Essay: eCabs market analysis (taxis)

Market Analysis
According to The Department of Transport, there are 285,400 licensed taxi cabs on the road in the United Kingdom. 74% are private hire vehicles (PHV’s) which require advanced booking and the other 26% are licensed to pick up passengers at the road side without the need to book e.g. Hackney carriages (Khamkar, 2018). In November 2018, Ibis World published results from research they conducted estimating that the UK taxi industry is worth £9.7 billion, with an annual growth of 2.1% (Ibis World, 2018).
Competitors – Market Segmentation
The way the taxi industry is segmented within the UK suggests that Uber is the market leader, for price and quality. However, each company has introduced something new into the market in order to challenge that.
Addison Lee app – ‘premium transport for your business and personal needs’ Addison Lee focuses primarily on premium travel (Addison Lee, 2018).
Gett app – ‘Driven by Quality’ Gett boasts that they have the highest rated drivers, that arrive 3 minutes quicker than Uber, free rides for recommending friends, with various taxi and payment options (Gett, 2018).
Kabbee app – Kabbee’s website focusses mainly on airport runs ‘Airport rides don’t need to be Uber expensive’ whilst highlighting payment options, the reliability and fixed, cheap fares (Kabbee, 2018).
MyTaxi app – gives a customer the ability to book taxi’s in 500 cities across Europe. Much like Uber, drivers can be tracked and receipts are sent to a customers inbox once the journey has been completed (MyTaxi, 2018).
Taxi companies within the UK currently adapt a red ocean strategy. There is no real differentiation throughout the market (Blue Ocean, 2018). However, is this due to the fact that there is no real demand for change. Do customers just want to get from A to B safely and for a reasonable price or is there a potential market for something different?
Porter’s competitive strategy states that in order to achieve an above average income in a competitive industry, a business needs to obtain sustainable competitive advantage. This is achieved by focussing on:
Cost Leadership – This is a strategy which enables a company to become the market leader based on providing customers products and/or services at a lower price. This would need to be sustainable for the business in order to become profitable.
Differentiation – A company that brings something new to a specific market can then charge a premium price for this product and in turn become a leading competitor.
Focus – This strategy is most effective within a small segment of an industry containing narrow competition. The product or service offered is exclusively for this group and rules out others (Cambridge, 2018).
(Porter, 1985)
Customer Analysis
Using market orientation theory, which seeks the wants and needs of customers. Below features research based around consumer behaviour regarding the main taxi booking applications within the UK The Google Play Store provides a download counter for featured apps, from this data, popularity can be gaged featuring companies from the main competition mentioned previously.
See below:
(Google Play Store, 2018) Data accurate as of 8th November 2018.
It is evident from this data that Uber is currently the stand out market leader. With the second rival Gett reaching only 10% of the downloads of Uber. If Uber is broken down further, the app is operational in over 65 countries, over 15 million trips are completed each day, well over 5bn trips have been completed worldwide since was established in 2009 and the main demographic is 18-24 year olds (Iqbal, 2018). Since Uber was introduced to the UK private hire taxi bookings have increased by almost 25k each financial year.
(Titcomb, 2017)
Market Research
Based on analysis conducted, qualitative research was carried out in the form of a questionnaire. The questionnaire was sent out to a convenient sample of people, in the form of social media account followers on Facebook and Twitter, in addition to email questionnaires sent to work colleagues. This questionnaire was created to gain greater understanding of consumer demand, with the hopes of receiving a range of responses back. This method would either confirm or challenge current assumptions around the taxi market within the UK.
The main limitations of this questionnaire would potentially be timing and response rates. Statistically, only 33% of email questionnaires are returned, as they are easily ignored (Lindermann, 2018). In addition, there are only a few months to collate, analyse and interpret the data so there could potentially be less response rates that needed to draw up reliable conclusions. However, in order to tackle this the questionnaire was kept to three short questions and some data is better than no data in order to penetrate the market from a successful angle.
Findings
The results from the surveys collected suggest that cost is the priority when booking a taxi. However, this could be due to receiving just 42 responses, mainly from 25-34 year olds. For the results to be completely reliable, it is recommended that the same size be increased and more varied i.e. various ages, backgrounds, job roles, locations etc. This research could also be expanded into the industry, questions could be adapted to represent the staff to penetrate the market by appealing to staff as well as customers. However, the results collected are a a good source of information for this purpose.
In conjunction with market, competitor and customer analysis. An external analysis has also been completed on the taxi industry, see appendix 1 environmental. It is well known that electric cars are not only great for emissions reduction but also cost. On average, it costs £69.85 in the UK to fill a ‘medium’ 55 litre petrol tank – which can fluctuate based on the location and price of petrol see appendix 3 (BBC, 2018). Diesel costs even more to fill and arguably produces higher emissions than petrol, hence the introduction of London’s low emissions zone, which will be introduced in April 2019. With the aim of reducing emissions, high polluting diesel vehicles will be subject to charges when entering London’s low emissions zones. (Nieuwenhuis, 2018).
The combination of higher fuel prices, vehicle tax price rises and London’s low emissions zone. There has been a significant rise in electric cars within the UK, now accounting for 1 in every 12 new cars purchased and ‘The Society of Motor Manufacturers and Traders (SMMT) said hybrid, plug-in hybrid and pure electric cars made up 8% of the overall market’ (BBC,2018). This figure is only expected to rise.
To conclude:
The taxi industry is extremely competitive and whilst companies attempt to differentiate themselves, it is a difficult task, as it is essentially taking customers from A to B.
Customers main priorities when booking a taxi are price and convenience i.e. a user friendly app that allows customers to see their booked taxi on a map, notifications updating them of the journey, driver ratings and a variety of payment options.
The environment is a worldwide issue at the moment through all industries. Campaigners who are passionate about this topic are pushing for businesses to do more to prevent more damage to our earth.
Therefore, an angle into this market would be eCabs. An economical solution that would benefit not just the environment, but also the customer. Using only electric cars, this would help reduce pollution in areas such as London and reduce the cost dramatically as charging an electric car is considerably cheaper than petrol and diesel. In addition to this, a loyalty scheme would be appealing as no other platform offers this type of reward program – which has proven effective for other businesses such as coffee shops and restaurants.
Mission Statement
“Saving the world, whilst saving you money”
Pricing & People
According to the GOV website petrol prices range from 11.9 ppm to 22.1 ppm and diesel ranges from 10.1 ppm to 13.7 pp – depending on engine size (GOV.co.uk, 2018).
In contrast an electric car costs just around £4.92 to fully charge and correlated to 2ppm (Greenage, 2017).
The reduction in costs for electric cars would allow eCabs to adapt a market pricing penetrating strategy and allow the driver to take home a larger portion of the fare cost. As, there are over 40,000 Uber drivers that are operational within the UK. ’Uber claims that on average drivers could make around £565 for a 35-45 hour week, and that’s after it takes its 20% ‘service fee’ (though drivers who signed up after April 24 2016 have to pay 25%).’  In addition to this, drivers need to think about insurance, petrol costs, car maintenance, own a car that is no more than 5 years old and mobile data (Love Money, 2018). If eCabs reduced the journey cost for the customer, charged the driver just 10% of the journey fee then this would appeal to both the customer and drivers.
Process & Promotion
eCabs must provide a user friendly app, with fare estimates, payment options, driver tracking and ratings. Uber are a great example of this. In addition, loyalty discounts, in which every 10th ride is free (up to the cost of the average of the last 9 rides). Promotion would also include discounts for referring a friend i.e. £5 free credit for you and a friend signing up to the app.
(Knotko, 2018)
KPI’s
For eCabs to achieve within the first year:
200 drivers using the app
500 trips completed
These KPI’s will grow over time and will adjust with how the market welcomes eCabs.