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Lyft’s Business Model: Exploiting an Existing Competitor’s Weakness

Putting Out Your Digital Thumb; Lyft Aims to Bring New Meaning to ‘Catching A Ride’

A few weeks ago, we profiled new cab provider UberCab, which is quickly gaining a dedicated following in cities around America and Europe with its alternative, intuitive cab services.  With an integrated mobile approach, geared toward removing the guesswork usually involved in catching a cab in a major city, UberCab has latched on to the need in this struggling economy for cheap rides and convenient pickups, especially for suburban commuters looking for an alternative to unreliable or cost-prohibitive public transportation.

Uber

Learning from Uber Mistakes

However, Uber is just one small fish in a pond that seems to grow larger with each new interested user.  One of the more exciting and innovative options jumping into the crowdsourcing ridesharing game (unwieldy term, I know) is Lyft, another startup focusing on getting people rides cheaply and easily, in urban areas specifically.  However, Lyft has avoided the headaches and hangups that have been delaying Uber, specifically because Lyft has removed one major element from the Uber business model – the cabs and limousines themselves. 

Instead, Lyft chooses to connect users who have cars or carseats to share, with other users who are looking for a cheaper, more convenient, and easy-to-access-through-mobile platform for finding their own rides to work.  Lyft has expanded from an initial unveiling in San Francisco (we know, another exciting start-up from the San Francisco/Silicon Valley cradle of digital civilization, borrrrrring) to Seattle, Los Angeles, and more recently, my hometown of Chicago.

lyft_905

The model remains essentially the same as Uber, allowing users to summon cars to their current location and pay via their smartphone, but the main difference is the cars themselves.  They are piloted by users operating their personal vehicles, and the cost per ride is determined by the rider and the driver (although Lyft will send a suggested donation recommendation determined by the distance of the ride).

Certainly, while the benefits of this type of business model allow Lyft to position itself as a very real and very enticing alternative to cab-reliant services like Uber, it’s time for us to examine Lyft using our patented SWOT analysis and find out what it is about Lyft that we can take back to our ventures and businesses:

 

The S.W.O.T. Analysis

Strengths

  • Removal of union and city contract issues that have plagued Uber. Drivers using personal cars allow Lyft to circumvent this constant inhibitor to business growth
  • Intuitive and innovative marketing approach, including mustachioed cars (yes, Lyft cars have giant mustaches on the front) and social rollout similar to the process utilized by Spotify, Google Plus, and others in the past.
  • Benefits not only for those who need rides, but also for those who can make extra money by fulfilling the need for rides. (The essential component of service networking)

Weaknesses

  • Liability issues.  Background checks/oversight of drivers still won’t answer concerns about rider injuries, payment issues, safety issues, and reliability issues.
  • Legal issues remain.  The network essentially turns drivers into gypsy cabs, which have been maligned and pursued in major cities for years as illegal and threatening to unionized cabs and services.
  • Market cap.  Since money being paid for fares is going largely to drivers, Lyft’s profit on each ride is currently limited.

Opportunities

  • Subscription services, or scheduled rides.  By engaging users in subscribing to the service, or committing to consistent rides over an extended period of time (daily, weekly, monthly), the company can generate the type of consistent revenue that can allow the model to explode.
  • Plenty of places to expand.  As Uber, Lyft’s major rival, has only expanded through the U.S. and London, Lyft still has the opportunity to introduce its business model and services in advance of competitors/alternatives.
  • Party buses, pickup trucks, etc.  If Lyft can begin to differentiate the types of “rides” available, consumer interest will grow as customers explore new options for Lyft.

Threats

  • Competition from Uber, as well as other new ridesharing startups.  Lyft must establish itself as reliable and profitable in as large a market as possible before competitors encroach.
  • The liability issues, along with potentially destructive press from the wide array of situations that can arise in the model, leave danger signs for Lyft’s future growth.

 

Lift Up Your Own Business Using the Lyft Model

Sure, the innovative approach Lyft has to identifying an existing demand in current markets and responding to it is perhaps the most essential component of Lyft’s future growth and success.  However, for we entrepreneurs and innovators always looking for best practices and methods in entrepreneurship, Lyft provides several clear takeaways for us to apply to our own business.

We have written about this before here, and it may seem intuitive to many of us, but one of the most important strategies Lyft put into practice while attempting to break into an emerging market was to identify an existing competitor’s weakness, and exploit it fully.  By removing the cab/limo element of the Uber business model, Lyft is able to circumvent from the outset the very problems that have dogged Uber’s expansion throughout the rival company’s young history.

While certainly a whole new slew of potential problems arises from this approach, notably the necessity for Lyft to experience its own problems and liability issues, Lyft also manages to present itself as a viable and innovative alternative to its largest competitor no matter where it launches.

Aside from this, another key takeaway for us from Lyft has been the effectiveness of intuitive social media marketing and contests as a means for rocket-launching our businesses to the forefront of the industries we are attempting to break into and dominate.  Slick marketing, puns, eye-catching visual ads, clever slogans, slightly inappropriate branding; all of these are elements that have helped Lyft gain traction and notice in the four cities it currently resides.  No matter how established a proven competitor, an effective and engaging viral media campaign can make up for millions of dollars in advertising by generating organic interest and a dedicated following, even before the launch of a product or service.

Go cash in on today,

 

 

Adam

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Adam Hausman is a capitalist and educator of many ventures. His ventures include ClickChores.com, a micro task service network, as well freelance work with sites like TabletLeader.com. Adam is particularly interested in the continued growth of the service networking economy, which is connecting people to share resources and skills and make life easier collectively. His own current ventures, as well as new ones he and his former roommates at Indiana University and the University of Illinois-Chicago are scheming on now, are trying to grab a piece of this emerging market.

  • Manup

    Listen to the union hack talk about rules and regulations like he actually gives a damn!!!!! He couldn’t care less about the customers. This is a great idea and makes things cheaper for the customer!!!!

    • Mylk.me

      As for the “end of shift” problem, those old milks were
      plagued by a needless government regulation called the “expiration
      date.” I mean, come on, am I right! Mylk replaces this
      apparatchik mentality with a rating system — if you unfortunately
      receive spoiled milk through our service, you are free to pay as
      little (or nothing) for it as you like, and you can rate your Mylk
      experience, which assures that only quality Mylk will come your way
      in the future!

      Try Mylk! Then Share It With Your Friends! ™

      • Manup

        huh you lost me at Mylk?

        • Mylk.me

          Mylk is a platform that allows friends to share milk and milk-like substances. If, like many others, you are fed up with the meaningless and outdated restrictions imposed by government regulators who are hopelessly in bed with the mafia-esque dairy industry, you should check out Mylk!

          Check out our YouTube ad for more info:

          https://www.youtube.com/watch?v=m9aqrAngmvE

        • Anonymous

          He’s a mentally ill state worshipping faggot, who believes it entirely acceptable for the government to send SWAT teams against peaceful Amish people for selling raw milk.
          DEATH TO GOVERNMENT WORSHIPPERS. DEATH TO POLICE THUGS.

      • Anonymous

        God I can’t wait to kill people like you.

  • Onlineguru

    Smart but I see some liability issues arising still. What happens if someone gets picked up and then injured in an accident at the driver’s fault? Do they have an online opt in message that clears Lyft of any fault?

    • Dylanator

      You would think they would have that angle covered by their legal.

      • Onlineguru

        You would think

    • You are riding on the drivers personal insurance.. the screwed up thing.. these companies put the liability of insurance on the driver.. if the passenger tells the insurance company the ride was “paid” – donation or fare(lyft or uberx or sidecar.. a paid ride is a paid ride no matter what buzz word you use) the ride would be fraud and the drop down $1mm policies these companies provide would be null and voice. Uber claims the policy is drop down.. which still leaves the driver responsible for comp/collision.. everything but liability.. he will end up paying your medical bills the rest of his life if anything happened.. the insurance companies all state any fare ride is fraud.. the companies need to create a NEW insurance plan for personal use which will cover ride sharing.. a “citizin taxi” insurance plan.. the companies claim its full legal. but I high disagree and I am waiting for a airbnb like accident to bust open these companies .. and maybe then we can find out who Lyft/Sidecar, etc uses for their unknown insurance carrier.. notice there is only two kindergarden like lines about the safety insurance on the websites.. all the websites are is pretty much a download lander.. people don’t even read the TOS.. I asked almost every passenger.. nobody read it.. just downloaded the app and got into a car.. Kool aid drinkers.. look at the paperwork you need to sign when you rent a car.. transportation is no joke.. and people just download the app and dont read and hop in..

      • Onlineguru

        Makes sense

      • Onlineguru

        It tells us that’s what people want though. But the driver’s must have commercial operator insurance or some sort? Some sort of business insurance.

        • Danger_zone

          Loaded with liability for the drivers, but is it the fault of an application telling you where to find a driver? Shouldn’t be that’s for sure. Unless it was criminal then they would be an accomplice but it clearly isn’t that.

          • ClaimsAdjuster

            Behind the application is a well funded company that recruits drivers to be dispatched. They screen the driver, approve the vehicle and accept non-commercial insurance that they know will not cover running a taxi service.

        • ClaimsAdjuster

          No, most of these vehicles are covered by non-commercial insurance which excludes running a taxi service. The vehicle owners hide what they are doing with their cars from their insurer because their policies will be cancelled and any claims submitted denied if their insurance company finds out what the drivers are up to. This is the insurance fraud that is at the heart of this “innovative” business model.

  • Dylanator

    I just wish companies like Lyft and Uber were free to run their businesses as is so long as they abide within the law. The people who win when companies creative like Lyft and Uber are allowed to grow are the consumers anyway.

    • Libsbegone

      Ya me too. It’s called a free market. Novel concept.

      • Mylk.me

        Thank you, Lisbegone! We at Mylk — Whole-Heartedly ™ — agree! In fact we know from a recent seance that Ayn Rand would have been a Mylker! Take that, Moober and Sidecow!

        Free the Market! And Free the Mylk!

  • Mylk.me

    The author of this article has fallen for a parody – “Lyft,” the “crowd-sharing” taxi service, although quite funny! is nothing more than an internet “joke” based on the real milk-sharing application, Mylk.

    “Lyft’s” online antics are sometimes pretty funny, we’ll admit. But in all seriousness, we want to ensure readers that the outrageous claims made by “Lyft” and its preposterous “taxi” service, bear no relation to the real, very safe, and completely vetted service provided by Mylk.

    Mylk ™ is a platform allowing friends and friend-like persons to share milk and milk-like substances. Sound amazing? It is! Mylk is at the forefront of the milk-sharing revolution which is transforming the way we drink milky liquids. Technology today means NO MORE NEED for regulation! No more silly “pasteurization” or “expiration dates”! Plus, you can now share milk with regular, everyday people! Not some crazy, possibly metallic “milk-man” (??) !!!

    DISCLAIMER: Mylk does not represent its product as actual milk. You and those you share Mylk with accept all risks of the transaction including obesity, weight loss, heart palpitations, sudden death, slow death, and death from radiation poisoning. For a full list, see mylk.me/terms.

  • Mylk.me

    Unfortunately, Time also fell for the “Lyft” parody. It is actually Mylk which has raised this money, a sign of the brave gamble which our VC friends are willing to make against the waning power of the Dairy Mafia.

  • Uhmm this article is off man.. you are comparing apples to oranges.. UberX would be apples to apples.. and Uber will smoke Lyft as far as safety, quality of cars, and has an extra $1mm of insurance when you have 4-5 people in your vehicle.. on top of the fact the company regulates its drivers better on UberX, i.e. blocking the airport, not sending drivers in the taxi lines(when P2P drivers cant even pick up off the street), and is averaging almost double per average ride in fares.

    • Dylanator

      that’s good insight Brett. Uber does seem to me to be the more professional of the two.

  • ClaimsAdjuster

    UberX, Sidecar, Lyft dispatch private cars to pick up passengers. Most of these vehicles are covered by non-commercial insurance which excludes running a taxi service. The vehicle owners hide what they are doing with their cars from their insurer because their policies will be cancelled and any claims submitted denied if their insurance company finds out what the drivers are up to. This is the insurance fraud that is at the heart of this “innovative” business model.

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