IBBAAA BRAND MARKETING PLAN FOR THE TARGET MARKET MUNICH - GERMANY

Analysis | Strategies | Tactics

EVELYN SINDERMANN |MIM 2015 Professor Protano: Strategic Brand Management

EXECUTIVE SUMMARY Ø  The brands opportunity is to increase the revenue to €8.2M by targeting the

corporate market and creating a premium offer by the end of 2015.

Ø  The rise in disposable net income (€2,504 in average) and the growing number of corporations in Munich offer new business opportunities for UBER. Raising brand awareness by capturing & communicating a superior value proposition strengthens UBERs brand equity.

Ø  The strategic alternatives are: A: “Keep Driving” (gain market share by penetrating existing target audience) B: “Go Corporate” (attract new target audience with existing service) C: “Go Crazy” (innovate & create new product for new audience – be provocative)

Ø  Recommendation: “Go Corporate” is the best option in terms of market potential (growing demand) and an ROI of 17.7%

Porters 5 forces | The market attractiveness is low due to a highly competitive environment, risks of substitutes and medium threats of new market entrants

Threat of new entrants | MEDIUM

¤  Patents on various technologies build a boundary for competitors from a technological aspect

¤  There are no proprietary elements that prevent new market entrants.

¤  Compliance with German transportation laws is required to enter the market

¤  Low seed capital is needed to enter the market

Power of Suppliers | HIGH

¤  Drivers & Rental Car Companies have a high bargaining power.

Power of Competitors | HIGH

¤  Taxi & Limousine services are higher in price but offer a broader network

¤  Similar services to Uber (Lyft & Wundercar) are currently banned by law but have the potential to enter the competition with new business models similar to Uber.

Threat of Substitutes | MEDIUM

¤  Public transportation, car sharing services and bicycles are easy accessible alternatives and less in price

Power of Buyers | HIGH

¤  Customers have multiple choices according to their needs ¤  Scheduled rides: Taxi ¤  Luxury rides: Limousine Services ¤  Self - driving: Car sharing e.g. DriveNow,

Car2Go,

MDI: Opportunity to tap 86% passenger transportation market by increasing the number of rides by 2020

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Market Demand of Passenger transportation in Munich*1: 12,2M

Potential Market Demand*2: 90,4M MDI: 12,2M/90,4M ≈ 14%

*1: Passenger transportation based on Taxi business excluding car sharing & public transportation. *2: Estimated data

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Market Penetration

UBER has a growth potential – differentiation & innovation is required

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Share Development Index

MDI ≈ 14% SDI ≈ 54%

Growth with Market Development

Uber has the opportunity to increase their market share from 7,78% to 14,41% by 2020.

Our competitive advantage: Price Leadership

Operational Excellence

Product Leadership

Customer Intimacy

Munich Drivers (Private Limousine Service)

Taxi München eG/ IsarFunk (2 main taxi operators in MUC)

UBER

MVG (Munich public transportaton system: Ubahn, Sbahn, Bus, Tram)

Uber operates in an attractive market with potential to strengthen their competitive position towards leadership

Unattractive Average Attractive

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Market Attractiveness

Com

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Posi

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Disinvest

Proceed with Care

Cash generator

Phased Withdrawal

Proceed with Care

Growth Leader Leader

Try Harder

Double or Quit

Building on low operational costs allows price leadership position.

Relative Strengths Relative Weaknesses ¤  Competitive Advantage

Ø  No proprietary inventory (cars) & direct employees (drivers & dispatchers) allow minimal operational cost and fares that are 20% lower compared to the competition

Ø  A scalable business model facilitates a possible German-wide expansion with minimum investments

Ø  High quality standards of cars & services ensure brand recognition and strengthen

¤  Superior Value Ø  Cash-less payments and pricing

transparency builds trust & safety among customers and drivers

¤  Superior technology & innovation strengthen Ubers operational excellence and help growing brand recognition in a competitive environment.

¤  Legal vulnerability Ø  Successful US business model is restricted in

Germany and leads to additional costs.

Ø  Commercial drivers license: €240,- per driver/ every 5 years

Ø  Privately owned cars are restricted to commercial use. Rental car companies need to provide cars and insurance

¤  Lower profit margins due to additional costs and shared revenue with rental car companies are compensated with higher volume.

Market growth potential compensates possible profit loss due to external threats

¤  Increase the number of drivers from 120 to 200 by the end of 2015 Ø  Use economies of scale: 80 additional

cars result into a 40% revenue growth Ø  Higher frequency lowers the estimated

time of arrival. Ø  Customers benefit from faster

service

Ø  Increasing the frequency of rides per driver/day from an average of 11 rides to 15 results in an estimated revenue plus of €2.5M annually

¤  Capitalize on operational excellence to increase the volume and frequency of rides and gain market share of more than 5% by the end of 2013.

Opportunities Threats ¤  High pressure from governmental

restrictions & key industry players Ø  Taxi industry sees Uber as a “grey-

market service” and tries to file lawsuits that may cause unexpected legal expenditures.

Ø  Possible minimum wage restrictions for the taxi industry and price increases from rental car companies will decrease profit margins.

Ø  Negative PR about Uber influences the customer behavior and can result in dropping demand and market share.

¤  Profitability will drop if Uber cannot compensate possible cost increases by establishing significant brand equity

The business model in Germany – an explanation

1.Uber recruits drivers •  Pays commercial taxi license (legal requirement)

2.Uber connects drivers with local rental car companies •  Commercially driving with

private cars is illegal

4. Drivers receive requests via the Uber app: •  Locate passenger

pick-up & drop-off destination

•  Receive cash-less payment via Uber

3. Passengers use Uber app: •  Pick-Up request •  Real-time tracking •  Payment

Consumer – two main target groups Students (age 18-25) Young Professionals (25-35)

•  Transportation to/ from University •  Cheap alternative to taxis & public

transportation •  Pick-up from parties & events •  Split fares with friends

•  Transportation to/ from work or business meeting

•  Comfortable driving experience •  Fast & reliable transport •  Expense tracking when traveling for

work •  Traveling “in-style”

•  “Cooler” than taxis •  Most of my friends don’t know about it

yet •  Surge-pricing during peak times too

expensive

•  A high qualitative service with short waiting times

Consumers support the Uber business model. Build on general demand for transportation, enhance brand equity and awareness for future growth.

Customers – Drivers build the core of the business model

Drivers

•  Passengers •  Profit margin •  Commercial taxi license •  A vehicle •  Easy-to-use technology •  Safe money transfer •  Reliable customers •  Insurance & benefits •  Reliable partner who provides technology & infrastructure •  Direct connection to the passenger

Drivers value Uber technology. Build on drivers feedback for innovation and consumer insights.

Collaborators – Local rental car companies (a necessary middleman by law)

Rental car companies

•  Renters (Uber drivers) •  Profit margin •  Long-term contracts about expected rental volume

•  Responsible drivers •  Growing customer base

•  Partner who delivers constant source of income

Enhanced credibility and higher rental volume increases the chances to negotiate lower rates.

PESTEL: Increasing market demand opens possibilities in the areas of new technologies & sustainability. Risks of increasing costs need to be considered.

Political & Legal Industry regulations: •  Government requires

commercial licenses •  Political discussion about

minimum wage laws for taxi industry

Ø  Decreasing profit margin due to higher cost

Economic •  Germany reached historical high in

disposable income. Munich has the highest disposable income (monthly net average: €2,504)

•  Growing corporate sector Ø  Price sensitivity decreases Ø  Growing profit in corporate sector

increases demand for private transportation

Social •  Population density in cities is

growing •  People follow fast paced life

style Ø  Increasing demand for

transportation in urban areas

Technological •  Automobile manufacturers work on

technologies for more sustainable vehicles

•  Use of mobile applications for daily activities is increasing

Ø  The market is open for technological enhancements and innovation

Environmental •  Trend goes towards environmental

friendly & sustainable transportation •  Growing demand for Electrical &

Hybrid cars

The strategic problem – a lack of brand awareness

Situation: UBER penetrates a traditional service industry with an innovative & technology based business model – for a 20% lower price than the average competition...

...but what is the problem? – Supply & Demand

Uber is new to the German market. People don’t see Uber as their “first choice” yet.

Low demand makes the business unattractive for drivers.

The business has a high growth potential but lacks in Brand Awareness

Strategic Brand Alternatives

LOW BRAND AWARENESS

ESTABLISH BRAND EQUITY

“KEEP DRIVING” “GO CORPORATE” “GO CRAZY”

CHANGE BUSINESS

MODEL (Invest into own fleet of electric & hybrid

cars)

LEAVE GERMAN MARKET (Search for

other European countries with less

governmental restrictions)

The Alternatives – A | B | C

A: “Keep Driving” (gain market share by penetrating existing target audience) B: “Go Corporate” (attract new target audience with existing service) C: “Go Crazy” (innovate & create new product for new audience – be provocative)

Existing

Target Market New

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CNot an option Ø High legal

restrictions

A: “Keep Driving” PRO CON BENEFIT

•  No need for investments in R&D or innovation

•  Existing customers can be used as advocates

•  Increases sales & profits

•  Changing customers perception of an existing product/brand is difficult

•  No differentiation •  Easy to imitate for

competitors

•  Price Leadership status can be retained

Investment Marketing campaign

€ 700,000

ROI 6,5%

B: “Go Corporate” PRO CON BENEFIT

•  Enter new customer segment •  Create value for a different

audience •  Leverage on growing number of

corporations and high disposable income within the business sector

•  High costs in terms of Marketing

•  Combines the knowledge of Ubers operational excellence with new market options

Investment Marketing Campaign: €200,000 Sponsorship/ Branding € 85,000

ROI 17.7%

C: “Go Crazy” PRO CON BENEFIT

•  Advantages of the “first mover”

•  No competition (at least for a short time)

•  Very risky strategy •  High costs •  Difficult to implement

•  Immediate industry attention (if implemented successfully)

Investment •  New Product Development &

Marketing Campaign: € 2,000,000

ROI 8.9%

Recommendation: “Go Corporate” is the best option in terms of market potential (growing demand) and an ROI of 17.7%

Market share

2015 2020

7.7%

14.8%

Increase frequency of rides/ driver per day

2015 2016

11

15

120

200

Increase number of drivers

2015 2017

By focusing on large businesses Uber can leverage on its high quality, double its market share by 2017 and take over the market leadership in the corporate passenger transportation sector by 2020.

PHASE 1 PHASE 2

€ 8,6

€ 12

Increase average price/ride

2015 2018

PHASE 3 RESULT

Entering new target market by communicating brand value

Functional

Emotional Experiential

UBER stands for fast | reliable | high quality transportation

Uber means consistency & high customer friendliness •  No need to hail taxis on the street •  Corporations rely on Uber:

whenever & wherever they need transportation

UBER is a partner that cares about you and the people that are important for your success: •  Clients / Business

partners •  Employees

Brand asset valuator: Consumer awareness is the key to brand value.

Brand Stature Esteem & Knowledge

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Unused potential /niche

New / fading brands

Power brands LEADER

Mass market

Eroding brands

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Str

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th Goal: Partner with the 10

largest companies in Munich within the next 5 years. Ø  Differentiate through Quality Ø  Use customer feedback for

improvement Ø  Research new innovations for

the UBER App Ø  Customize service according to

the companies needs Ø  Stimulate positive word-of-

mouth among business professionals

Enhance partnership with leading corporations and encourage positive word of mouth (Customers & Drivers)

S B I V A R Solution

Raising brand awareness by creating a premium value proposition for corporations.

PERCEIVED CONSUMER PERFORMANCE

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High

Inferior Superior

Economy

Average

Premium

S B I V A R Branding / Value

TRANSPORTATION EXCELLENCE

Brand Awareness and revenue growth through corporate business partnerships with “The big 4”

Companies with high transportation demand

BMW: 33.000 employees Allianz: 4.200 employees Siemens: 1.600 employees MAN: 1.400 employees

= Average demand of 1884 rides/day

Hypothesis: 5% of “The Big 4” employees need a transportation alternative to/from work

•  Revenue of €8.2M by specific targeting towards Allianz, Siemens, BMW & MAN

•  Possibility of gradually increasing demand until 2020 by offering high quality

•  Employees obtain subsidies for their commute to/from work

•  Less price sensitive customers •  Brand exposure •  Positive word of mouth among big

companies increases chances for future business opportunities

S B I V A R Info / Incentive

Benefits

Targeting “The Big 4” for long-term relationships

Brand Awareness through corporate sponsorship with leading local corporations

S B I V A R Info / Incentive

VIP Shuttle service for FC Bayern players and business partners #FCBgoesUBER Official limousine service for the BMW Open. Most prestigious Golf & Tennis tournament in Germany #PoweredByUBER

•  Enhance image •  Shape customer attitudes •  Showcase UBER attributes

•  Comfort| Reliability | Prestige •  Create positive publicity & visibility

Identify local key events

Football | Tennis & Golf

Benefits

Sponsored UBER rides for corporate events expose the brand

Estimated Investment (for Event Sponsorship & Corporate Partnerships)

Marketing campaign (online/offline): €200,000 Sponsorship /car branding: 85,000

THANK YOU

EVELYN SINDERMANN |MIM 2015 Professor Protano: Strategic Brand Management

APENDIX A – Calculation DEMAND/MDI/SDI

UBER  rides  per  year      cars   120  rides  per  day   11  days   365       481.800,00  

Maket  Demand  rides  per  person/year   2,96  average  price   8,6  rides/year   481.800,00  total    12.264.700,80    

Popula@on  Munich  (7+)   1.200.000,00  rides  per  person/year   2,96  Overall  Taxi  rides  per  year  MUC   3.552.000,00          Demand   90.419.712,00  

Revenue  Total  Market  revenue    €53.280.000,00    Uber  Market  revenue    €4.143.480,00    

APENDIX B - Calculation Alternatives

Op@on  A    €  700.000,00    Investment  Increase  rides  to  15   6,53  ROI  Increase  #  cars  to  200    €5.273.520,00    Profit              Op@on  B          Marke@ng  Strategy    €200.000,00    Investment  Increase  prices  to  12  EUR   17,70  ROI  Increase  number  of  rides  to  15   €3.740.520,00  Profit              Op@on  C          Investment   €2.000.000,00  Investment       8,97  ROI       €19.946.520,00  Profit  

References https://growthhackers.com/companies/uber/ http://www.muenchen.de/sehenswuerdigkeiten/muenchen-in-zahlen.html http://www.adweek.com/prnewser/ceo-of-ubers-branding-agency-talks-visual-communications/105578 https://clarity.fm/questions/709/how-as-uber-grown-so-fast http://www.spiegel.de/wirtschaft/unternehmen/uber-startet-uberx-in-deutschland-a-1034452.html http://www.taxi-heute.de/Taxi-Thema/verschlagwortung-taxi-heuteallgemeine-stichworte/Muenchen https://www.statistik.bayern.de/statistik/kreise/ https://www.destatis.de/DE/ZahlenFakten/Wirtschaftsbereiche/TransportVerkehr/Personenverkehr/Personenverkehr.html