BUSINESS MODEL CANVAS: Lyft’s expansion into the Indian Market

I’ll be discussing an exhaustive business plan using the Business Model Canvas (BMC) and Value Proposition Canvas(VPC) as a PM at Lyft for the expansion into the Indian market.

Lyft is an on-demand American ride sharing service that allows riders to quickly find a driver and get from one place to another. It is based in San Francisco, California and operates in 644 cities in the United States and 12 cities in Canada. Lyft does not own any vehicles; instead, it receives a commission from each booking. With a 32% market share, Lyft is the second-largest ridesharing company in the United States after Uber.

Considering the success of Uber and Ola, there is a huge demand of ride sharing services in the Indian market.

Features of Lyft:

• They use the tag line — A ride whenever you need one
• Lyft matches customers who want a ride with nearest available drivers
• Customer gets to know the driver details and ETA when he requests a ride
• All Lyft cars have a big pink coloured moustache on their front
• Live tracking tells driver the exact location of the customer from where ride has been requested
• Lyft business model has a rating system in place for drivers as well as riders where they can rate each other

A Business Model Canvas includes the below-mentioned parameters in the business plan:

• Customer segments
• Value proposition
• Revenue streams
• Channels
• Customer relationships
• Key activities
• Key resource
• Key partners
• Cost structure

Lyft’s BMC

Customer Segments:

There can be three broad categories of customer segments for Lyft in India:

• Drivers

Full-time drivers (People who own a car or work as a full time driver)

Part-time drivers (People who love to drive and want to earn some extra cash)

• Passengers/Riders

People who do not have their own vehicle to commute

People who have a car but don’t want to drive themselves

People who want a low-cost ride

• Corporate Communities

Tie-ups with different corporate where the driver picks and drops the employees

Value Proposition:

• Value proposition for drivers

Income generation: Helps to earn additional source of income for the drivers

Driver Rewards program: Ensure rewards to driver partners based on work hours or number of trips completed

Flexible work hours: Flexible work timings can help the drivers work as per their convenience

Ease of joining: Easy Requirements to join that can be met by most car-owners (includes background verification, vehicle inspection etc.)

Frequent payments and track earnings: Making payment procedure easy so that drivers don’t have to wait for a long time to get their money and the ability to track their earnings

Tie up with third party car rental companies: Tie up with third party car rental companies to encourage more drivers onboarding to the platform by rending cars if they don’t own one

• Value proposition for Riders

On-demand rides availability: Cabs to be available on one tap on the app; thereby reducing the waiting time

Affordability: Reduced cost compared to taxi fares, making it affordable

Safety: 24/7 customer support, ability to see driver’s details, reviews on the driver by other riders. Real-time tracking should be available during the ride

Book ride in advance: Ability to book rides in advance to avoid last minute hassle and guaranteed booking

Upfront pricing: Providing estimated fare of the trip before the ride

Ease and convenience: Come at the doorstep, allow for cashless transaction. Have an option to choose among the different vehicle types like economy, premium etc.

Feedback: Ability to give feedback after the end of each trip describing their experience with the driver or other riders

Discounts: Offer coupons for discounted and sometimes free rides

Subscription plans: It can offer special features on each ride like no surge pricing, connecting with the best rated drivers etc.

Real time customer support: In case there are any issues in the on-going ride, rider just needs to press the emergency button in the app or call an emergency number

Revenue Streams:

The primary purpose of every business is to generate revenue. Lyft revenue model has multiple revenue generating streams:

• The primary revenue stream is the riding or booking cost charged to the rider. For every ride, Lyft keeps a percentage (20%) of the price paid by the rider and the rest is paid out to the driver
• The second revenue stream is surge pricing (via Heat maps, that define an area where the demand is more) charged by the taxi dispatching company in case of high demand
• A new addition to Lyft revenue model is a new Express Drive program initiated by Lyft. This program is targeted at drivers who do not own a car. Lyft connects these drivers with local car rental companies and earns by assisting the transaction between both parties

Customer Relationship:

• Drivers
  The relationship for the drivers will mainly be defined by what the platform does for them.

A part-time/casual driver will care about the hourly wage and flexible work hours

A full-time driver, who will use his car predominantly, will look for wider package of pay and entitlements

• Riders

Reviews, Rating and Feedback system: Making sure that the user’s reviews, rating and feedback is heard and appropriate action is taken on it

Safety: By having verified drivers and ability to deal with customer issues in a timely manner.

Referral bonus and promotional codes: It helps build customer loyalty, increases user’s engagement level and enhances brand reputation.

Channels:

Channels for the initial awareness and customer acquisition can be:

• Social Media: Awareness through social media like YouTube, Facebook, Twitter, LinkedIn, Pinterest etc.
• Word of Mouth: Early adopters in the adoption lifecycle can be gathered through this channel
• Campaigns: Providing free vouchers to attract customers. Example: Providing vouchers through 3rd party apps or at public transport stations
• Digital ad campaigns: This can be done through Google Ads and Social Media
• App Stores (Android, iOS): Through high ratings, ads and being featured

Most tasks are managed through the app apart from the customer support that requires human intervention. One of the best customer relationship channel is Social Media that can be used to instantly respond to queries raised by customers.

Key Activities:

• Product development and management: Lyft will primarily be accessed through app/website, hence it’s important to ensure a seamless user experience for all the customer segments
• Marketing and customer acquisition: This will be a primary activity involved when Lyft is planning to expand in India
• Hiring drivers and background verification: Drivers form an integral part of Lyft’s customer segment and it is important to perform background verification before onboarding any driver to ensure safety for riders
• Customer support: User feedback must be taken into account and their queries should be resolved in a timely manner to retain its users
• Manage seamless transaction & driver pay-outs: Offer seamless payment transaction for riders as well as drivers and ensure that the drivers receive payments in a timely manner

Key Resources:

• Skilled Engineering staff for a technologically strong platform
• Skilled drivers for a safe and comfortable riding experience
• Active users and drivers
• Captured user data, algorithms and the capability to analyse and gain insights are essential.
• Digital assets like app/websites and the tech stack

Key Partners:

• Drivers: It’s essential to have enough skilled drivers onboarded on the platform to be able to provide timely pick-up at low cost
• Investors/Venture Capitalists: They will bring funding to the table which will be used for all the key activities of business
• Technology partners: Partners offering leading-edge, proprietary technology that is essential for the company like providers for GPS, maps, payment processors, cloud services etc.
• Corporate Partners: This partnership will help in tie-ups with corporates for easy pickup and drop of their employees
• Insurance Companies: Provide insurance for drivers, cars & riders

Cost Structure:

• Marketing & Sales Cost: Includes advertising expenses, expenses for customer acquisition and retention
• Research & Development Cost: Compensation expenses for engineering, product development and design employees, Technical Infrastructure etc.
• Commission to drivers: This includes pay-outs, incentives given to drivers
• Other Costs: This includes insurance expenses, payment processing fees etc.

Value Proposition Canvas:

Value Proposition — Customer Profile (Passengers/Riders):

I’ll be discussing about the Value Proposition Canvas for the Riders’ of Lyft in India. Essentially, a user of Lyft will be trying to get from Place A to Place B and there can be multiple reasons for considering to travel by Lyft.

• To avoid drink and drive
• Users Don’t want to waste time finding a place to park his vehicle
• Commuting to airport
• Users don’t want to drive a vehicle on his own and just sit back and relax during the journey
• More privacy as compared to public transport

In all these cases, the user may feel confident that travelling by Lyft could ensure a hassle-free experience without worrying about the trip cost, as they trust that they won’t be overcharged and will have multiple options of vehicles to choose from.

As travelling in a cab will ensure more privacy, it will be a preferred mode of transport compared to the public transports. But a customer will prefer to travel by Lyft if it’s a reliable and safe service, as they might need to travel to unfamiliar areas at any point of time in the day. Also, the users would expect some form of rewards or discounts for being loyal to the brand.

By adding in the feature of pre-booking a shared ride, Lyft can alleviate a lot of the anxiety that comes with booking a shared ride, when the user needs to be somewhere at a certain time. This could be relevant to people getting to work, catching a flight, or any situation where the user has a fixed time in advance.

Lyft’s VPC

Value proposition:

Lyft can provide a lot of services to the customers primary one being, cab availability on a single tap with minimal or no waiting time. This can be ensured by onboarding enough drivers to the platform with a process of verification to ensure safety of the passengers. Users might not be able to afford private cabs all the time, so they can go forward with shared rides as per their convenience. The upfront pricing shown to the users will simplify their decision making on selecting the appropriate type of ride.

• Gain Creators:

— More pleasant sharing ride experience

— Offers time to be productive

— Taking feedback & review will help in building trust and loyalty

— Reducing traffic on the road

• Pain Relievers:

— Save money while being efficient

— Reduce frustration with other riders by ensuring friendly environment

— Fixed cost at time of booking, no surge pricing

— A clean, hygienic and comfortable ride

— Safety features: SOS or share ride details with friends/family

• Products and Services:

— On- demand cabs on a single tap

— Upfront pricing: Providing estimated fare of the trip before the ride

— Book shared ride up to 24h in advance: The idea for this feature is that users would book 24-hours in advance and receive driver and route confirmation. A user would be able to cancel their booking, but they would be charged a cancelation fee

— Rate experience with drivers & other riders: Passengers could then rate drivers & co-riders, and give feedback on things such as being late for pick-up, being inconsiderate in the car, with the premise being that if a person receives 5 sad face reviews over a 2-week period, they would be temporarily banned from booking shared services through Lyft (they could still book private rides)

Customer Profile:

Customer Jobs:

• Book & Board the cab
• Not worry about driving under influence & worry about parking
• Make a transaction for the payment
• Give feedback & reviews

Customer Gains:

• Easy to get around unfamiliar places
• Good alternative when weather is bad
• Time to be productive
• Reliable & safe option to commute
• More privacy than public transport

Customer Pains:

• Surge pricing
• Difficult to change pick up point once en-route
• Driver unable to find pickup point
• Hygiene and car cleanliness not taken as a priority
• GPS taking a slower route than usual
• Arrival time may be different to the time on the app

Conclusion:

Essentially, a user of Lyft is trying to get from point A to point B, but that is not the only job they are trying to complete when they use Lyft. There are many jobs that can be completed. On an emotional level, they may feel confident they are not being price gouged (the price you see is the price you pay before confirming your ride) and relaxed that they themselves don’t need to sit in traffic or deal with other drivers.