Market Penetration Strategy and Uberization
Game Changers Challenge the Status Quo, Near-Term Profitability is Hardly on Mind
When a company is in a market penetration mode with disruptive forays, it is prepared for a rocky ride and even huge losses.
In its seminal years, Amazon was losing billions but now its revenues demonstrate just the reverse. Google was only a search engine when it entered the market that was dominated by Yahoo. Facebook, too, did not appear to have a meaningful revenue model not too long ago.
But today Amazon, Google and Facebook are great success stories, being among companies sweeping investors and users off their feet with business innovations.
Game Changers
Uber falls into this category of industry players with game-changing products and services that challenge the status quo. The recent report that it has lost $1.2 billion in the first half of this year is thus no surprise.
Its real success is enabling its business model to permeate other sectors in what has come to be known as “Uberization” of everything.
On-Demand Customer Experience
But then Uberization is not about Uber. It is about the model they embraced which is finding acceptance in other sectors such as travel, hospitality, healthcare, logistics, professional services and even banking.
It is the customer experience, delivered on demand, that is key to the success of the business model. It is a model developed to address the challenges faced by consumers, unlike the old ways where the focus was on themselves, not consumers. A model enabled by mobile technologies, real-time data availability, the convenience of cashless payment and pricing that is dynamic to adjust to demand.
New Entrants
Within its own domain, Uber has spawned new entrants (such as Didi in China, Grab in Singapore and Ola in India) invading its turf worldwide. This makes the apps-based ride-hailing business competitive, with passengers becoming big beneficiaries.
Heavy discounts and other promotions to make inroads into the market put Didi, too, in the red. Uber addressed its China challenge by getting into a deal with Didi and exiting the country to focus on other markets.
Ad Blockers
Google did not run into competitive trouble in the search space. But they had to encounter ad-blockers who began to crimp its revenues. Far from being unnerved by the threat, Google developed a counter-strategy by getting into the whitelists of ad-blockers.
Competition does lead to innovation that eventually benefits consumers. Businesses spend big to gain market share and build on it for profitability and long-term success. Just as the likes of Amazon, Google and Facebook have been able to gain a firm footing over time!
G Joslin Vethakumar
