2nd 3 Assignment

PLEASE PEER REVIEW THIS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pricing, Promotion, and Distribution Channels

Analysis of Current Pricing Models in the Market

Lyft

            According to Table 1.1 below, Lyft charges a service fee, a fee per minute, a fee per mile, and a minimum fare (Helling, 2020). Although Lyft charges all these fees, customers should tip their drivers as well. The average tip to a Lyft driver is 20% (Helling, 2018). When referencing a trip of 20 miles at 40 miles per hour, the total time would be 18.5 minutes. Taking all the fees and tip into account, the total cost of the trip via a standard Lyft vehicle would be $.9 base fare + ($1.90*18.5 minutes) + ($.09 * 20 miles) + 20% tip = $45.42. Lyft's fare rates are fairly constant. However, Lyft also utilizes the dynamic pricing model (Didur, 2018).

Table 1.1 – Average Lyft fare

Initial Cost	Service Fee	Per Minute	Per Mile	Minimum Fare
Lyft	$0.90	$1.90	$0.09	$0.90	$3.50
Lyft Plus	$1.50	$1.90	$0.18	$1.50	$3.50
Lyft Lux	$3.50	$1.90	$0.30	$2.05	$10.00

 

During Prime Time, Lyft increases ride prices by 200% and reduces ride prices by up to 50% during Happy Hour (Didur, 2018). This dynamic pricing ensures that Lyft has the right number of drivers at the right time. Another company that practices the dynamic pricing model is another top direct competitor: Uber (Jensen, 2013).

Uber

            Unlike Lyft, Uber does not have a broad average base fare for its ridesharing services. According to Table 1.2 below, Uber offers its services at different prices across the United States ("How much,” 2016). Along with the base fare, fare per minute, and fare per mile, Uber also charges a $1 fee for its drivers' background check (Hetting et al., 2020). A scenario used to compare Lyft and Uber's rates will use a trip in Austin, Texas ("How much," 2016). The trip will be 20 miles at 40 miles per hour, and the total time will be 18.5 minutes. Taking all the fees into account, the total cost of the trip via a standard Uber vehicle would be $1 base fare + ($.18*18.5 minutes) + ($1.10*20 miles) + $1 background check + 20% tip = $32.796. This trip would be less than the Lyft trip, but the same trip in NYC would cost $65.28.

Table 1.2 – Average Uber fare per city

            Along with Uber's dynamic pricing approach per city, Uber also increases prices during significant events, Friday and Saturday nights, and after-work rush hour (Netherlands, 2019). Uber is usually less expensive than traditional taxis. However, due to the surge pricing model, Uber can be more costly than its competitor: Taxicab ("How much," 2016).

Taxicab

            Like its competitor Uber, taxicab also uses a dynamic pricing approach per city (Howmuchisit.org Staff, 2018). However, the taxicabs pricing structure is a bit different from Lyft and Uber. Some towns charge per minute, whereas some cities charge per mile (Howmuchisit.org Staff, 2018). Taxicab's rates are much higher than Lyft and Uber's at .5-$3 per minute and $1-$3 per mile. Taxicab can also charge various fees such as $15 to $40 to wait per hour, $5-15 for pick-up from specific locations, a premium surcharge of 20-40% for various hours of the day, and fuel surcharge of $2-$5 (Howmuchisit.org Staff, 2020). To compare, a 20-mile at $2 per mile with a $10 pickup fee, $3 fuel surcharge, and a 15% tip, the trip's cost would be $60.95.

Analysis of Current Promotional Models in the Market

Lyft

            Lyft promotes its business primarily through Google Display and large job boards and has roughly spent $914,000 in six months (Nickel, n.d.). Lyft appeals to its audience by creating ads that focus directly on specific geographic regions with various income potentials (Nickel, n.d.). After clicking on Lyft's links, viewers are routed to Lyft's homepage to apply online to be a driver (Nickel, n.d.). Although Lyft is doing a great job at advertising and gaining market share, Uber remains one step above Lyft.

Uber

            Uber promotes its business on various sites such as Google Display, MediaMath, and Advertising.com (Nickel, n.d.). Uber is also more aggressive than Lyft by spending roughly $1.3 million in the past three months on advertising (Nickel, n.d.). Uber is like Lyft by posting its ads to job boards; however, Uber also publishes to other sites (Nickel, n.d.). Uber's links take viewers to three different sites to test various advertising phrases (Nickel, n.d).

            Neither Uber nor Lyft spends much on advertising to the public. However, taxicab advertises directly to the public and gets paid to do so.

Taxicab

            Taxicab not only drives customers to and from destinations but also makes money advertising in the process. Cabs help businesses display their products and services directly to the public in real-time by displaying decals (“How does,” 2020).

Analysis of Current Distribution Models in the Market

Lyft currently operates in 321 cities between the United States and Canada (“Lyft Cities,” n.d.). Uber currently operates in 10,000 + cities between 70 countries (“Uber cities,” n.d.). Taxis operate in most major cities in the United States. All three competitors of JGJ, Inc. have vastly different distribution models.

Recommended Pricing Strategy for JGJ, Inc.

            The recommended pricing strategy for JGJ, Inc. is to charge slightly lower base fare rates and fees than our rivals. The average rate for JGJ, Inc. is below in Table 1.3. A 20-mile trip at 18.5 minutes without a waiting fee would cost $0.75 base fare + ($.15*20) + ($1.25*18.5) + 20% tip = $32.25.

Table 1.3 – JGJ, Inc. average rate

            JGJ, Inc. is not priced drastically lower than its competitors due to the partnership with Medicare. However, JGJ, Inc. needs to be positioned just below its competitor's pricing due to pursuing additional market share besides the Medicare population.

Recommended Promotional Strategy for JGJ Inc.

            AARP and the Medicare website will be JGJ, Inc.'s home sites for advertising. This is where the elderly population goes for important information. Along with this, JGJ, Inc., and Medicare can work on including the partnership in Medicare's newsletter and fliers that are sent out to Medicare's clients to promote the new ride-share service specifically tailored to suit their needs.

            JGJ, Inc. will also use Indeed, Monster, and other job boards to find drivers. JGJ, Inc. will offer drivers $500 sign-on bonuses after being a driver for one year with their company. JGJ, Inc. should also pursue a partnership with TikTok and Facebook to advertise hiring events.

Recommended Distribution Strategy for JGJ Inc.

            The recommended distribution strategy for JGJ, Inc. is to operate in cities larger than 35,000 citizens in the United States. If drivers are interested in working in a city with a smaller population size, special job assignments can made.

 

 

 

 

 

 

 

References

Didur, I. (29 May 2018). Dynamic pricing algorithms on Uber and Lyft. DataRoot Labs. datarootlabs.com/blog/uber-lift-gett-surge-pricing-algorithms.

Helling, B. (12 Dec. 2018). Lyft tipping guide - should you tip your Lyft driver? Gigworker.com. gigworker.com/lyft-tipping-guide/#:~:text=Most%20Lyft%20rides%20cost%20less%20than%20$10,%20so,of%20water,%20or%20provided%20snacks%20along%20the%20ride.

Helling, B. (3 Dec. 2020). Lyft estimate cost: How to get an accurate Lyft estimate for your next ride. Ridester.com. www.ridester.com/lyft-estimate-fare-calculator/.

Helling, Brett, et al. (3 Dec. 2020). How much does Uber cost? – A comprehensive guide. Ridester.com. www.ridester.com/uber-rates-cost/.

How does taxi advertising work? (25 Mar. 2020). Taxiadvertising.com. taxiadvertising.com/blog/taxi-advertising-process/.

How much does Uber cost? (16 Sep. 2016). TechBoomers.com. techboomers.com/t/uber-cost#:~:text=On%20average,%20an%20Uber%20fare%20costs%20$24%20U.S.,How%20much%20does%20an%20UberX%20cost,%20on%20average?

Howmuchisit.org Staff. (15 Aug. 2020). How much does a taxi cost? howmuchisit.org howmuchisit.org/how-much-does-a-taxi-cost/.

Jensen, M. (2013). Setting profitable prices: A step-by-step guide to pricing strategy--without hiring a consultant. John Wiley & Sons, Incorporated.  https://ebookcentral.proquest.com/lib/indwes/detail.action?docID=1119804

Lyft Cities. (n.d.). Lyft Estimate. lyftrideestimate.com/cities.

Netherlands. (6 June 2019). How Uber's dynamic pricing works. Uber Blog. www.uber.com/en-NL/blog/how-ubers-dynamic-pricing-model-works/.

Nickel, B. (n.d). How Uber and Lyft run their paid traffic campaigns. Adbeat. blog.adbeat.com/uber-lyft/.

Uber cities in and around the world. (n.d). Uber. www.uber.com/global/en/cities/.