Austin is the capital city of Texas, but also of all things weird and local. Austinites buy groceries at Central Market, get outdoor gear from Whole Earth Provisions, and work remotely at local, non-franchised coffee shops. Ask anyone and they’ll have a favorite unnamed, street corner taco trailer. We love shopping local, and so when Uber and Lyft left abruptly in 2016 following a vote by residents in support of (more expensive but safer) fingerprint-based background checks, Austin became the perfect breeding ground for a new crop of local rideshare startups to thrive.
Enter RideAustin, Fasten, GetMe, Wingz, Fare, and InstaRyde. Visitors were confused, but locals quickly got on board.
Then, in May 2017, Uber and Lyft returned to Austin. My hope was that Austinites would continue to choose local ridesharing companies over the returning giants, who had left us in the lurch by departing with minimal warning. After all, treating your customers poorly is supposed to herald business failure.
Unfortunately, the numbers show that even locally focused Austinites don’t always make decisions based on their loyalty to weird and local companies. Andy Tryba, CEO of RideAustin, a nonprofit that is locally funded, shared on Medium that they saw a 55 percent decrease in trip volume the first week that Uber and Lyft were back in Austin.
So what happened? That Austinites stopped using a ridesharing app they’d used for 12 months—one that pays drivers more, donates to charity, and operates as a nonprofit—came as a shock. Is it possible that some companies, like Uber and Lyft, are just too big to fail? Is there a certain business need that outweighs the necessity to provide a good customer experience?
Is it possible that some companies, like Uber and Lyft, are just too big to fail? Is there a certain business need that outweighs the necessity to provide a good customer experience?
When bad customer service doesn’t drive customers away
During that Uber- and Lyft-less year, both companies had a bad reputation—and not just because they abandoned us. Nationally, both companies have suffered through multiple scandals. That’s why it was a surprise that Austinites flocked back to the big ridesharing apps after we had more, and arguably better, options.
But ridesharing might be the latest addition to other industries known for surviving despite volatile customer experiences. Internet and mobile providers, cable companies, airlines, and health insurers top the list for anecdotes about poor customer service. From gate agents to help personnel, it often feels like we’re interacting with rusty machines more often than with another human.
There are a few reasons why these big businesses profit when the customer experience suffers. For one, even when there are multiple players in a space, the market is relatively small and price-conscious consumers may make decisions based on cost. Larger companies like Uber and Lyft are often able to offer steep discounts and cheaper prices to knock out competition.
This isn’t because larger companies are always profitable, however. Some big companies—Amazon is famous for this—don’t actually make money year-to-year. When a large brand has the clout and loyal customer base, they can afford to take the long-tail view and offer great prices to consumers in order to sustain their market share, even while taking a short-term loss.
In their infancy, Uber and Lyft knocked out taxis by offering the convenience of an app with real time updates. But they also undercut the price.
As Uber and Lyft returned to Austin, they played that game again. Uber and Lyft offered riders discounts and coupons for returning, and it worked. This forced local rideshare apps to also lower their prices. RideAustin price-matched, and then undercut Uber and Lyft by one cent on their mile per minute pricing. Tryba (and co-author Marisa Goldenberg) reported that RideAustin’s competitor Fasten both dropped its rates and expanded its discount program.
It may be too early to gauge, but Tryba is hoping that RideAustin’s values, contributions to the community, and higher driver wages will ultimately outweigh minor cost savings when it comes to garnering local loyalty.
Size doesn’t matter when it comes to customer service
For the majority of businesses, the customer is still king and customer service does impact the bottom line. According to research conducted by Zendesk, “66% of B2B and 52% of B2C customers stopped buying after a bad customer service interaction.” Do the math and bad service or a poor customer experience can add up to sizable losses, quickly.
"66% of B2B and 52% of B2C customers stopped buying after a bad customer service interaction." Do the math and bad service or a poor customer experience can add up to sizable losses, quickly.
There are large companies that have managed to create great customer experiences—Zappos, Fossil, Tesco, the State of Tennessee, and Apple, to name a few. From one-day shipping, to replacing damaged products, to phone lines where you can actually talk to a human, these companies have made their customers a priority.
If companies as large as Amazon and Apple can provide great, easy customer experiences, there’s hope that ridesharing, airline, telecom, and healthcare companies can do the same—whether or not newcomers have entered the market. As for me, I’m choosing to leave Lyft behind. I’m now a diehard fan of RideAustin, and it’s my rideshare of choice now that I have more, and better, options. #SupportLocal