Video is exclusive to members, sign up now to enjoy this and many other features.

Lyft versus Uber: Pricing Strategies

Kapil Agrawal
Former Global Head of Pricing and Strategic Initiatives at Uber

Learning outcomes

  • How Uber can defend their position versus competitors offering drivers lower take rates
  • Potential pricing strategies for Lyft versus Uber
Print

Executive Bio

Kapil Agrawal

Former Global Head of Pricing and Strategic Initiatives at Uber

Kapil joined Uber as the Global Head of Pricing & Strategic Initiatives in 2015 when the business was rapidly growing across developed but also emerging markets. He was responsible for formalising pricing structures across both UberX, UberPOOL and UberEats globally. Kapil left Uber after two years and joined Poshmark, the fast growing social commerce marketplace, as VP of Finance and Corporate Development where he has helped quadruple revenue at the business. Kapil has led $90m of capital raising for growth equity companies and has deep experience scaling marketplace businesses. Read more

View Profile Page

Interview Transcript

Especially in Europe, you have seen some competitors enter the ride business and have a lower take rate and try and, supposedly, give value back to the drivers. What is your view on how Uber could react to those lower take rate competitors?

The good thing about Uber is that they have very deep pockets now. They are a public company; they have $11 billion in cash. In any of those markets, if a competitor comes, they have a deep pocket, to compete with those players. For example, let’s say that a player comes along with 10% take rate and Uber’s take rate is 20%. Firstly, because efficiency on Uber’s platform is around 60% to 70%, the other player, if they are charging 10% take rate, but their efficiency is only 30%, then the drivers will be making the same amount of money on Uber’s platform, as compared to the competitor’s platform.

The other platform, therefore, needs to invest a lot of money to generate the rider-side demand and, unless they have very deep pockets, they will have a tough time to sustain that for a long period of time. But what Uber can do, in this particular case, is if the take rate on the other platform is 10% as opposed to Uber’s of 20%, rather than changing the fundamental structure of the take rate, they can provide a short-term subsidy to the drivers and also short-term promotions to the riders. The battle, between those two players, will continue for a while, until the time that the other players realize that it’s very hard for them to continue to burn the money, against a player who has deep pockets and who has high market share and high efficiency and better technology and infrastructure, to provide a better product and a better service.

So, I think, in Uber’s case, the right strategy would be to continue to execute on your longer-term vision, with a great service, a great product. In the short term, you might have to provide some more incentives and promotions, to compete with the players, so that you can still continue to work towards a certain market share, in that market.

This is where scale actually provides a real competitive advantage for Uber?

Yes, that is correct. I think that is why the market, where, for example, in London or France, or some of the Latin American markets and some of the cities in the US and, let’s say, Didi in China or Grab in South East Asia, if they have certain scale and have a certain market share, it’s very hard to displace that. However, in the US, because, in certain cities, Lyft also has the equivalent market share, that’s why there are a lot more promotions and subsidies for Uber in US marketplaces, which are a bit more competitive. Lyft is also a public company and they also have access to capital.

But yes, if you are in a market where you have achieved scale, where you have significant market share and you have deep pockets, it’s very hard for a competitive player to come and compete with you.

How would you price the ride-hailing business for Lyft?

Sign up to read the full interview and hundreds more.

PARTNER

Speak to Executive

Join waiting list for IP Partner
Did you like this article ?