Uber is trying to disrupt the taxi/ride for hire market
seamlessly connecting riders to drivers through our apps, we make cities more accessible, opening up more possibilities for riders and more business for drivers.
One of their innovations is “surge” pricing. When there is more supply than demand, prices go up. and during the recent snow storms, prices went up A LOT. or as Sam Biddle on Valleywag put it, this was “the weekend Uber Tried to Rip Everyone Off”
For several hours on Saturday, Uber was maybe the most hated company in America. Some of the year’s most atrocious weather dumped across the Northeast, and the transit company of the future hit customers with the worst price gouging we’ve ever seen—it would cost over a hundred bucks just to drive down the block. Get used to it.
Uber CEO Travis Kalanick defended the practice, claiming that it brings more cars onto the street (questionable) and that everyone wins. But it also seems to plant some seeds of ill will.
You’re the Boss Blog told the story of Gardiner’s Furniture and Mattress, a family owned Baltimore furniture store that
promised to give away all furniture bought in the days leading up to the big game if a Baltimore Raven returned a kickoff for a touchdown. And that, of course, is precisely what Jacoby Jones did — the first Super Bowl kickoff returned all the way since 2007.
This story highlighted a couple of key points for anyone running a small business, particularly retail.
1. If lightening strikes, you need to be prepared. In this case, they were:
The odds of a successful return for a touchdown were over 100 to 1. I was home with my wife watching the game. It all happened so quickly, I could hardly believe what I saw. Within seconds, the phone rang. One of our store managers was on the other line screaming. After two more calls from employees, I checked with our advertising manager to make sure that all of the call-in procedures had been followed correctly, and we were fully covered by the insurance.
2. If you haven’t done it before, bring in a professional
We worked out the details of the promotion through a third-party company, which specializes in wacky retail promotions and sales events. They acquired the necessary insurance and handled all of the paperwork to make it all legal and verifiable. At 3 p.m. Sunday, we were required to notify the promotion company and give them an exact dollar amount of written sales for the period that would be insured in case of a successful run back or touchdown.
3. The effect doesn’t last long. For the first two days the impact was huge. the owner reported doing interviews all day till 9PM on Monday. But by the end of the week it had died down.
Five days later, we were still getting winners into the store, but other than the name recognition, our company was back to business as usual. The party is over.
Google Analytics came out with a series of ads`to illustrate how frustrating bad eCommerce designs can make shopping a frustrating experience. Bad search, hidden charges, difficult checkout, and interruptions. Shopping online can be almost as bad as walking through the perfume department. My fave is the checkout
Every software startup is faced with a fundamental dilemma . No matter how well your startup is funded, you can’t go it 100% alone.
Your customers are looking for complete solutions. To some extent, this has always been true, but in today’s hyperconnected world, it is crucial. Workflows and departments are connected, companies want to be better connected with customers and suppliers. No software, no matter how good, will exist long as an island.
You want to focus on your added value. Let’s face it, you have limited resources, and don’t want to spend them working on problems that have been solved, or areas outside of your real area of expertise. You want your development resources focused on addressing the highest value problem. Your goal is to have the BEST solution for that problem, essential to find the niche where you add highest value.
Dealing with this dichotomy is a challenge throughout the entire software industry. Customers want a complete solution – your product, by necessity, is aimed at only part of the problem. Over the years, many software vendors have attempted to solve this problem by trying to become the “one stop shop” for whatever. This is almost always a bad idea, and I say this as someone who has created my share of “one stop shop” PowerPoint presentations. Customers may say that they want a one stop shop, but only if every item in their cart is best in class.
The answer for most companies involves some sort of partnership. The basis of the partnership could be marketing, development, or it could be a set of alliances that becomes an ecosystem. Clearly, these partnerships are necessary, but there are downsides and dangers, particularly if you are a small company forming a partnership with a much larger one. It is OK to get in bed with an elephant, but you better watch out if the elephant rolls over.
The potential benefits of getting into a partnership with a larger company are enticing. A partnership with a larger company can provide you with some instant credibility, access to a large installed base, and sometimes even a much needed cash infusion. Even so, the risks are high enough that Dharmesh Shah over at the OnStartups blog offers this advice to those considering a partnership with a big and powerful company –“Don’t“ I recommend the whole article, including the comments.
Shah highlights a number of problems, including what impact of the right of first refusal on the ultimate acquisition value of your startup, and advises you to consider the downside of partnership arrangements.
They volunteer to use their powerful sales resources to help sell what you have into their market. It could be game-changing! All they ask in return is that you exclusively work with them. So, in this kind of situation, the question to ask yourself is: “What if they don’t sell?” Could be intentional, could be uninentional, (sic) but the result is the same. Dollars are not coming in your door. And, unless you planned for this contingency, you’re sort of “stuck” into an exclusive arrangement where you can’t change your strategy to something that will deliver sales.
OK, one of my over riding principles is “Have a plan B” – and exclusive arrangements might prevent you from implementing your plan B. Overall, I prefer flexibility, but if you go into an “exclusive” make sure that there are guarantees and “outs” available if it doesn’t work out.
The start-up, Infoflows, began working with Corbis, the big photo library and licensing company owned by Bill Gates, Microsoft’s chairman, and in June 2006, the two signed a multimillion-dollar development agreement.
But four months later, things fell apart, culminating in a Washington State jury verdict against Corbis for misappropriation of trade secrets, fraud and breach of contract. The jury awarded damages of more than $20 million.
The big problem from Infoflow’s point of view is that they didn’t protect their IP before going into an exclusive deal, betting their whole company on one customer.
And the start-up went into the partnership without patenting its software or system for tracking digital rights, a further risk.
Technology start-ups that work with big companies, said Kevin Rivette, a Silicon Valley consultant, should take care to protect their most valuable ideas, even as they collaborate. “Innovation without protection is philanthropy,” said Mr. Rivette, a former vice president of intellectual property strategy for I.B.M.
Mr. Stone said he felt no rush to patent because he wanted the joint work with Corbis to move closer to a finished system. Infoflows, he said, would develop the underlying system for identifying and tracking digital objects across the Web, and Corbis would own the application for its photo-licensing business.
In December 2006, after Corbis terminated its agreement with Infoflows, Mr. Stone met with Corbis managers to discuss details of the breakup. Corbis said the intellectual property it claimed as its own was covered in the nonpublic patent Corbis had filed back in January of that year. It was the first time Mr. Stone had heard of Corbis patenting the work, he said. “I was shocked,” he recalled.
The Corbis patent, Infoflows said, was a move on its ideas. Mr. Stone said he had an oral agreement with Corbis, supported by an e-mail exchange, that neither side would file for patents until their work was well along. Corbis denied any such agreement.
I think that this is a fairly extreme, but not entirely unusual case, where a bigger company has power and resources to bully a smaller company. But even in the best of cases, incentives will change, and startups need to be careful and protect themselves.
In a future post, I will explore these issues and the problems of choosing an ecosystem to live in.
I am working on a piece about software partnerships and ecosystems, but I just saw this from Ben Kepes at the Diveristy Blog, and I thought it worth sharing.
I’ve been attending Salesforce’s user conference now for a few years and one thing that’s always been a little awkward is the fact that Salesforce has always tried to make the event meaningful for developers but has generally created a kind of Frankenstein beast where suited business types get highbrow in the main conference whilst a few token developer types are left hanging in the developer zones….
…This year however I stood amazed during the developer keynote as Salesforce’s new developer evangelist, Adam Seligman, spoke to a room that was more packed than almost all the other keynotes I attended – it got to the point where ushers sealed the doors because there were so many people standing in the aisles it was becoming a fire-hazard. As Seligman and his colleagues showed some live demos of coding using the new functions contained in the Salesforce Platform such as Touch, Canvas and AppExchange Checkout the woops and cheers from the audience were something akin to an Open Source event, not an enclave of the usually staid enterprise IT folks.
A few weeks ago, I asked if it was possible for mobile advertising to work, noting that mobile apps today get 1% of advertising dollars, in spite of the fact that people spend as much time in moblile as the do on TVs. At the time, I noted two main problems with mobile advertising that make effectiveness difficult. The first is the small size of the mobile display, there just isn’t the space to tell a compelling or seductive story, or quite frankly even to set up a good tease.
The other problem is that users of mobile devices are, well, mobile. They are moving around. A desktop or laptop user will be sitting in one place, writing, answering email, browsing. Their attention is focused on the screen, and it is possible to distract them. On the other hand, people use their mobile devices when they are out and about. They might be checking scores while waiting in line at the supermarket, sending a tweet from a wedding, or checking email while in a meeting. The key is that the display is not the main thing they are focused on, so enticing them is even more difficult.
Even so, there are A LOT of mobile devices out there, and there are a lot of business plans built around selling mobile ads, so some pretty smart people are working on the problem.
“I think mobile is going to save retail,” Ash Evans, director of corporate strategy at Verizon. “The notion that we can help a consumer who is walking past a store and engage them with information that is helpful to them via mobile is amazing.
An intriguing idea, but the article was amazingly light on details, and the idea of my mobile buzzing me every time I walk by a store is a little creepy. One of the few specifics was not based on advertising at all, but rather an app to improve customer service
Neiman Marcus is one retailer that is addressing this with an app that enables people in the store to interact with a store associate and also enables store associates to recognize when a particular customer that they know comes into the store.
Most of the article focused on best practices when collecting data, and the dangers of sharing Personally Identifiable Information (PII) between providers.
shakeup the mobile ad norm with their mobile campaign which is part of their overall Membership Effect Campaign that launched earlier this year.
The campaign, which is being officially launched today, will create rich experiences for smartphone users personalized to their interests and spending habits plus combine video, user generated content, and social media on smartphones. The campaign will also create a tailored timeline of images customized to each user. Based on responses to a set of interactive prompts in the experience, users can also create a personalized panorama that is tailored to their interests in shopping, dining, electronics or travel.
OK – but so far, the ads have only run on TV, and while amusing (they star Aziz Ansari) I don’t see anything new or really innovative about them. Nor do we see much in the article about how the ads will be delivered on mobile devices.
What is new is what they are advertising. Basically, they want you to sync your American Express card with your twitter account, then they (or Amex merchants will send you tweets that contain a hashtag starting #Amex. If you retweet, and then buy the product using your Amex card, you will get a refund on your statement. They don’t talk about how much, and my guess is that it will be pretty small, 1-3% leval. The video explains
For merchants, it is a chance to use their customers to make their ads go viral. If that works, it is a pretty small price.
“Phones can be location-specific so you can start to imagine what the product evolution might look like over time, particularly for retailers,” Carolyn Everson, Facebook’s vice president of global marketing solutions, said in a telephone interview. “We’ve had offers being tested over the last couple of months.”
One way the ads would be delivered would be in a mobile only newstream. Their plan is to combine the data they have about users with real time locations to try to present users with an offer right when they are about to buy. Once again, the issue is using the data without creeping users out. It is (at least) a delicate balance.
Where does this leave us?
It is always shaky to try to predict the future, but I think a trend is becoming apparent. The old model of advertising where a content publisher sells advertising that is interspersed with content does not translate well to mobile. Rather, delivering messages via mobile devices will require new methods ranging from mobile provider, to social networks, with other delivery methods coming in the future.
Privacy issues are huge and need to be addressed, and at some point, someone is going to have to prove the effectiveness of these new ads.
Strategy 1. Just get people to sign up. The first step in moving users to your paywall is to make them users. So you need to get them to sign up. Make it simple, make it no risk. Take a look at the home page of Constant Contact, one of the pioneers of Freemium pricing.
Notice that they do not list plans or pricing. Their call to action is a very simple “Get Started – No Risk, No Credit Card” When you click that link you come to this page.
Notice that there is still no mention of plans or prices, no place for a credit card. Constant Contact wants to get you into the system, and they want to reduce barriers to get there. Constant Contact does not make it easy for you to find the prices before you sign up. In order to find out what the different plans cost, I had to go to the help menu -and the FAQ tab. Another example of using this strategy effectively comes from DropBox. Their home page is remakably simple with a very limited number of choices. You can sign in, watch a video, sign up, or download the app.
Again, there is no mention of plans or pricing. In fact, for Dropbox in order to GET the pricing at all, I needed to sign up and sign in. I could not find pricing though any other means.
Strategy 2 Downplay the Free Offer.
If your free offer is good, you will get lots of attention for it. But you want the emphasis to be on the paid plan. Take a look at what Assembla does. On the home page, there is no mention of the free plan, only a free trial.
Now take a look at plans and prices. What you can see is that the free plans are set off from the paid plans. The idea is that the paid plans are of a different category than the free plans.
Strategy 3. Have limited number of plans and options
Research has shown that when presented with too many choices, people freeze, and do not make a choice at all. This is Wufoo. Notice that they have the free plan, and only 4 paid plans. I think that is the maximum number of options to make available. I prefer three. The other thing to note is that the plans go from most expensive to least expensive from left to right. That is the way our eyes read the page. So the first plan that people will see is the most expensive plan, and that becomes the “anchor” against which the cost of the other plans is measured.
Strategy 4. The reverse volume discount.
Does your product provide more value as the number of users increases? Does your product promote teamwork or sharing? The charge more per user for larger purchases. Assembla’s single plan is $19 for 20 users or $0.95 per user. But their group plan (designated the best value) is $49 for 40 users or $1.23 per user.
Strategy 5. Move the free users towards the Paywall
This really depends on your product. Some of the best Free products move users toward the paywall as they use the product more. Hootsuite’s free product is great. But if you really want to do a lot with it, you need to go to the Pro plan
I want to thank the organizers of the Freemium Meetup, and particularly Cynthia Typaldos of Kachingle for inviting me to speak at the most recent meetup.
It was an honor for me to participate in a panel with Bennet Porter and Chris Weltzien. These are two experienced marketers with a lot of worthwhile information to say. The audience was awesome, lots of great discussion, and even some disagreement.
I think they will be posting video, and I’ll link to it when I see it.
This graph from Derek Thompson shows us where Americans direct their attention, and where advertisers spend their dollars. The chart clearly shows that something is out of whack, Americans spend more time with mobile than they do with print media, yet print gets 25 times more advertising dollars than mobile. This leads me to ask two related questions.
1) Are advertisers overspending on print?
2) Are they underspending on mobil?
I think the answer to the first question is a definite yes, and this is very bad long term news for the world of newspapers and magazines. The simple fact is that print media is getting fewer and fewer eyeballs, and advertising dollars will also exit.
But I am not so sure about the second question. Jean-Louis Gassée asks the question “Why hasn’t mobile advertising taken off?” After all, the iPhone is now 5 years old. “There are tens of millions of smart phones sold each month” According to Pew Research, 27% of Americans are using moblile devices to get news. That’s a powerful lot of eyeballs, and yet no one seems to have found a way to make mobile advertising effective.
Gassee points to two problems. The first is screen size. As you can see in the screenshot below
The ad sizes available may simply not be big enough to catch our attention or entice us. Mobile devices are not just smaller laptops. They are entirely different devices with their own stregnths and weaknesses, and we use them differently.
When we sit down in front of a laptop or desktop screen, our attention is (somewhat) focused and our time is (reasonably) committed. We know where we are and what we’re doing.
With smartphones, we’re on the move, we’re surrounded by people, activities, real-world attractions and diversions. …, time spent on mobile devices is fragmented.
They love the word, they love the thought. And the internet has only intensified the quest for “free”. From free content to shareware to open source, customers are getting accustomed to getting something for nothing, and this makes it harder for products with conventional pricing models to succeed, and nowhere is this more true than for software, where finding a profitable price that consumers will pay has always been a challenge. To resolve this dilemma, many software vendors have turned to the “Freemium” model, where a basic version is offered for free, and users can upgrade for a price.
According to Leonov, there are three conditions where Fremium pricing is the right fit.
1)When the product provides so much value and is designed in such a way that a “significant portion of the users will inevitably cross the paywall. The longer you use the product, the more value you derive from it, and the closer you are to hitting the free upload limit. ” He gives Evernote as an example of a software that used this method well
2) A product with a “Network Lift” – such as Dropbox, which is really only useful if you convince other people to use it as well,
3) A truly useful application where the free version puts “Spotify” type ads in truly annoying places. (Leonov mentions the Sparrow mail app as an example)
If you have a product that falls into one of these three categories, awesome, freemium could work for you.
There’s a lot to be said for creating something of value and charging money for it. If you’re not charging for your product, then your users are the product. This forces you to focus on two unrelated efforts: growing your user base and figuring out how to monetize it. There are many benefits to having free users and focusing on hyper growth. But the decision to go the freemium route should be based on math specific to your business — not a pricing philosophy. Because the reality is, the freemium model doesn’t work for the majority of companies who try it.