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SWOT Report for MKT 100....

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Running Head: SITUATION ANALYSIS REPORT FOR CANADIAN LYFT SWOT

Written Assignment Situation Analysis Report for Canadian Operations Lyft SWOT Analysis

By Bikem Avsar 51 Michelle Li 84 Ashan Mahendran 48 Kayla Shui 95

Sec. #061

Submitted To: Professor Paul Gillespie Ted Rogers School of Management in partial fulfillment for the requirements for MKT100 – Principles of Marketing

Submitted On: Monday, October 29, 2018 Ryerson University

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SITUATION ANALYSIS REPORT FOR CANADIAN LYFT SWOT 2

Strengths One of the key strengths that distinguish Lyft from its competitors is its friendly culture, and engaged/good customer service. Over the years, Lyft has promised its customers a friendly, kind, and laid-back service, and it has continued with feel-good marketing and has placed a great amount of emphasis on driver-friendly policies (Roose, 2017). This approach came from the belief system that customers did not just want a cheap ride –they were looking for an experience that would go beyond that, they wanted a friendly environment. Lyft has promised to give their passengers an experience that placed an emphasis on friendship, eccentricity and authenticity (Roose, 2017). While rival Uber’s main emphasis has been on providing luxury and service, Lyft has been doing just the opposite by placing an emphasis on average people and the community. The co-founder of Lyft, John Zimmer, supports this claim by expressing how in order to offer the best service to the customer, they first need need to provide the best care for their drivers, as they view drivers as being one of their biggest assets, and that is a policy that they have been following every year since the launch of the app (Rider, 2017). He expresses that not only will this result in an experience more focused on the hospitality service, but also place great emphasis on driver community (Rider, 2017). This is a crucial strength of Lyft, as taking better care of their drivers leads to a more hospitable and friendly customer-driver relationship. It is also important to note that Lyft’s marketing approach has been more on the casual and friendly side, targeting the younger generation, which appears to be working for them as it is growing fast with younger populations as opposed to its competitors such as Uber. Lyft’s values of focusing on people, taking care of people, treating people well, treating people with mutual respect and promoting both inclusion and diversity has been a major strength in creating a different type of environment, an environment that its competitors seem to be lacking (Rider, 2017). Further, Lyft offers a great variety of rewards programs for its drivers in Canada, allowing their drivers to make more money in less time. The rewards programs that are available for all Lyft drivers in Canada include the streak bonus, weekly guarantee, and driver referral (Usman, 2018). It is important to note that not all rewards programs are available to all Lyft drivers, such as Power Zones, and the Weekly Ride Challenge, so these two could thus be considered as weaknesses. Lyft Streak Bonus is a great way to get extra income for the drivers. Drivers are simply asked to pick a required number of rides in a row and be rewarded with $5 and $25 streak bonus (Usman, 2018). This rewards program is a great earning opportunity for all

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Lyft drivers, it is essentially a way for Lyft to stick the driver with the app. Lyft’s Weekly Guarantee Rewards Program offers weekly guaranteed earnings to their drivers. Their aim is to encourage drivers to drive in their platform, thus motivating them (Usman, 2018). Driver Referral program is a great opportunity for drivers, as both the referring driver and the referred applicant can earn a bonus by meeting specified ride requirements (Lyft, “Referral rewards for drivers”, n.d.). All these programs offer drivers great incentives, thus making them more likely to stick to the app and in turn create a more hospitable environment for their customers. In addition, it is important to note that Lyft has a diverse selection of rides of all budgets; these include Shared (sharing a car with others going in the same direction at a discount price), Standard Lyft (accommodates up to four riders), Lyft XL (SUV), Lux (Luxury car up to four riders), Lux Black (premium service up to four riders), and Lux Black XL (premium service up to six riders). All these selection of rides can carry different numbers of passengers and allow passengers to pick an option that best suits their budget. The standard Lyft and the Shared options are the more economical options, the Lux and Lux Black are the Luxury options, and Lyft XL and Lux Black XL are for accommodating more people –up to 6 riders (Lyft, Lyft ride modes overview, n.d.). Thus, having all these options invites individuals from diverse socioeconomic backgrounds, and offers them a choice that is within the passenger’s budget. Therefore, it can be said that Lyft has a ride for every occasion, which is a policy that they proudly stand by. This allows for a more diverse selection of passengers, further emphasizing on the idea on community, friendship, and overall just offer a welcoming environment for individuals of all backgrounds.

Weaknesses Lyft has a series of internal weaknesses that simultaneously affect their company, drivers, and customers negatively. One of the most critical weaknesses Lyft possesses is the small, limited number of drivers on the road. This weakness is especially a large concern for a company whose business revolves around bringing customers to and from their destinations. A smaller number of available drivers in certain cities results in less coverage areas for Lyft drivers,

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reducing its ease of access and creating barriers between customers. The limited number of drivers on the road also creates a financial problem on Lyft’s side. Compared to their competitors, Lyft does not have a large driver count like Uber or taxis. According to Business Insider, Uber currently has the upper hand in the ride-hailing service in Canada, therefore, there are not enough Lyft drivers to satisfy the demands of the customers’ ride-hailing requests (Shields, 2017). As a result of Lyft’s lacking presence compared to other transportation services, less business and revenue is generated. In addition to an insufficient number of Lyft drivers on the road, another weakness that highly impacts Lyft as well as their customers are the delayed arrival times. The Toronto Sun reports that Lyft’s customers have to wait, on average, two to five minutes longer than their main competitor, Uber, which can ultimately be seen as a significant problem for customers who have strict time schedules (Toronto Sun, 2017). Accurate wait or arrival times are crucial aspects to customers of a ride-sharing service as it determines the company’s reliability and reputation. Inconsistent and late timing will adversely affect Lyft’s customer retention and eliminate trust between the company and users. Lyft’s weakness of late arrival times can potentially earn Lyft the reputation as the “worse Uber,” and in consequence of this poor reputation caused by late scheduling, Lyft’s usage rates will fall. Furthermore, Lyft’s cheaper prices is considered another one of their biggest weaknesses. Though cheaper prices may be a good thing for customers, it is an internal weakness for Lyft. Cheaper fares for customers result in less pay for the Lyft drivers. Also, because Lyft takes commission from their drivers’ pay, Lyft drivers earn even less than the advertised fare. A low pay for Lyft drivers leads to an amotivation to work since there are little benefits made from driving long hours. The costs required for a Lyft driver to simply start working such gas and maintenance, take up the majority of a driver’s expenses which sees an unfair exchange between Lyft drivers’ benefits and sacrifices. The realization of small benefits will cause drivers to leave and stop working for Lyft as it has already been happening. A Lyft driver on a public forum site stated that, “I did this [driving for Lyft alongside his standard job] and I did not find it was worth it. The mileage and gas spent really cuts into your profits - and the only way it really works is if you consistently work during the busiest times and busiest areas” (Is driving for lyft in very limited quantities worth it, 2018). Because Lyft's prices are so cheap, it creates another series of problems such as high driver concentrations in only one area and many driver cancellations. One

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Lyft user recalls her Lyft ride saying, On the way back, I asked Aliaskar if he knew why the two other drivers had failed to pick me up. He said everyone was headed toward Greenpoint, another neighborhood in Brooklyn, where rates were much higher, and that drivers probably weren’t interested in my cheap Lyft Line fare (Griswold, 2018). Although this incident took place in the U.S., exclusive price hikes in certain areas indeed does happen in Canada since surge pricing occurs according to driver demand. The cheap prices cause drivers to flock to areas with higher demand such as more urban and populated areas, leaving those outside of these demanding areas to their own devices due to last minute driver cancellations. Therefore, Lyft’s cheap prices are a weakness to the company as it provokes Lyft’s drivers to drive for competing ride-sharing services and causes a high volume of customer trip cancellations.

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Opportunities A common concern for consumers that affect their purchasing decisions is time. With the rise of technology, online services are becoming exceedingly popular. This being said, online food delivery services have become extremely successful as it is fast and convenient for consumers. The food delivery business is continually expanding and allows choice in an instant. Currently, the world-wide food delivery market consists of $83 billion and in three years, an estimated growing rate of 3.5 percent. Furthermore, there are already five food delivery systems that have a value of over $1 billion. Lyft is already a commonly known brand for convenient rides and taking advantage of the opportunity of food delivery trends will be highly beneficial for the company. Lyft expanding its platform into the food delivery industry will increase their brand recognition which will result in gaining new consumers as well as the ability to offer a new service to current ones. Uber, one of Lyft’s major competitors, have recently had issues & complaints come up about their services getting slower (ex. Some delivery workers were walking). There have been multiple cases where their consumers were receiving cold food, deliveries with missing items & moldy products. Lyft can take this opportunity to advertise their service as fast delivery with quality food, gaining a competitive advantage. Lyft is already known for their friendly culture which often keeps their consumers using their services. The company can ensure on maintaining customer relationships by developing customer loyalty programs and rewards. Trending towards customer loyalty programs and rewards will help increase sales over time as it persuades consumers to repeatedly purchase the service gaining ability to gain something for free. Above that, taking advantage of this opportunity can help boost Lyft’s reputation as loyalty programs guarantees customer value and represents customer appreciation. This is beneficial as it increases the possibility of current customers sharing their contentment with others. Customer loyalty programs are also very cost effective as it trying to get current customers to repurchase the service/product instead of advertising to gain new customers, making it a lot cheaper. Shoppers Drug Mart Optimum program is one the most popular customer loyalty programs in Canada with approximately 11

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million members. Although Shoppers Drug Mart has more expensive products compared to their competitors, consumers continue to shop there due to their desires to receive something in return (points). Many consumers are trending towards greener and more environment friendly products/services. Lyft should take the opportunity of promoting and including more fuelefficient cars as fuel efficiency is a huge component of a car’s green factor. Research shows that consumers who are aware of the environment tend to earn more and are willing to pay more for greener/environment friendly products/services. Approximately 70 percent of millennials and 50 percent of all consumers say that a company’s attention to the environment will impact their purchasing decisions. This is because millennials see greener products as a long-term investment that will better the environment. With that being said, approximately 60 percent of all Canadian consumers consider themselves ethical customers. Consumers who are aware/care for the environment may be hesitant on using a service that pollutes. However, by trending towards more environment friendly cars, Lyft can bring in a new market and also encourage repurchases from current customers.

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Threats One of the primary threats that Lyft faces are its direct competitors, namely Uber and other taxi companies. Lyft and Uber are both very similar ride-sharing companies that both satisfy customer needs in almost identical ways. Both apps allow users to easily request rides to specific locations and are offered an estimated time of their arrival while having their fares calculated in advanced (Dingman, 2017). Though neither Lyft or Uber have serious competitive advantages over one another, Uber does have a stronger platform and following compared to Lyft. As Uber launched three years prior to Lyft in Canada (News Staff, 2014), Uber has had more time to build up their company and get a head start in gathering customers, resulting in the majority of the mass market recognizing Uber as the only ride-sharing service. Lyft on the other hand just launched in Canada last year, meaning the company is still new and does not have as many resources, drivers and support staff to equally compete with Uber. With Lyft’s late arrival in Canada, Uber has the ability to dominate the Canadian ride-sharing market as numerous consumers are familiar with Uber and aren’t aware of other alternatives. Because Lyft is a smaller company, it is not considered the go-to ride-sharing service. Being a more recognizable brand, Uber seizes Lyft’s potential customers ultimately causing Lyft to lose some of its business. A second threat that is posed against Lyft are Canada’s ride-sharing laws and regulations. Fortunately, for ride-sharing services such as Lyft, there is a low probability that services as such will become illegal. However, in order to protect local taxi services such as Téo Taxi in Quebec and Beck Taxi in Ontario, the cities of Quebec, Toronto, Edmonton, Calgary, and Ottawa have passed bylaws that require ride-sharing drivers like Lyft to own specific permits (Licorish, 2016). Because of these regulations, it is now more difficult for Lyft to increase their driver count as obtaining a legal ride-sharing permit involves more than uploading legal documents online and undergoing background checks like Lyft currently practices (Lyft, n.d.). For Lyft drivers in Toronto and the GTA, drivers are required to have PTC - Private Transportation Company (Lyft, n.d.) licenses as well posing a threat to Lyft’s ability to expand their company and surpass their competitors in the future. The societal shift towards healthy living in Canada is yet another threat that could jeopardize Lyft’s business. One FitBit report concludes that the most popular types of physical activities amongst Canadians include running and biking (Kozika, 2015). Running and biking are exercises that are easily able to replace most types of transportation such as buses, cars and

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services like Lyft. Because the wants and needs of individuals who are health-conscious focus on improving one’s physical capabilities, a service like Lyft cannot meet or satisfy this segment’s needs. This choice of living healthy lifestyles is becoming more of an importance to many Canadians which causes a concern for services like Lyft whose concentration is providing people with idle, convenient ways to travel around the city. As a result of this large societal shift of individuals living healthier lives, the amount of people who are interested in using ride-sharing services are reduced due to lack of benefits provided.

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Lyft Recommendations Based on our SWOT analysis, we recommend Lyft to go greener and use more environmentally friendly cars that are fuel efficient. The fuel efficiency of cars are a key element in determining its green factor. Becoming more environmentally friendly by using fuel efficient cars will maximize Lyft’s strengths as it adds more variety to their already large selection of cars. A core component of Lyft and what differentiates them from other companies are their cheap prices, creating a difficulty raising them. This strategy will allow Lyft to increase their prices as people who are environmentally aware are willing to pay more for greener products/services. Lyft trending towards a greener company and using more fuel-efficient cars will open up an assortment of opportunities. Predominantly, Lyft will be able to advertise and attract a new market - people who are environmentally aware looking for greener alternatives. Moreover, Lyft will be able to increase their sales from luring in new consumers and raising their prices on fuelefficient cars. Additionally, becoming a greener company will boost Lyft’s reputation as they exhibit value towards the environment and consumers who continually demand greener products/services. Lyft faces an abundance of competition, as it shares a great number of similarities with other companies, but using more fuel-efficient cars will give them a competitive advantage. Numerous driving services aren’t environmentally aware and by giving consumers a greener alternative that isn’t an option available anywhere else, Lyft will have the upper hand in this business. All things considered, Lyft becoming a greener company will maximize their strengths of variety, enable more freedom in pricing, entice new consumers and will give them a competitive advantage.

Appendix A: SWOT ANALYSIS Canadian Operations Team for Lyft

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Factor

Factor

Strengths

Weaknesses ❖ Unscheduled ➢ Not enough operators at certain times (Example. Night) ❖ Cheaper Prices & drivers get 100% of tips ❖ Only accepts credit cards and not debit cards or cash. ❖ Only operates in the US and Ontario ❖ Power Zones (randomly selected areas by Lyft that let drivers earn 10-40% more on top of usual fare if the driver picks up a rider in the zones) not widely available for all drivers ➢ No set requirements for Power Zone eligibility therefore eligible drivers for the zones are picked randomly (random algorithm generated from Lyft) ■ Some drivers are picked more often than others ➢ Power Zones sometimes are not available for weeks or months unreliable way for drivers looking for bonuses other than Prime Time

❖ Engaged/good customer service. ❖ After Sales (Tips) - Customers able to tip on app right after the ride ❖ Friendly culture ❖ Offers discounts for first time users to pull customers in ❖ Offers rides from airports ❖ Reduces transit ownership caused by taxis ❖ Offers rewards program for drivers ❖ Multiple vehicle/ride configurations of all budgets: ➢ Lyft Line, Lyft, Lyft Plus, Lyft Premier ❖ Thorough background checks made on drivers ➢...