Connect with the Drivers—Lyft Advertising Strategy

Lyft is one of the most well-known ride-hailing apps among U.S. consumers. It has been on the Top 10 Most Downloaded App charts of both App Store (iOS) and Google Play Store (Android) for years. The general public often refer to Lyft as the tight follower and biggest competitor of another industry behemoth, Uber, because of their long-going rivalry. As of January 2018, there were 23 million recorded active riders on the platform, making around 1 billion rides per month.

With $867.3 million revenue in Q2 2019, Lyft anticipates for the whole year of 2019 to raise its revenue to between $3.47 billion and $3.5 billion with an annual growth rate of 61%. Lyft is currently available in 350 U.S. cities, and Toronto in Canada. The company’s founders have said that they will not be pursuing further international expansion. And there is still plenty of room for Lyft to grow. According to a brand awareness study, 41% of the respondents are “somewhat familiar” with the app, compared to 25% who were “very familiar”. The remaining 34% are “not very” or “not at all familiar” with Lyft. It’s practical to factor in the non-urban population who are not and most likely will never be served by Lyft (“Lyft Revenue and Usage Statistics,” 2019).

The outlook is promising. But there is also a big challenge for Lyft: how to outrun Uber in the ride-hailing sector in order to survive in the highly competitive U.S. market? If Lyft cannot surpass Uber’s market share with significantly more rides and revenues, it will only become more difficult for the company to stay profitable as the second in the long-run, since unlike Uber, Lyft only doesn’t have a global presence or a diversified portfolio of products and services.

In the past, Lyft has tried different strategies to compete with Uber, most of which failed. In the early 2010s, the company implemented an undercutting pricing method, offering $1-3 cheaper rides as compared to Uber’s similar ride options. Various discounts and promotion codes could also be easily found through online coupon platforms to reduce the ride prices. This strategy worked for only a short while as the company soon found out that the ride count boost was not sustainable in the long-run. Lyft has also tried marketing heavily on its better services, safer rides, and more “hip” vibes to win over swinging customers. However the reception of the marketing campaigns was less than ideal as these crafted brand messages were not effective enough to challenge Uber’s well-established “ride-share leader” brand image. What should Lyft do to grow? In this paper, our agency will propose how the company can overtake Uber not through the riders but rather the other often missing side of the story, the drivers.

Lyft is a private transportation network company first founded in San Francisco in 2007. The company’s main product is its mobile application which helps connect riders with drivers and makes it easier for people to get around affordably. Today, the company operates in almost every major U.S. cities and aims to expand its horizons in the coming years (“Lyft Success Story,” 2019).

The company was initially launched as “Zimride,” providing long-distance ride-sharing services between college campuses in the Greater San Francisco Area. As the company's CEO, Logan Green explained, the idea came from when “he was traveling in Zimbabwe and saw locals using crowdsourced carpool networks to get around. Green was using Greyhound and Craigslist to hitch rides between Santa Barbara, California, and Los Angeles to see his girlfriend, and decided to use the ride-sharing model to fill up seats” (Greiner, McFarland, Sherman, & Tse, 2019). 

In March 2012, Lyft was launched as a service of Zimride and offered short-haul ride-sharing trips different from the inter-campus rides. The company was instantly recognizable because Lyft drivers affixed large, fuzzy pink mustaches to the front of their vehicles. The mustaches were the brainchild of Ethan Eyler, the founder of Carstache, who sold a number of decorations to Zimmer and Green back then and later joined Lyft as a brand manager (Greiner, McFarland, Sherman, & Tse, 2019). 

In 2013, the company continued to grow steadily. At the beginning of the year, it raised $15 million in funding during a Series B round led by Founders Fund, at which time the company also expanded its services to Los Angeles. Later, the company renamed itself from Zimride ito Lyft. The company also shifted its focus from longer rides for college students to short-haul ride sharing instead by selling its Zimride private carpool business to the parent company of Enterprise Rent-A-Car. A total of $60 million was raised in its Series C venture financing round led by Andreessen Horowitz (Greiner, McFarland, Sherman, & Tse, 2019).

In 2014, the company unveiled its grand expansion move and laid the foundation for its later steady growth in a market overcast by Uber. Lyft announced plans to add 24 locations, and expand to a total of 60 cities, including New York City, which was already well captured by Uber. Lyft decided that it would temporarily stop taking commissions from drivers, and tried cutting customer fares by 20%. Meanwhile, the company completed another round of funding, and took in $250 million from Coatue, Alibaba, and Andreessen Horowitz, bringing its total amount raised to $332.5 million (Greiner, McFarland, Sherman, & Tse, 2019).

From August 2017 through July 2018, there were four main ride-hailing players in the market, Uber Technologies Inc., Lyft Inc., Gett/Juno, and Curb mobility. Uber was the market leader with 64% of market share. Lyft followed Uber with 32% of market share. Gett/Juno and Curb had 2% and 1% respective market share (Lazich & Burton, 2018a).

According to “Top Ground Transportation Expensed by Business Travelers in North America, 2018,” an analysis based on more than 10 million receipts and expenses from business travelers from the third quarter of 2018 shows that Uber leads the market with a whopping 73% of share of the total consumer expenses, while Lyft only has about 20% of that pie (Lazich & Burton 2018b).

On the driver side, the two main players of the industry, Uber and Lyft, had respectively 2 million and 1.4 million drivers as of 2017. The numbers are not mutually exclusive since although not common because of the doubled commission cut, some drivers do use both platforms to connect with more potential riders.

As reported by consumers, the typical ride-sharing experiences offered by different companies are more or less the same. The main difference is the price and the market is very price sensitive. Companies with a $1-2 lower price can tip over the market by 5% on a monthly basis.

—Good driver compensation package

—Very distinguishable brand image

—Good reputation and media perception

—Focused business goals

—More nimble and agile than competitors

—Much smaller driver pool 

—Limited operation cities

—Limited financial resources

—Lack of diversified product portfolio

—Drivers always looking for a better platform to work with

—Current GPS services can be improved for better navigation

—Emerging markets are promising

—Uber’s upcoming new products and services

—Low market entry barriers

—Legislation risks

The SWOT analysis suggests that it would be extremely difficult for Lyft to directly attract Uber riders to switch base, because it would take huge resources that Lyft doesn’t possess to change the existing consumer (riders) behaviors. However, Lyft can address directly to the much smaller driver pool and attack the challenge from the driver side. If Lyft can attract Uber drivers to switch base, the company will significantly sabotage Uber’s current pricing and cost structures. On the one hand, with more drivers on the platform, Lyft will be able to lower the ride costs for its riders, thus providing real incentives to change behaviors. And on the other hand, with few drivers to work with, Uber will have to increase its prices to maintain its margins to support its other business. The result is that Uber will slowly push away the price sensitive ride-hailing market to Lyft. As a result, the best growth strategy for Lyft is to advertise toward drivers rather than riders.

If the driver is already working with Uber, how should Lyft persuade this driver to change his or her attitudes, behaviors, and switch base? The answer to this question is the Elaboration Likelihood Model (ELM) of attitude change (Petty and Cacioppo, 1981). The basic idea of the model suggests that different persuasion methods work differently based on whether the elaboration likelihood of the communication situation is high or low. When the elaboration likelihood is high, the central route to persuasion is more effective. And when the elaboration likelihood is low, the peripheral route should work better (Petty, Cacioppo, & Schumann, 1983).

There are two studies that attest this theory. The first study was conducted by Petty and Cacioppo in 1980. In this study, they manipulated three variables:

1. The personal relevance of a shampoo ad (high involvement subjects were led to believe that the product would be available in their local area, while the low involvement subjects were not).

2. The quality of the arguments in the ad (high quality arguments contained more specific statements, while low quality arguments contained fewer).

3. The physical attractiveness of the endorsers of the shampoo (attractive celebrities as contrast to average citizens).

The results of this study proved that the quality of the arguments contained in the ad had more influence on the attitudes of the participants when the product was more relevant to them. However, since the physical attractiveness of the endorsers may also have functioned as a relevant quality arguments, the study did not find any difference the attractiveness produced between the high and low involvement participants (Petty and Cacioppo, 1980). 

To further uncover the effect of peripheral cues under high involvement conditions, Petty, Cacioppo and Schumann did another study in which the peripheral cue could not be construed as a product-relevant argument. A total of 160 male and female undergraduates from University of Missouri–Columbia participated in this study. 20 subjects were randomly assigned to each of the cells in a 2 (involvement high vs low) × 2 (argument quality strong vs weak) × 2 (cue celebrity vs noncelebrity) factorial design. The researcher manipulated: (1) the involvement conditions by telling some participants that the razor would be soon available in the local area and giving them a free razor gift (high involvement); (2) the argument quality by presenting “scientifically designed” (strong) vs “designed for beauty” (weak) razor arguments; (3) the peripheral cue through presenting famous athlete endorsers vs non famous endorsers. Two booklets (one containing the advertising stimuli and the other one containing the dependent measures) were presented to the participants. The sixth ad in each booklet was the crucial fictitious as for Edge Razor. The participants were asked to browser through the booklets and finished the measuring booklet at their own pace. The results revealed several key interactions. First, an Involvement × Endorser interaction revealed that the nature of the product endorser had a significant impact on product attitudes only under low involvement, but not under high involvement. Second, an Involvement × Arguments interaction revealed that the impact of argument quality on attitudes was greater under high rather than low involvement. No significance was approached for the Endorser × Arguments nor the three-way interaction (Petty, Cacioppo, & Schumann, 1983). This study provided further evidence for ELM, complementing the first study. It also supports the view that attitudes formed via the central route will be more predictive of behavior than attitudes formed via the peripheral route. According to ELM, personal relevance is the only determinant of the route to persuasion. It increases a person’s motivation for engaging in a diligent consideration of the issue-relevant information. On the other hand, when the personal relevance is low, a peripheral route of persuasion is a very potent determinant of attitudes.

Using the theoretical foundation provided by the ELM model, we suggest that Lyft advertised toward the drivers via either the central or peripheral route depending on the driver’s current status (already driver for Uber vs looking forward to driving for Uber or Lyft). The method is shown in the table.

While the study by Petty and Cacioppo (1981) suggests that the only factor that affects the route to persuasion is personal relevance, another study by Firat and Venkatesh will help us find the right meaning that the brand should contain through the consumer’s eye. In fact, meaning might be the most important product a brand sells today. The “meaning” of a brand is adopted by consumers to express who they are and what they stand for.

In 1995, Firat and Venkatesh first introduced the Co-construction Branding Theory. The theory suggests a co-construction process of the brand experience rather than a one-way process. Consumers consume the meaning of a brand that is intended by the brand but at the same time add their own interpretations to the brand thus changing the meaning of this brand. The model suggests that the brand’s cultural power is shifting away from the company but to the consumer. Through this co-construction process, meanings beyond what marketers originally intended or recognized as potential are constantly being added to a brand, reflecting the wants, needs, and hopes of the consumer of this brand. Recognizing this co-construction of brand experience gives brand managers and marketers a new perspective to manage and promote brands by allowing and recognizing the agency of the consumer. The meaning of a brand is best created through the negotiation between the two sides.

To test this theory, anthropologists Schouten and McAlexander conducted a study concentrating on the consumer’s experience of the iconic brand Harley-Davison in Australia. The outcome is a summary of the experiential meaning and value of Harley-Davidson for Australian consumers. Recognizing the Harley-Davidson phenomenon’s experiential nature, this study begins with the Harley-Davison’s consumer experience. The researcher conducted ethnographic research fieldwork over the span of 3 years. Throughout these years, they collected observational data through informal and unstructured field interviews, all captured on a hand-held camcorder. In order to have an initial understanding of the “subculture,” their interviews started with marginal members and then gradually progressed to the key members of the community to collect more detailed information, thus ensuring the validity of the findings.

To further study, the researchers also invested in a 1200 cc Sportster, and subsequently upgraded to a 1450 cc Dyna. They became more intimately aware of what Harley-Davidson means by switching roles from “riding bitch” to owner and rider. Cultural immersion also took place through participation in the monthly rides, annual rallies, social evenings, and numerous other activities/events. Active engagement as a full member built reputation. Slowly but surely, the members and particularly the core members, began to relate to the author as a fellow member and rider. At that point, mystique and seduction of Harley world started to expose its secrets. The members worked with the author to ensure the accuracy of the data, often going out of their way to facilitate the research of the study. The researchers were able to come as close as possible to the experiential meaning of Harley–Davidson from within the Australian HOGs context 

From this study, researchers concluded that Harley-Davidson’s experience in the HOG sense was a shared emotion in which repeated symbolic rituals established a shared way of life, and common values tied members together. A strong community ethos had developed within the Australian HOGs with the simple goal of riding and having fun, where experience and involvement built reputation. Riders knew the strengths and weaknesses of the bike in the context of these relationships. Transcendental was the most extreme aspect of this experience (Pirsig, 1974).  Riders experienced a feeling of elation and magic that brings them away from the road somewhere else. At the end of the research, the authors found out that the Australian owners of Harley-Davidson riders have been the actual creator of the brand’s meaning through all the community events and defined what Australian HOG represents. This attests to the Co-construction Branding Theory.

The theory has also been tested in the real business world. A research was conducted by the well-known Lego company under the principle of “co-creating with customers” to better understand the play phenomenon and to answer questions such as: “What is the experience of children when the play, what do they want from it, and how can Lego fulfill those needs?” Lego "anthros" (a play on "anthropologists") were dispatched, spending time in different homes around the world to learn about how girls and boys play differently. The company was able to masterfully rebuilt its product lines separately for boys and girls. They expressly targeted boys for their love of building from start to finish with more complicated Lego sets that took more time to assemble. They also designed sets for girls because they learned that girls wanted more role-play with their toys, figures with names and back-stories, the ability to partially assemble a set and accessorize their minifigures to be veterinarians, hairdressers, and coffee shop baristas and so on. After the initial success, the concept of co-creating with the kids took off and lead to Lego Ideas, an online community where members can discover cool creations from other fans and share their own designs for new sets. Fans can vote on submissions and give feedback. If a project gets 10,000 votes, Lego will review the idea and pick a winner from the pool to be made and sold worldwide. This concept is a huge success since it celebrates with loyal customers and rewards them with innovation, creativity and entrepreneurialism. Without the Co-constructing Branding Theory, Lego could not have built its successful businesses that it’s known for today.

Using the theoretical foundation provided by the co-construction theory, we suggest that Lyft actively invite its drivers and riders to participate in the building of the meaning of the Lyft brand in its advertisement campaigns, leaving more room for the audience to add their own interpretations of the brand.

Some of Lyft main competitors such as Uber have better financial, technical, marketing, research and development, name recognition, longer operating histories and a larger user base. And no matter what strategies Lyft applied to compete directly with its rival, it always failed. After several studies and research, our team has come up with the final strategy that will be significantly differentiate Lyft’s key competitors: to become a driver-centric company. In other words, we believe that focusing on drivers isn’t just the right thing to do, it provides a lasting competitive advantage. Our strategy can be well supported by two key theories, the Elaboration Likelihood Model, which shows us how to retain current Lyft drivers and attract or persuade the potential drivers to join the Lyft, and the“Anthropological and Sense-making,” which helps us find out the real goals that drives and motivates the drivers to work with Lyft. 

To implement this strategy for Lyft, we recommend the advertising campaign “Big Love for Lyft” towards potential drivers. This campaign will show that Lyft has made concerted effort in its business strategies and its advertising to make its drivers feel valued and cared for. The background music and illustrations that are used in video Ad and posters will give the current and potential drivers an idea that it is a right choice to join the Lyft company and they won’t regret it. Therefore, by implementing the strategies of persuading and inner motivations in our “Big Love for Lyft” advertising concept,  Lyft will ultimately create a driver loyalty and sustainable competitive advantage that the rival will one day wish for.

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