ver the weekend, I received a politically charged email from Lyft expressing their fervent opposition to recent presidential moves, strongly outlining their brand beliefs and promising to proactively support their cause. Many company leaders issued similar statements. But this article is not about politics—it’s about marketing.
Stepping back from the emotions, what impact does an email like that create? At the surface level, we could assume that roughly half the country supports the administration’s actions and about half don’t. Then it would seem that Lyft may have engendered more support among their anti-administration users and alienated their pro-administration users. Therefore, it could be that the business impact of the decision may have been to shear their market in half (albeit one could argue for a more lucrative half). I’m not sure how much business or marketing thought went into the decision, and I’m not here to argue about the place of business goals over political or social goals.
What I find interesting is that the decision to “shear their market in half” may have been brilliant. At a high-level, we have Uber and Lyft in a race for dominance in the ride-sharing market. Lyft is clearly an underdog, with various reports putting Uber at around 80% share. As both fight fiercely, we consumers have won with down-driven prices while the ride-sharing services bleed profits.
This phenomenon happens quite a bit. When we find offerings to be parity on nearly all elements, consumers default to price. Commoditization is the great evil to brands, as it nearly always ends in a value-destroying price war.
So what are brands to do? As I’ve mentioned in the past, strategy is choice. A brand must decide to be different than the competition. Not incrementally cheaper or slightly better in ways that are copied immediately, but fundamentally different. With this choice, the brand will make trade-offs. They will not serve the entire market equally as well as their competitor. They will choose to provide less value to some segments of the market so that they can provide more value to other selected segments. You have seen this at play and made a choice based on it within the last 12 hours. You paid a little more for coffee that you prefer, while someone else refilled their travel mug at 7-11.
Rather than serving everyone at parity, brands find a segment for which they can create an offering to serve better than competition. Let’s say Lyft has a 10 share and no point of difference. With their stance, they chose to segment the market into two halves, and for one of those halves, they have potentially created a higher-order benefit that aligns with the needs of that segment. So that’s a start. But two more issues arise.
First, did they choose the more lucrative half? When segmenting, it’s crucial that you align on a segment for which you can provide differentiating value and that can also create value for you. One could make the assumption that large, metro areas are the highest volume potential markets for ride-sharing and that consumers in these markets may also over-index on Lyft’s higher-order benefit positioning. Therefore, the segment for whom they might be targeting could have greater potential value. That’s just an assumption. I’m sure someone could make an argument another way.
But couldn’t Uber just copy the stance? Yes and no. Uber apparently had a bit of a hard time over the weekend clarifying their position, but they eventually landed on refugee support in some way. The rub is that it probably doesn’t make marketing sense to copy Lyft. Do they also alienate half the market, particularly the pro-administration half that Lyft left them? Probably not. Does it make sense for Uber to take the opposite political stance? Arguably no. With 80% market share, Uber won’t want to split up their pie at all. Their most likely action is one that is apolitical and uncontroversial. At the end of the day, 50% of the market may agree with Lyft’s brand beliefs, but that doesn’t correlate to 50% market share. Not everyone who aligns with Lyft’s beliefs is aware of the positioning. Lyft may not even choose to differentiate on this higher-order benefit longer-term to cement the positioning. And not everyone in their “half” cares to the same degree. On the spectrum, there will certainly be some people that use this as the deciding factor in choice. But some people who agree with Lyft's position will stick to their routinized behavior and use Uber. Alignment with brand belief is one element that impacts the behavior of different consumers in different ways.
The marketing take-away is that ties are broken by price. Brands who are not structurally designed for a price battle should look to differentiate for an attractive segment. Success comes from molding their entire offering to be a better choice for that segment rather than a lukewarm choice for all segments.
In the meantime, I invite our nation to come together over some delicious, famous brand ice cream—whichever one is on sale this week.
Update: 2/2/17 - The website AppAnnie tracks the downloads of apps and has some preliminary data on the potential impact based on daily download numbers. Lyft went from around 50th in total number of downloads in the U.S. to peak at 7th over the weekend. They also went from 3rd (behind Yelp) to #1 on travel apps during the buzz. The impact already appears to be wearing off a bit, as they're back down to 20th overall and 2nd in travel. Uber is back to 15th overall and reclaimed #1 in travel. It will be interesting to see if Lyft tries to make this into a long-term differentiation play and, if so, how consumers prioritize that aspect of the brand when it comes to making a choice in ride-sharing apps.