Take Me for a Ride

The taxi industry in India is booming(or so it would seem). Apps abound and customers are spoilt for choice. TFS, MERU, UBER and OLA are battling it out. But for what, one begs to ask.

The companies are trying to capture customers using promotions. But history shows that promotions are not a source of sustainable competitive advantage. They don't have any of the characteristics of value, rarity, non-imitability and non-substitutability.

And the realities are proving just that. People have apps from all taxi providers (Hey! They're Free!) and use the one that gives the best deal.The best deal usually involves an unrealistically low fare to the customer on common routes. This fare commitment is met by paying the taxi drivers the differential amount from the actual fare. OLA goes a step further and pays the taxi driver 500 for 5 trips in a day, and 900 for 10 trips in a day.

But is building a customer base enough? What is the plan for loyalty building? How is the habit going to be built when a customer is in a picking behaviour? When the buyer has lesser dependence on the seller, loyalty can never be built, And since we started off by "building an app for that" and made these apps free, the dependence is largely non-existent.

Of course, this is only one half of the story. In the other half, the taxi drivers are smart.

1) OLA gives away Huawei phones to taxi drivers. MERU cannot control what phones their taxi drivers own. Neither can OLA mandate that phones dont "run out of charge" at times.
2) One cannot control who downloads one's apps. Taxi drivers themselves download the apps, put in the promo codes and get paid for travelling empty. Rs.150 off implies that at Rs 15 per km, it's a free-ride of 10 km to the taxi driver courtesy of Mssrs. TFS.

One MERU cab driver I was able to observe had the Huawei phone and had downloaded the UBER and the TFS apps on it, He could choose which client to pick up depending on where he wanted to go. If he didnt want the TFS customer, No problem, he calls up a friend who is waiting for a "savaari".

So the taxi app companies find themselves in an unenviable situation where neither their suppliers or their customers find them irreplaceable.

Not everything is bad for everyone though.

MERU has built some sort of dependence on themselves for the taxi drivers - tehir equipment sits in the car and the cabs are painted with the MERU colours - and made a habit for some customers(some combination of 4's and 2's innit?)

OLA has made sure that the taxi driver has to physically have the phone with them to actually bill anything. This means that even if the driver they gave the phone to gives it some other driver friend of his, their purpose is solved. In fact, this is even better since essentially they are able to reach a market they couldn't directly reach before. but they need to act fast to figure out who actually has the phones they gave out and institutionalise them into their own cab booking process.

TFS has also started putting their numbers out there on the cabs with a jingle to match so they're tackling the question of habit building on the customer side.

We should soon see a demarcation of boundaries and some exclusivity clauses coming up in this market on the supply side.  Hyperlocal advertisements and suggestions are another way to increase value to customer.
Phase 1 - attention grabbing - is coming to an end. In phase 2, companies need to tighten the screws on the suppliers and customers. The government regulated price per k.m could act as a very nice place to start for people to implicitly converge on with MCCs with already em-paneled taxi drivers. With no reason for anyone to shift prices lower than the ones on the MCCs, some stability(and sanity) can hope to prevail soon.

I for one am taking them for a ride till then.