UBER PRICING STRATEGIES AND MARKETING COMMUNICATION

Problem statement

Following Uber's insistence to use surge pricing, the company has developed a negative public image with its customers with most clients willing to unsubscribe from receiving the business's services. Besides, the company faces pressure from regulations aimed at limiting the number of cars it can operate in given cities with Seattle limiting the number of cars Uber can operate to 150 only. Such rules will prevent the company from achieving economies of scale and maximizing its profits. In addition, such moves may avoid the company from realizing its cost leadership strategies.

Introduction

In today’s world, the rapid technological and economic change makes consumers more educated, more curious, and more conversant with what they exactly require. Therefore, marketing of products and services should be tailored to position a business to satisfy the needs of its customers. Price and promotion are important parts of the marketing mix and getting the price-point, and promotional objectives right are critical to the success of a company.

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Therefore, pricing provides cues to the customers concerning a company’s positioning and forms the starting point for organizations returns on investments. Price is the amount customers pay for a service or the value that consumers give in exchange for the service they get. Price, according to Baldacci, Mingozzi and Roberti (2011, p. 1276), affects the buying decisions of customers, especially for services frequently purchased. Uber has negative public perceptions because its pricing strategies are inaccurate. As it stands, consumers perceive the prices that Uber charge as unnecessarily too expensive without adding any value. The company is also restricted with the number of cars it can operate in some cities, and this means that the company cannot achieve its cost leadership strategies through economies of scale. The way customers perceive prices charged by a firm can either help create positive public relations or lead to negative public relations. Uber should, therefore, find the right pricing strategies that will ensure that the available cars are optimized, and maximum revenues are generated without creating the negative public relations with customers.

Critical Analysis and Environmental Scanning Strengths

As a private luxury rental car, Uber can quickly reach the premium market having upperclass income earning customers. Accessing the premium market can enable the company charge premium prices for its services (Dubelaar 2015). Uber operates in more than 85 cities, and this provides it with an opportunity to achieve economies of scale and maximize its revenues. The cities also served consist of upper-class individuals who can pay for premium prices in the company’s luxurious taxis. Uber uses up-to-date technologies that allow individuals with Smartphone to virtually hail vehicles. The company has no drivers of its own, and this makes it avoid unnecessary expenses on the drivers and maintenance. In addition, the company lacks vehicles of its own, and this enables it to avoid unnecessary start-up and maintenance costs.

Uber has a short wait time, and this has increased convenience for customers thus drawing more customers to the company. The company receives more requests for travel due to its wide customer base. The company has high annual revenues that can help it pay its operational costs effectively. The company has strong social media precedence that enables it access customer complaints and compliments and takes necessary actions.

Weaknesses

Inadequate screening and training of drivers endangers customers and creates unfair competition in the industry (Dubelaar 2015). The company’s pricing strategies prevent it from entering some luxurious markets such as Las Vegas city where it can access individuals with upper incomes. The company's public image is destroyed by Kalanick who does not has enough public relations and communications skills

Opportunities

The demand for a taxi is expected to increase in the coming years and with the number of cabs and taxis fixed, the Uber may decide to increase its prices. The increase in prices will enable the company to maximize its revenues.

Threats

New legal regulations limiting the number of cars that businesses can operate in some cities will restrict the company from maximizing its profits through economies of scale (Dubelaar 2015). The taxi industry is, therefore, an overregulated industry and this stifles possibilities of growth strategies. The fares are standardized, and this prevents Uber from successfully applying its surge pricing strategies. The company faces stiff competition from tradition taxi businesses and new technology-based companies such as Lyft, Sidecar, and Hailo.

Action plan

Choosing pricing objectives and its associated strategy are a crucial function for business organizations (De Spiegeleer & Schoutens 2011, p. 76). To improve its public image, the company needs new public relations personnel who will be responsible for receiving and responding to customer complaints and compliments appropriately. Since Uber targets clients who want more luxury taxis than the standard taxis, the company should practice a differentiation strategy. As it stands, the company's cost leadership strategy prevents it from operating in some markets such as the Las Vegas market where prices are higher than other places (Dubelaar 2015). Besides, the cost leadership strategy cannot be profitable because the number of cars is highly regulated and companies are not allowed to own more than 150 cars in some cities such as cities. For this reason, the regulation of the maximum number of taxis that companies can operate prevents Uber from realizing economies of scale that is a significant factor for cost leadership strategy. Therefore, to realize improved profits, the company should introduce unique features in its services.

The company will recruit drivers with luxurious cars that will provide value to the customers. In addition, the drivers will have to be retested by the company through appropriate training to ensure the safety of consumers (Hollensen 2015, p. 52). The company's use of Uber technology will also add more value to the customer expectations, and this will enable the company to charge higher prices during all seasons for the services it provides. The company will also recruit public relations personnel who will ensure that the company’s public image improves in the social media.

Expected ramifications

As a countermeasure, the competitors will try to improve their market share through the charging lower prices. However, since the taxi industry is highly regulated and companies cannot achieve economies of scale by adding additional cars, most companies will go into losses as the operating costs will exceed revenues. Furthermore, Uber already has a broad customer base that enjoys the company's convenience and time consciousness.

Outcome expectations

It is expected that by adding value to the services that the company offer, more customers will appreciate the premium prices that the company charges. The premium prices, in turn, will enable the company to increase its revenues. Recruiting professional public relations personnel is expected to repair the bad public relations between the enterprise and its social media customer’s trough effective communication skills (Lefebvre, 2011, p. 64). Retraining drivers will bring more confidence to the consumers concerning their safety while traveling in cars controlled by Uber.