Saturday, December 09, 2017

Will the strategic tie up with Uber be beneficial to Comfort Taxis?

Comfort Taxis entered into a strategic alliance with Uber to benefit from Uber's taxi booking app. I do not understand the rationale.

Comfort had an excellent taxi booking service using a call center. For a long time, it dominated the taxi booking market. Most taxi calls are made through Comfort.

When booking through apps became popular, Comfort already developed its app to provide this facility to its customers.

The main pricing scheme for Comfort is the standard taxi fare plus a booking fee. Comfort has also introduced its fixed fare tariff.

Comfort started to lose its market share only after Grab introduced its attractive promotions. Their customers could get a $5, $4 or $3 discount for each ride. This is very expensive for Grab and must have cost massive losses. It is not sustainable for the long term.

Grab also offered attractive incentives to entice Comfort drivers to move over to them. Again, this is done at a heavy cost to Grab.

Comfort could have responded to Grab by offering similar promotions to customers. They could have maintained their market share or suffer a smaller erosion.

Comfort could also have responded to the the loss of taxi drivers by offering incentives for their drivers to take bookings. They can also lower their rental rates and lock up their drivers on a 6 or 12 month contract.

By partnering with Uber, I suspect that Comfort is not addressing the root of the problem. Customers do not need fancy features. They want to get a taxi quickly and they want the fare to be lower. If Comfort could match what Grab is doing, their customers will still prefer to ride with Comfort.

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