GRAB: Consumer Psychology Applications

Running head: UNDERSTANDING GRAB’S SUCCESS 1

School of Humanities and Social Sciences

Consumer Psychology (HP3806)

Group Project: Final Report Clear Positioning and Understanding Consumer Needs for Success: The Grab Story

10 th April 2018Submitted by: Group 4

S/N

Name

Matriculation Number

1

Chun Win Ee

U1530948L

2

Nicholas Lee Leong Sheng

U1531006K

3

Ng Xue Qi

U1530836F

4

Tan Jun Hao

U1530944A

5

Sim Wei Khang, Jeremy

U1530399H

Declaration: By submitting this work, we are declaring that the following work is our own original work and that all other sources used in this work have been appropriately acknowledged in the bibliography. We have not plagiarised information and have not tried to pass off other people’s ideas and findings as our own. We understand that plagiarism is the act of taking and using the whole or any part of another person’s work and presenting it as our own without proper acknowledgement. We also understand that it is an academic offence and that disciplinary action will be taken for plagiarism.

UNDERSTANDING GRAB’S SUCCESS 2

Clear Positioning and Understanding Consumer Needs for Success: The Grab Story

With over 81 million users, Grab is Southeast Asia’s leading ride-hailing company that offers transportation services such as private-hire cars, taxis, and coaches that passengers can book a ride for a fee (Grab, 2018). In the past, commuters had to wait by roadsides to wait in uncertainty for taxis, but the introduction of Grab changed Singapore’s transport landscape by enabling users to book rides on demand via their mobile phone. In this report, an analysis of Grab’s marketing mix will be reviewed, demonstrating that its success is down to two factors: (1) understanding the needs of the market segment and the (2) clear positioning of its products.

Grab’s target segment is the price-conscious mass market that includes middle- and lower-income consumers. To meet the needs of this segment, Grab positioned itself as an affordable and convenient transport service provider offering a range of options for specific transport needs via its mobile application.

Product / Service: Suiting Consumer Needs & Dynamically Continuous Innovation

As a ride-hailing service, Grab offered customers the convenience of on-demand booking of rides via their mobile phones. Through its application, Grab provided a range of commuting options to cater different consumer needs. For the majority of budget-conscious passengers, the GrabCar Economy 4-seater was an option replacing conventional taxis. For even more budget-conscious consumers, GrabHitch and GrabShare were even cheaper options for those who were willing to share a transport service with others. By offering a variety of commuting options, Grab was able to match their services to suit different consumer goals and needs, and enhanced consumers’ purchasing abilities (Hoyer, et. al., 2018).

Compared to conventional taxis, Grab was introduced as a dynamically continuous innovation (Hoyer et al., 2018), which leveraged on the on-demand nature of mobile phone services to change the consumption of rides. Grab was successful in diffusing across the

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market rapidly and fostering high consumer adoption rate due to the following factors: characteristics of the innovation, consumer learning costs and social relevance (Hoyer, et. al., 2018). In terms of characteristics, Grab had high perceived value and perceived benefits, due to the ability to conveniently hail rides on demand at low prices. This offered a relative advantage to conventional taxis, which is a predictor of a new product success (Henard & Szymanski, 2001). In terms of consumer learning costs, Grab had high compatibility with users’ existing behaviours of using smartphone applications for services, thus preventing potential resistance from incompatibility (Gatignon & Robertson, 1990). In terms of social relevance, Grab usage had high observability from users’ word-of-mouth, contributing to diffusion and adoption, as consumers are more likely to adopt an innovation when they see others use it (Fisher & Price, 1992).

Price and Promotion: Pricing Techniques, Brand Loyalty & Hyperlocalisation

Grab not only prices its fares competitively compared to Uber (see Appendix Figure 1 & Figure 2) to appeal to price-sensitive customers, but also uses a variety of pricing techniques (Hoyer, et. al., 2018), such as frequent promo codes to discount these rides further (Money Digest, 2017), which directly appeal to deal-prone consumers (DelVecchio, 2005). In addition, compared to competitors (see Appendix Table 1), Grab effectively captured consumers’ attention with a rewarding loyalty program and personally relevant promotions. GrabRewards allowed customers to earn points through rides, which could be exchanged for discounts on subsequent rides or purchases from partnering stores. Members who accumulate enough points for higher tiers of the loyalty programme gain additional privileges, such as prioritised bookings.

The choice of daily transportation options is typically associated with low-effort decision making. In such repeat-purchase situations, choice tactics (Hoyer et. al., 2018) in the form of performance, price or habit are heuristics used to guide decision-making. These

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choice tactics could be learnt through GrabRewards whereby greater discounts for higher membership tiers are forms of positive reinforcement which increase consumer satisfaction associated with using Grab. Such frequent-user reward programmes are effective in inducing usage, as they have been shown to accelerate consumer’s purchasing as they get closer to a reward (Kivetz, Urminsky & Zheng, 2006). These rewards serve as positive reinforcements to induce greater repeated usage and a higher level of commitment from consumers, which builds brand loyalty (Hoyer et. al., 2018). In turn, Grab users who are brand loyal are less likely to switch to other services.

Grab’s core marketing strategies focused on hyperlocalisation, which embraced local cultural scenes. This was absent in competitors. For example, Grab’s advertisement campaigns showcased personal stories of Singaporean Grab drivers and commuters (see Appendix Figure 3), which established personal relevance among its users. These personally relevant campaigns appealed to consumers’ emotions, needs and values, which grabs their attention (Andronikidis, & Lambrianidou, 2010), increases their motivation to process information (Hoyer, et. al., 2018), and evoke situational felt involvement with the brand. Such campaigns are more desirable to consumers than standardised ones (Hongsik John, Chang-Hoan, & Sutherland, 2007).

In addition, Grab designed marketing campaigns around local festive celebrations, such as its E-Ang Bao rewards in 2018 (see Appendix Figure 4). E-Ang Bao followed the Chinese cultural practice of giving “Ang Baos” during Chinese New Year, allowing users to send and receive “Ang Bao” in the form of Grabpay credits. As Grab demonstrated the considerations of timelines, localisation, and personalization in their marketing campaigns, they established the key antecedents for consumers’ extrinsic motivation to consume (Feng, Fu, & Qing, 2016). The novelty (Ryan, Deci, Nix, & Manly, 1999; Reis, 1994) and joy (Altuna & Konuk, 2009) of its festive-related promotions increases customers’ intrinsic motivation to attend to, process and consume Grab’s products and services (Reeve, 1989).

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Placement: Increasing Consumers’ Ability to Consume through Distribution

Grab was also able to grow rapidly through its distribution channel, increasing fleet size through partnerships, and optimisation of drivers to ride locations. Grab’s distribution channel is the smartphone, which has an 88% penetration rate among Singaporeans (Blackbox, 2012). This maximised consumer exposure to the application and increased brand awareness (Hoyer, et. al., 2018). The repeated exposure enhances the opportunities to think about and remember Grab (Batra & Ray, 1995), thus increasing liking for it through the mere exposure effect (Rethan, Swazy & Marks, 1986). Additionally, Grab established strategic alliances with existing taxi-companies which its competitors did not (Au-Yongs, R., 2017). This increased the availability of Grab to consumers all over the island. To complement this, data analytics was used to identify “hot spot” areas to direct drivers where demand is higher. For example, drivers were directed to Tanah Merah Ferry Terminal in advance to prepare for the surge in bookings when ferries dock. With the increase in availability through increased fleet sizes and hot-spot targeting, Grab was able to increase consumer opportunity through shortening waiting time, and ensuring consumers’ financial ability to use it by lowering service costs (e.g. Maclnnis & Jaworski, 1989).

Conclusion: Grab’s Continued Success, Underpinned by Understanding Consumers

Overall, Grab’s clear positioning focused on consumer’s needs within the local context, which provided compelling service for its consumers to want to use their product rather than their competitors’. Across all 4Ps, Grab enhanced consumers’ ability to use their products, strengthened its relevance to their consumers, and encouraged repeated consumption of their products. Ultimately, this required Grab to understand their consumers and focus on delivering their needs, which they did so exemplarily and accounted for its huge success.

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Grab, (2018). Grab corporate profile. Retrieved March 3, 2018, from https://www.grab.com/sg/pressdownload/

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Money Digest. Here’s a huge list of Grab, Uber and ComfortDelGro promo codes for the month of April 2017. Retrieved April 7, 2018, from http://www.moneydigest.sg/heres-a-huge-list-of-grab-uber-and-comfortdelgro-promocodes-for-the-month-of-april-2017/

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Appendix

Grab’s Price Competitiveness

Figures 1 and Figure 2 showcase Group 4’s collected data of Grab and Uber’s prices. The sampling includes prices from five different locations to Central Business District (Figure 2) and to Nanyang Technological University (Figure 1) averaged across five different time points of the day. Demonstrably, base prices between Grab and Uber are already competitive, even before the application of promo codes and Grab’s loyalty programme.

Figure 1. Price comparison from different places to CBD.

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Figure 2. Price comparison from different places to NTU.

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Grab’s loyalty programme compared to competitors

Evident from Table 1 below, Grab has a comprehensive loyalty rewards programme,which is not matched by competitors.Table 1

Competitor Analysis of Reward Programmes, as extracted from respective mobile applications.

Mobile Apps

Points

Discounted Rides

Preferential Prices

Prioritised Bookings

Store Discounts

Other attributes

Grab

$1 = 1 point, with seasonal multiplication of points

$5 off approximately every 2000 points

Unlocked with Silver membership and above

Unlocked with Platinum membership

Available to purchase with points

Amount of points needed decreases as status increases

Uber

None

None

None

None

None

Paid subscription program for premium benefits

Comfort $10 ride = 20 Cabpoints

83 points = 50cents off 1,000 points = $5 Taxi voucher

None

None

None

Complex to follow Same card used throughout whole commute Voucher takes 14 working days to be mailed

Bluecar SG

None

None

None

None

None

Paid subscription program for premium benefits

Ryde

None

Yes, but not tied to a reward programme

None

None

None

Does not have a proper reward programme. Seasonal promotion

codes

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Grab’s distinctive culturally relevant marketing campaigns

Grab has an extensive playlist of advertisements that specifically targets Singaporean consumers, including those that capture personal stories. This is shown in Figure 1 below, which presents an example where a local Grab driver’s story was showcased.

Figure 3. Grab advertisement, illustrating personal story of its driver. Retrieved from https://www.youtube.com/watch?v=TbOBbD3- YEY&list=PLnlsoKq9KL0F8WweoqNK5bDKCdaLcr9SR&index=1

Figure 4 below presents Grab’s E-Ang Bao advertising campaign, which ran duringChinese New Year of 2018.

Figure 4. Grab advertisement, illustrating Grab E-Ang Bao. Retrieved from https://www.grab.com/sg/cny18/