number of taxis in each jurisdiction and issue are uncommon, since customers must register passenger transportation licences, while the city their identity and have a valid credit card or PayPal adds rules such as a criminal background check and account to get a ride (there’s an audit trail). a chauffeur permit from the Vancouver Police, as well However, as of December 1, 2016, as reported as a low-emission vehicle requirement (which favours by WhosDrivingYou.org, there have been 46 alleged such vehicles as the Toyota Prius). The additional assaults by drivers, 206 alleged sexual assaults and uniqueness of Vancouver, besides the fact that the harassments, 9 alleged kidnappings and 10 deaths. city is not an amalgamated municipality, is that its The BBC reported that an Indian Uber driver was auto insurance is regulated and controlled by the charged and subsequently convicted of rape in 2015, provincial government, i.e., ICBC.” March 2017 3 Furthermore, there are safety and service quality UBER’S RESPONSE concerns regarding Uber drivers. Taxicab companies argue that established During an interview with Michael van Hemmen, protocols for criminal background checks and public policy manager at Uber, we asked specific taxicab driver screening, as well as licensing, questions about the company’s market entry into eliminate these issues of public safety and Vancouver and their approach to marketing in this discrimination. The added cost of licensing unique environment. We asked about their approach (arguably quality control) is included in the taxi to managing not only ICBC and the insurance policy licensing fee, which runs upward of $1 million, issue, but also about lobbying governments to and that’s why a taxicab ride costs almost twice as change rules about insurance. much as one from Uber or Lyft. Councillor Meggs Van Hemmen stated, “So the insurance regime is stated, “The City of Vancouver’s position was that different in B.C. than that in other provinces. From we wanted to move to ride sharing in a way that a policy perspective, the mode that we see best is protected the assets that we feel we have as a result coalitions. It’s one thing for a single company to of the taxi system. So we think there’s some real say, “We want you to change these rules,” but what benefits to it.” He characterized Uber as “very we’re also doing is we’re going around to a variety pleasant people, but the overlying message was of stakeholders, including the Vancouver Board of rude”. Trade, the Suzuki Foundation and other types of The additional regulations from the City of organizations, such as tourism and the cruise ship Vancouver in the tourism sector, as well as in the industry, and highlighting the benefits that this transportation industry, stem from the fact that “the improved urban mobility provides not just for Uber, stakeholders are extra-fussy,” says Meggs. “If there is but for their organizations, their stakeholders and an opportunity for the taxi industry to innovate and society more broadly. As government hears from meet this competition, we would welcome that.” a wide variety of stakeholders that this actually should be done and it should be done sooner rather than later, that’s when government starts to pay more attention and it starts to act.” And when probed about whether he thought marketing efforts in Vancouver were different from those of other jurisdictions that do not have these policy issues, van Hemmen elaborated on the subject. “These challenges arise everywhere. So there’s truth in that. We’re continuing to iterate and evolve products. There’s politics associated. In many ways, it’s the same. When you’re looking to change March 2017 4 or update rules, the way that you encourage that • Proposing a partnership or alliance strategy chance to happen is to engage potential customers with taxi companies to avoid competition, or partners, and in that sense, it is marketing.” which would result in lower wages, as the “You have to remember, we’re a very young success of Uber lies in the promise of always company,” said van Hemmen, who seemed to having passengers suggest that policies, plans and strategies were not • Incorporating a feature on the app to provide fully in place and Uber was learning as it acted, or riders with the option of choosing a standard reacted, to governments

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