The aim of this article is to analyze the seven P’s in the marketing mix of Lyft, a popular ride-sharing app. The services marketing mix is an extension of the four Ps of the product marketing mix. Apart from the first four Ps – Product, Place, Price, and Promotion, three more Ps are included in the services marketing mix – People, Processes, and Physical evidence. This helps offer a more thorough analysis of the services marketing mix. The pricing of services is generally more complex because of their intangible nature.
While technological evolution in the 21st century has led to an explosion of new categories of services, marketing has also evolved a lot with the advancement of digital technology. Lyft is a popular ride-sharing app, serving customers in the US and Canada. In this article, we will focus on the seven Ps and how each one affects the demand and popularity of the app among its customers. The article will also include suggestions to improve the app’s marketing for superior results and after expansion. The ride-sharing market has also received a strong blow due to the pandemic. The article will also analyze how Lyft will address key forthcoming challenges.
| About Lyft: | |
| Type | Public |
|---|---|
| Traded as | Nasdaq: LYFT (Class A) |
| Industry | Ride-hailing |
| Founded | June 9, 2012; 8 years ago (as Zimride) |
| Founders | Logan Green John Zimmer |
| Headquarters | San Francisco, California, U.S. |
| Area served | United States, Canada |
| Key people | Logan Green, CEO John Zimmer, President Brian Roberts, CFO |
| Revenue | US$3.616 billion (2019) |
| Operating Loss | US$(2.702 billion) (2019) |
| Net Loss | US$(2.602 billion )(2019) |
| Total Assets | US$5.691 billion (2019) |
| Total Equity | US$2.854 billion (2019) |
| Top Investor | Rakuten (11%) |
| Number of employees | 5,683 (2020) |
| Subsidiaries | Motivate |
| Website | lyft.com |
Lyft’s Business: An Introduction
Lyft (NASDAQ: LYFT) was founded in 2012. The company is headquartered in the San Francisco Bay area in California, United States. It is among the fastest-growing transportation networks in the US and Canada. Since its launch, the company has expanded its transportation offerings for riders including individuals and corporate customers across all sectors. Lyft’s mission is to “improve people’s lives with the world’s best transportation”.
In 2019, the company experienced sharp growth in the number of active riders. The total number of Lyft Active riders during the fourth quarter of 2019 was 22.9 million, having risen from 18.6 million in 2018 during the same period the previous year (Pratap, 2019). The number of active riders fell in the second and third quarters of 2020 but is expected to rise again as the pandemic’s effect comes under control in the US and Canadian markets.
Lyft’s growth has been driven by the increased use of digital apps, changing lifestyles of people, and a transition from car ownership to transportation as a service. The company has experienced a significant jump in its net revenue during the past four years. From 2016 to 2019, Lyft’s net revenue jumped by more than ten times. However, the company has not been able to generate a positive net income yet (investor. Lyft, 2019).
The following sections of this article analyze the seven Ps in the marketing mix of Lyft and how each one of them plays a vital role in the marketing of the brand and has helped it find faster growth in the markets where it operates.
Product Mix:
The product mix in the case of a services company means the services portfolio of the company. Moreover, services are heterogeneous, intangible, and perishable. The production and consumption of services mostly happen together (Lumen Learning 2021).
Lyft is a leading provider of transportation solutions in the United States and Canada. It runs multimodal transportation networks in the US and Canada offering customers in the two markets access to a variety of transportation options through its online platform and mobile apps.
Lyft basically connects the drivers with riders needing a ride. The company launched a peer to peer marketplace in 2012 and since then it has continued to expand its offerings for customers in the United States and Canada.
Lyft offers its services through an app. The app provides access to a variety of offerings that suit the diverse transportation needs of customers. Lyft has designed its app to be fast, simple and purposeful. When a rider opens the app, all the rides available in his location are shown in a unified experience including scooters, bikes, public transit, car rentals, Shared and Shared Saver Rides, regular rides, big rides, and more.
Lyft Subscription Plans and Ride Passes:
Lyft also offers ride subscription plans and ride passes to help its drivers find new earnings opportunities and to cater to the diverse range of riders’ budgets. The company released a new membership program called Lyft Pink that allows its riders to unlock more from their memberships. Some of the main benefits of this subscription program include 15% savings on all car rides, priority airport pickups, surprise offers, and relaxed cancellations. This subscription program is for the riders that take at least 2 to three rides every week and want to make the most of their time and money. The subscription price for the Pink riders is only $19.99 per month and it auto renews each month (Lyft Blog, 2019).
LYFT Business:
Lyft has also introduced transportation solutions for small and large businesses across various industry sectors including corporate, healthcare, auto, education and government. In case of ground transportation, there is no one solution that can fit the needs of people across all industry sectors since transportations needs and habits of people in each sector can vary. Lyft has introduced customized solutions that cater to the needs of people working across diverse industry sectors. It allows companies to manage their transportation costs more effectively and drive employee satisfaction higher. It offers a comprehensive set of solutions that allows companies to design, manage and pay for their own and customized transportation programs. Some of the leading benefits of this offering for businesses include reduced operating expenses, time savings, higher employee productivity and satisfaction, and streamlined operations. Clients across various industries are benefiting from tailored solutions offered by Lyft. Some of Lyft’s business clients include Salesforce, AARP, SCL Health, Denver Health and Paul Quinn College (LyftBusiness, 2021).
Corporate Business Travel:
Lyft also partners with leading travel and expense management companies like SAP Concur, Certify and Expensify to offer its corporate clients a seamless travelling experience (Arrowsmith, 2017).
Concierge:-
Lyft originally developed Concierge to assist healthcare organizations. Now organizations of all types and sizes use the Lyft Concierge program to access the Lyft Network and request or schedule rides for other people. To improve its services directed at healthcare organizations, the company partnered with Epic, a leading Electronic Health Record (EHR), that the majority of hospitals and medical schools in the US use (LyftBlog, 2020). Lyft for Epic integrates Lyft Concierge directly into Epic and makes it easier for healthcare staff to order a Lyft ride for a patient.
Enterprise Programs:-
Lyft offers several enterprise programs, including monthly ride credits for daily commutes, supplementing public transit by providing rides for the first and last leg of commute trips, late-night rides home and shuttle replacement rides. Companies including Slack offer their employees Lyft credits to ensure hasslefree and convenient late night trips from the office.
Lyft for Events:
Lyft also offers customized transportation solutions for events like recruitment events, meetings, celebrations, office retreats, and other events. Organizations or individuals that are using Lyft for events can create in-app experiences and custom codes for their attendees to ride to and from events.
Lyft Up:-
Through Lyft Up, Lyft ensures that everyone has access to affordable transportation regardless of his age, income or zip code. The company built Lyft Up to support the marginalized communities mainly. LyftUp partners with leading non profit organizations to provide access to free or discounted car, bike and scooter rides for the individuals and families in need.
Lyft’s transportation network offers its riders seamless, ondemand and personalized access to a variety of mobility options.
Lyft’s transportation network: –
Ridesharing marketplace:
Lyft’s core offering since its foundation is the ridesharing marketplace. It has been connecting drivers with riders needing to go somewhere since 2012. Through its large scale network, the company is able to anticipate demand better and incentivize the drivers to remain available at the right point of time at the right places to help riders in need reach their destinations. Drivers are on one side of the marketplace and on the other are the riders. The market place creates earning opportunities for the drivers on the one hand and provides convenient rides for riders all around the world. Lyft’s ridesharing marketplace connects drivers and riders across cities in the US and in select cities across Canada.
Bikes and scooters:-
Lyft also offers bikes and scooters for riders looking for lower priced and more active rides. Riders often look for bikes and scooters for short rides covering smaller trips.
Lyft became the largest provider of bike sharing services after its acquisition of Motivate in 2018 (Small, 2018). Motivate is a NewYork based bike sharing company that operates its business in some of the US cities experiencing densest traffic. Lyft renamed Motivate Lyft Bikes. Lyft bikes and scooters are available in nine major cities in the United States. It operates its bike sharing system in partnership with cities and local governments across the country (Lyft, 2019).
Public transit:
Lyft’s public transit offering is available only in select cities and is not monetized by the company. This offering is aimed at helping the riders find available public transit routes and channels to their destinations. It is available in eight major US cities and offers real time public transit information to users. The offering is designed to increase user engagement on the Lyft app.
Autonomous vehicles:
Lyft has formed strategic partnerships with Waymo and Aptiv to offer riders access to autonomous vehicles. The company entered into an open platform partnership with Aptiv that enabled it to commercially deploy a fleet of autonomous vehicles on its platform in Las Vegas. Since January 2018 and by the end of fiscal 2019, Lyft had facilitated more than 100,000 rides of autonomous vehicles with a safety driver (Lyft Annual Report, 2019).
Lyft Rentals:
Lyft started testing car rentals for riders in 2019. The company also offers Express Drive, a car rental program for drivers that want to drive for Lyft but do not own a car that matches the platform’s requirements. Lyft Rentals is available in two metropolitan areas. It is an attractive option for riders on long-distance trips like those going away on a weekend.
Place Mix:
Lyft offers its services in Canada and the United States. However, the company has more than 100 offices in the US, Canada and additional locations around the world (Lyft Annual Report, 2019). The company headquarters are located in San Francisco, California. Additionally, it has offices in multiple locations in the U.S. and internationally in London, United Kingdom, Montreal, Canada, Munich, Germany and Minsk, Belarus. The company has more than 50 driver hubs and field locations in the US and Canada to support drivers and local business operations.
Price Mix:
Lyft generates most of its revenue from its ridesharing marketplace connecting drivers with riders. The company charges commissions and fees from drivers in exchange for using the company’s marketplace. When drivers complete more rides, the company generates more revenue.
The platform employs a dynamic pricing model – where prices can react to instantaneous imbalances between available supply and incoming demand (Riquelme, Johari & Banerjee, 2015).
Lyft tries to make its rides affordable to all riders. It calculates ride prices dynamically based on a large number of factors that include route, time of day, ride type, number of available drivers, current demand for rides, and any local fees or surcharges (Lyft, 2021).
Lyft charges upfront prices. When riders enter a destination, it shows them the price in advance. However, the upfront prices do not apply if the rider changes the destination or the route midway.
Lyft’s prices can grow higher when the demand is higher. When a rider sees a higher than usual price, the main reason is that it is busier right then.
However, competition is also an important factor that affects Lyft’s pricing strategy. The company is facing heavy competition from Uber and several other ride sharing brands (Pratap, 2017). It is why apart from keeping prices affordable, ride sharing companies also use deals and discounts to attract riders.
Promotions Mix :-
The ridesharing industry is experiencing an intense level of competition. Uber is leading the industry with the largest market share in the US ride-sharing industry. However, Uber’s share has declined in recent years to the benefit of Lyft. Technological innovation, increased focus on marketing and partnerships have helped Lyft grow its brand faster. Lyft has intensified its focus on marketing in an effort to grab market share from its rivals. According to Statista, Uber’s market share in the United States has declined to 68% in January 2021 from 74% in September 2017 (Mazareanu, 2021).
Lyft uses various marketing tools and technologies to grow its business, attract customers and riders, and to increase brand awareness. The company attributes much of its growth in driver and rider base to its paid marketing efforts. Its current marketing efforts include referrals, affiliate programs, free or discount trials, partnerships, display advertising, television, billboards, radio, video, content, direct mail, social media, email, hiring and classified advertisement websites, mobile “push” communications, search engine optimization and keyword search campaigns.
In 2019, the company spent $814 million on marketing and sales, which was around 13% of the total operating expenses of the company during the year. Lyft uses creative and memorable ways to grow brand awareness and attract riders and drivers. Some of the leading strategies adopted by the company to improve brand awareness include the following:
- Company Generated Content: The company produces original content and publishes it on social media regularly. It has a YouTube Channel with 451K subscribers (Lyft YouTube Channel, 2021). Lyft uses its YouTube channel for posting promotional videos, educational videos and other types of engaging video content created to increase brand awareness. Lyft’s ‘Undercover Lyft’ is a series of videos with celebs disguised as Lyft drivers.
- Popular culture: Lyft places advertisements in popular culture such as television series and movies to grow brand awareness and engage its existing customers.
- Marketing Partnerships: The company has entered into marketing partnerships with several industry leading brands. Some of the brands Lyft has partnered with include J.P. Morgan (Chase), Delta Air Lines, Hilton, and Walt Disney Parks & Resorts.
- Local Events: The company also sponsors local events to boost its brand awareness.
- Outdoor advertising: The company also runs outdoor billboard campaigns in key markets to grow brand awareness.
- Specialty Modes: Lyft also promotes its rides using specialty or promotional ride modes for local events and organizations.
Lyft Amp:
Lyft has developed Lyft Amps or oval shaped devices that sit on the dashboards of Lyft drivers. These devices are designed to enhance user experience, promote safety and boost brand awareness. They help the riders identify their drivers’ vehicles and display personalized greetings and ETA during non shared rides to inform the riders of the estimated time to their destination.
People :-
People are the main driving force behind the success of any organization. They are the foundation of the competitive advantage an organization enjoys in the market. The company employed 5,683 employees as of 2019 in more than 100 offices and additional locations including driver hubs, driver centers and driver desks. The company’s 43% workforce works in the product management, design and engineering functions, including several hundred employees in its Level 5 engineering center in Palo Alto, California (Lyft Annual Report, 2019).
The company also employs contractors and consultants. None of Lyft’s employees is represented by a trade union. The company has focused on establishing strong relationships with its employees. It has also invested in establishing a strong work culture that empowers and motivates employees. The company operates based on its core values that underpin its organizational culture. The three core values of the company include: Be Yourself, Uplift Others and Make It Happen.
Lyft believes that amazing companies have amazing people onboard. It is creating a diverse team of smart and passionate people that feel comfortable being themselves and are motivated by the company’s shared goal – improving people’s lives with the world’s best transportation. The company motivates its employees to dive deep, create fearlessly and amaze the customers by doing amazing things for them while remaining absolutely independent and delivering impact through their commitment.
Lyft offers its employees benefits and perks so they are satisfied and happy. Health benefits, paid time offs, free transportation, financial planning support and parental leaves are among some of the leading benefits that Lyft offers its employees (Lyft Careers, 2021).
Processes :-
The process of service delivery is a crucial part of the services marketing mix since it ensures that the company delivers the same standard of services repeatedly to the customers and doesn’t fall from its standards. Companies develop a services blueprint with details of the services delivery process that often even explains the finest points like the greeting phrases staff must use before the customers (Lumen Learning, 2021).
Lyft offers its services through an app that users can download from Google Play Store or App store. Users can order rides through the app including taxis, bikes and scooters. The company also trains drivers and employees so they can offer best quality services to the customers. The process of service delivery is simple. A user can request a ride from the app and he will have the necessary information available in the app to recognize the ride when it arrives. The app also provides necessary information related to estimated price and time of the ride. Users can pay through the app, which is designed to offer riders a seamless experience. The app also provides public transit information, which is driving higher rider engagement.
Physical Evidence :-
Due to the intangible nature of services, the service providers incorporate certain tangible features into their services to enhance the appeal of their offerings for the customers (Lumen Learning, 2021). For example, Lyft offers scooters and bikes with Lyft branding and Lyft Amp, an oval shaped device for Lyft taxis. These things help add a tangible aspect to its services. The importance of physical evidence in services marketing has diminished since a very large number of customers globally have grown used to buying and consuming services online. The rise of Netflix and other online streaming services providers is an example. The same applies to the other services delivered via apps. However, for travel companies or ride sharing brands, the tangible aspects of services marketing are still important. They are not just physical evidence of the services the company delivers but also important tools for branding and promotions. The Lyft logo on Lyft taxis, bikes and scooters help grow brand awareness and drive higher leads and conversion.
Suggestions:
Lyft has grown its market share in the United States through a consistent focus on marketing, innovation, and customer service. The company is facing intense competition in both the US and Canada markets. To find faster growth, the company must focus on internal expansion to start from the UK, the European markets, and China before entering other smaller markets. Marketing is another important strategic area requiring higher focus if the company aspires to achieve faster growth. The company must invest in growing market sponsorships with larger brands, including entertainment brands like Netflix, since it can help Lyft grow brand awareness faster.
The gig economy faces a large set of challenges, including legal and regulatory. However, it has also emerged as a winner at several points due to the special benefits, including higher employment opportunities. The Proposition 22 of California also signaled that gig workers might have a brighter future nationwide (Farivar, 2020). Lyft’s growth over the past few years reflects its growth potential. The pandemic has brought a new set of challenges before the company, but its rivals face the same issues. However, these challenges may come under control as the pandemic’s impact is minimized across various markets. Apart from these things, the company needs to focus on managing customer relationships and growing the penetration of its existing markets through higher rider engagement. It must employ social media and other channels to drive rider engagement higher and grow conversion across the US and Canada.
References:
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Lyft Inc, 2021. How to estimate a Lyft ride’s cost. Available online at: https://help.lyft.com/hc/en-us/articles/115013080308
Lyft Blog, 2019. Introducing Lyft Pink: A Membership That Unlocks More. Available online at: https://www.lyft.com/blog/posts/introducing-lyft-pink
Lyft Blog, 2020. Lyft is Integrating with Epic, a leading Electronic Health Record. Lyft Blog.
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