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How Uber enters new markets

Since it’s inception in 2000, Uber has been the tech company we all love to hate. Its rise has been rapid. In 2014, it was rolling out at a rate of one city per day. Now, it’s in more than 450 cities worldwide.

So, this is how Uber does it.

  • Scout

Despite the speed of its expansion, Uber has always been extremely deliberate about figuring out the markets that they want to enter. Nothing is done on a whim or without planning. Cities are put into a priority band:

Band 1: Enter ASAP
Band 2: Enter within 6 months
Band 3: Enter later.

Local network coverage and smartphone saturation are key metrics that determine whether Uber will have any chance of success. Without a sense of the infrastructure, it’s difficult to decide how feasible market entry might be. Mina Radhakrishnan, former Head of Product at Uber, writes about a specific rubric that covers devices, connectivity, and market segmentation for assessing barriers to entry on her blog.

Once they know the tech is in place, Uber actively assesses the kind of value-add they are likely to bring to the table. Some markets have an obvious need for a ride-sharing service. This was the case in Uber’s hometown of San Francisco with it’s patchy, unreliable network of cabs. In markets where Uber has an obvious and dominant competitor, collaboration can be the preferred route. In China and Russia, Uber has partnered with domestic behemoths Didi Chuxing and Yandex.

  • Prep

Product design is the mainstay of Uber’s preparation for entering new cities. The apps are tweaked to be responsive to local needs and usage habits. Sometimes this involves significant rework, including redeploying the entire website each time. More recently, a complete rebranding has seen Uber deliberately create colour palettes to celebrate its cities. While for many developers translation can be something of an afterthought, Uber makes a concerted effort to get the language and look right.

Next, Uber looks at logistical integration. What can they do to mesh their app into existing local infrastructure to make it seamless for their new customers to use? Payment integration is the most important consideration at this stage. Local payment systems range from the most up-to-date credit card services to the most basic of all: cash.

Legal requirements must also be considered. Negotiating municipal regulations can be a minefield. Some markets prohibit discount pricing (Germany and France), while others (Massachusetts, USA) legislate for taxation.

Uber is, of course, no stranger to controversy, often running afoul of local regulations designed to protect the taxi industry in particular. Their most recent headache in London, with the city authority refusing to renew their operating license, shows that disruptive tech is not always welcomed with open arms.

  • Launch

The launch is really only about one thing: growing users. Uber’s business model is what they describe as a “two-sided economy” – the drivers on the one side and the riders on the other. Drivers are recruited aggressively to establish a good level of coverage and service. This geographic density has been described by Uber’s Rider Growth Lead Andrew Chen as key to their “hyperlocal” strategy. Marketing is overt (NZ has recently experienced a deluge of YouTube and TV ads). Free ice cream days don’t hurt either.

Another smart decision is Uber’s strategy of managing on the ground. Uber’s operations arm quickly realised that coordinating expansion from the US would be an impossible nightmare. Entering and operating in multiple cities around the world required management in line with their ‘stay local’ ethos. And so, in every major city that Uber operates, a local office is responsible for running the business day-to-day.

 

Doing your homework, getting on the ground, and localisation: it’s been Uber’s formula for success.

To Incubate, or to Accelerate: That is the question.
How Uber enters new markets
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To Incubate, or to Accelerate: That is the question.