Uber Business Model

Uber Business Model – How Does Uber Work?

For those of you yet to jump on the Uber bandwagon, you may be wondering how it all works and what is Uber business model? The majority of Uber’s valuation ($70 billion) comes from the fact that it operates in a growing industry. The ride-hailing market in the United States is expected to reach an annual value of $285 billion by 2030. That’s a lot of growth!

Uber has proven to be one of the most prominent and revolutionary transportation services worldwide leading to a plethora of questions being raised about Uber’s revenue model. A taxi arriving at your doorstep just by a few clicks on your smartphone must have sounded insane to everybody 20 years back but today Uber has converted this luxurious dream into a successful reality.

Uber runs on an on-demand business model and has generated a wave of curiosity around young entrepreneurial brains to learn about this model. Being a two-sided marketplace actively connecting drivers and riders, Uber never fails to disappoint its clients in terms of services.

Uber Business Model Explained

Now that Uber is one of the few tech companies to be valued at over $70 billion, Uber has started to broaden its spectrum and has added sub-branches like Uber eats-food delivery application and Uber Freight- on-demand truck services app under its umbrella.

Let us take you through Uber’s dynamic business model.

How Uber’s revenue generation model works?

Uber Revenue Model

Uber in the simplest terms is an on-demand transportation service. So, whenever a person travels in an Uber cab, he/she pays the uber driver right away and that becomes the major source of revenue for Uber just like other taxi giants in the market, but what makes Uber so extraordinarily successful is the client base it has established. Imagine 1 million people traveling in Uber cabs! The numbers are scaling heights and Uber’s customer delight acts as a cherry on the cake.

Now let us take you down the lane of how Uber uses different techniques to generate revenue:

  • Surge pricing techniques

Surging prices or a drastic hype in cab prices as soon as the demand for cabs increases is termed surge pricing. Surge pricing is not new to us, we see it all around us rather it be a surge in food delivery prices during peak festive seasons or it is a surge in fruit prices according to seasons. Uber surges prices during peak hours to generate extra revenue for its partner drivers as well as their own selves.

  • Cancellation fee

Uber has a strict mechanism of fining its riders with a cancellation fee if a passenger cancels their ride after a considerable amount of time of booking a cab. This cancellation fee compensates for the driver’s time wasted and also generates extra revenue for the company. But then again, Uber has a really passenger-friendly client base and allows its users to report an issue if they think the cancellation fee is unjustified.

  • Customization available when choosing cars for your ride

Uber doesn’t have any specific clientele to cater to; rather it caters to every rider equally, hence Uber has a wide range of options available when one chooses his/her ride. Ranging from luxurious SUVs to pocket-friendly bike ride services, Uber has catered to people from every financial background.

  • Luxury ride options

Uber offers premium rides to its users in luxurious sedans as well as SUVs.These expensive travelling options help Uber mint much more money by generating great profits.

Uber’s Value propositions for its customers

Uber Value propositions

Uber initially analysed what needs to be improved in local taxi chains and identified the pain points of passengers travelling through taxis everyday before launching a user-friendly platform that eliminates all their worries,

Uber has worked immensely hard on every tiny detail, for instance, as soon as a user opens the Uber application, its homepage smoothly delivers the message of simplicity to its clients and that is the main objective of Uber, to establish itself as a brand that promotes simple living.

A few points that attracted people to shift from local taxis to Uber taxis are mentioned below:

  • It eliminates the trend of waiting for taxis to arrive and alternatively provides passengers to decide when to and where to call a cab to.
  • Its fixed and budget-friendly prices are a boon for its users as well, users who cannot opt to buy a car have easily shifted to online taxi services.
  • Easy payment options with options to pay through digital wallets as well. Uber has made its payment scenario really flexible with the inclusion of online payment options with cash payments.
  • Discounts and offers from time to time. Uber never fails to surprise its users with discount coupons and free rides and that is the reason for increased engagement on the application.

Uber’s value proposition for its drivers

Uber’s value proposition for its drivers - Uber Business Model

For people looking for a source of income in adverse times to students looking for part time income, Uber provides employment at large scale to people who possess decent driving skills.

  • Flexible working hours with no hard and fast timings to comply with.

Uber allows its drivers to work according to their schedule with no 9 to 5 working environment. So, work full time or part-time, Uber supports both patterns.

  • Easy to receive payments.

Uber drivers have a bunch of options through which they can receive payments from their passengers. All these payment gateways are hassle free and trustworthy with minimal failures.

  • Driving enthusiasts can easily convert their hobby into a working profession.They can earn while pursuing what they love! What more can a person ask for!
  • Uber provides its drivers the option to accept or reject a ride according to their will. No Uber policy forces drivers to fulfill specific targets or take specific rides, so drivers have a leverage to choose for themselves.

What makes Uber exceptionally successful?

One might ask that Uber isn’t the only online transportation service running in the market but it still dominates the majority of the transportation market today. Why?

There are a few pointers in this answer and let us go through a few of them

  • Uber passionately found solutions for existing real world problems.

Rather it is tackling problems faced by local taxi chains or it is using AI and technology in the best form, Uber did a commendable job. Anything that eases people of their sufferings is labeled as a godsend and the same happened with Uber.

  • Never settling and always improving attitude

Uber has an ever-growing notion and doesn’t settle when it reaches heights. The founders very well know the importance of regular importance in these times when the competition is breathtaking in every field. The launch of Uber eats is one of the best examples to put forward this point, even though Uber was achieving laurels at every place they went but still, the team was determined to work harder for the people.

  • Early marketing strategies

Uber adopted mass marketing strategies since its very launch in San Fransisco. It offered initial discounts and always kept its pricing at a lower edge as compared to other taxi services. Doorstep pickup and drop also added to its success rate because going to parties and offices wasn’t a task anymore.

  • Reference marketing

Uber made its client experience so memorable that everybody started using Uber through somebody’s recommendation or experience. Uber’s word-of-mouth advertising did the magic in the initial stage.

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