MARKETING UBER IN THE HIGHLY REGULATED MARKETPLACE March 2017

Roadblocks and Strategic Marketing Decisions by Uber in , 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, , (“UberSELECT”). In communities with populations 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 and markets. taxicab GENERAL RECOMMENDATIONS: WHAT COULD UBER Taxicab companies might consider the following: AND TAXI COMPANIES DO NOW? • Improving customer service and metrics for service quality Some existing Uber drivers might argue that the • Increasing vehicle comfort and learning about quality of work and revenues are no better than best practices in the retail, banking and travel those associated with driving a regular taxi, but sectors, for example; customers are always besides creating jobs, Uber might consider the willing to pay more for a premium experience, following: better services and safety • Sharing its data from its big data analytic • Eliminating the need for a dispatcher and tools with local city government to improve developing their own platform transportation planning • Implementing a marketing program to develop • Reinvesting some of its profits in local charities repeat customers and thus customer lifetime and giving back where it operates (TELUS’s Day value, rather than one-off transactions of Giving motto We Give Where We Live is a great example!) • Using digital technologies and learning about the wants and needs of millennials and iGen • Engaging in a friendly and open way with all (or Cloud Gen), namely, access, experience and levels of government, not just provincial, and sharing, which appear to replace the concept of demonstrating collaboration with stakeholders, ownership including taxi companies

March 2017 5 • Reviewing the entire cost structure and 3. Launch educational campaigns (surrounding eliminating steps or activities that bring no issues, legislation, service, benefits, myths and value to riders laws). In addition to these general business a. For Uber drivers, dispel the myth that ICBC is recommendations, we have identified three specific not providing insurance. In fact, drivers can marketing ideas that may or may not have been already get ICBC coverage if they have a Class considered by Uber, but which we believe would 4 licence. They can be insured to drive for facilitate Uber’s market entry into Vancouver. Uber in Vancouver.

TOP THREE MARKETING RECOMMENDATIONS b. Increase the number of Uber drivers by FOR UBER creating a taxi driver “switch” campaign to encourage taxi drivers to drive for Uber; 1. View marketing for Uber to include public facilitate market entry by increasing the lobbying and demand generation, combined to supply of qualified drivers showcase voter enthusiasm to change legislation and policies that prohibit Uber’s operation in B.C. c. Start Uber app services in the GVRD and throughout B.C. a. Develop an integrated media campaign (TV, radio, print, social media, etc.) to both register support for Uber and lobby government officials; the cost of this campaign should be equivalent to, or less than, the lost opportunity cost of revenues derived from Uber services in a city or jurisdiction equal to the size of the GVRD or B.C.

b. Dedicate a legislative or lobbying campaign to businesses wanting to partner with or who would benefit from Uber’s market entry (travel & tourism)

2. Create a pre-marketing campaign aimed at Uber users and drivers that funnels them to the mobile app and website to solicit further action.

a. Lobby government and ICBC, as well as their partners and associations

b. Get the public to sign a petition (by riders) to lobby government to change rules

March 2017 6 In conclusion, Uber attempted to enter the rules and bylaws regarding car-sharing services, it Vancouver market without understanding the has failed to develop a comprehensive and focused impact of government-controlled (monopolistic) strategy to enter this highly regulated market. insurance and other legal issues not found in other The authors have provided eight strategic and jurisdictions. While it has attempted to lobby the tactical marketing recommendations for Uber to local city and provincial governments on changing accelerate market entry in the GVRD.

Al Leong is a former contributor to Techvibes. He earned a Bachelor of Commerce in Marketing from UBC; an MBA in Global Management, Strategy Consulting and Technology Innovation from the ; and a Certificate in Managing Complex Product Development Projects from MIT, Sloan School of Management. He has consulted for clients and projects including Adobe, Apple, IBM, Motorola, Disney, Estey-Hoover/Deloitte, IDC/ IDG Canada, Microsoft, Ogilvy & Mather/Direct, Siemens, Sony and the US Department of Defense. If you need consultation or advice, or assistance with developing powerful, elegant and innovative solutions, contact him at 1 604 781 4470 or at [email protected].

Jean Lachapelle is a strategic and hands-on marketing leader with a track record of value creation in the B2B and B2G global market landscape. Quantitative approach to sales, demand generation, competitive strategy analysis, customer mapping and segment selection, branding, product and service positioning. Focused in creating and delivering customer value, ROI and market success in small to large organizations, more recently at TELUS and a number of technology firms in Ottawa, Montreal, Quebec City and Silicon Valley, California. He holds an MBA in Strategy & Marketing from HEC Montréal, a Masters of Engineering from McMaster University, and is a business Coach and Mentor at Futurpreneur Canada and the University of British Columbia.

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