'Loyalty will win the taxi wars': Somo co-founder on the stand-off between Uber and London's black cabs
Hackney carriages, or black cabs, are a London institution and have long controlled the local taxi market. Drivers have held the power and riders have been at their mercy; hoping to be able to flag one down in the street or calling a private hire and hoping it shows up, tracking its location only by repeat calls back to the controller.
Since the launch of Uber in 2009, there has been a massive power shift in the market. Passengers are no longer subject to the availability of the Hackney carriage, but now have smartphones that essentially put a taxi in their pocket whenever they need one, in any major city in the world.
Perhaps the most important thing Uber offers passengers is the aggregation of choice. If you’re strapped for cash and eco-conscious, order yourself a Toyota Prius. Entertaining a client? Order yourself a Mercedes and don’t think twice about payment, as they already have your credit card details, the tip is taken care of, and you will have the receipt to expense back to your company already waiting for you in your email. Within a few clicks, the perfect car for you is on its way and you are tracking its journey via GPS, thus never waiting and wondering when it will arrive. This has drastically changed the experience for both drivers and riders in the London taxi market - and the Hackney carriage drivers are not happy about it.
10,000 black cabbies are threatening to wreak havoc across London today, 11 June, in protest of Uber, claiming that the startup’s practices are damaging to their business. What the black cab camp fails to realise is that what Uber is doing - as are Hailo and other competitors - is merely following consumer behaviour patterns, and black cabbies would do well to follow suit.
As a born and bred Londoner, I would be gutted to see the end of the black cab and its global heritage. The fact is, as technology evolves and enables consumers to have more and more choices, old players in traditional markets need to adapt to stay relevant. Black cabs need to embrace the change and rethink the business model to put today’s connected customer at the centre. Driver knowledge alone is no longer the point of differentiation it once was for black cabs.
Contrary to what cabbies may think, Uber has not devalued this knowledge. The original GPS systems such as Garmin and TomTom made them far less relevant years ago. The smartphone has simply been the final twist of the knife, taking the GPS front and centre on the dashboard or putting Google-acquired Waze into the hands of the passenger, arming them with more information than a traditional cab driver would ever have.
Holding on to the monopoly power black cabs once had so tightly is not a viable option. They now need to instead embrace the opportunity here - integrate with Uber, cooperate with Hailo, and become a desirable option for today’s connected customer.
Here in London, Hailo launched as a smartphone solution for the Hackney carriage and is just that - a great solution for calling a black cab. But why is Hailo limiting itself? What will set them apart in the long haul?
Minicab company Addison Lee is another strong contender in the race for market dominance in London with approximately 4,000 cars on the road. They surely can relate to Uber today as they’ve fought Hackney carriages in the past and lost. But with more power behind them, Uber may have greater success in regulatory battles and we can expect Addison Lee to jump on the bandwagon, evolve, and pay attention to consumers to stay relevant.
What will ultimately lead these taxi solutions to success, whether it’s Uber, Hailo, or a revamped black cab, will be a shift in focus from service to loyalty. Yes, Uber has developed a fantastic product. The San Francisco-based startup’s recent $17bn valuation is further evidence of its success. However, there is nothing about it that competitors can’t replicate. In the long run, this becomes a loyalty play - both driver and consumer - and the business that does it best will win.
Uber has focused primarily on equalising supply and demand to optimise profit. While economically sound, that thinking will not create the loyalty it needs to keep both drivers and riders coming back. To create the loyalty it will need to succeed, Uber could initiate a points system, similar to Air Miles or Nectar, where customers get rewarded for taking more trips with them. That may encourage passive users to opt to order an Uber over the many other transport options available to them on any given day.
Drivers are surely motivated by the ability to get more business and make more money, and therefore will follow the demand. However, during nonpeak times when demand is about equal across various taxi services, Uber should be giving drivers a reason to go with them and thus take supply away from other minicab providers. If they instituted a system to reward drivers for taking more trips during these times, they would then have a stronger, more consistent supply base.
Ultimately, black cabs need to realise that it’s up to them – not Uber, Hailo, Addison Lee or other competitors – to maintain their connection with London taxi passengers. Black cabbies would be better served by rethinking their business model instead of disrupting life around London today. It is loyalty that will win the taxi wars in the not-too-distant future (before - let’s face it - taxis are all driverless), and all anyone can do now is try to give Uber a run for their money.
Carl Uminski is co-founder and chief operating officer at Somo.