Why Careem and Uber are launching a rewards program?
The first thought is, do we need yet another loyalty program in the market? There is always room for more rewards to customers of course, but let's discover some of the elements of the reward program that could be beneficial.
Launching a rewards program for on-demand service startups makes sense in principle, where customer loyalty is key to increase the customer lifetime value, i.e. how much you spend with the brand. Most of us have been bombarded with enough “50% off this weekend” and “AED20 for the first 5 rides” promotions, all in an effort to keep you coming back once you are an acquired user.
Careem already has experience with loyalty programs, as you can earn points with the likes of Emirates Skywards and STC Qitaf on your rides, and also convert your existing points to Careem credit. It is hard to tell how much of those partnerships generate in terms of new trips for Careem, however at the least, they give important visibility with huge partners, and the people who would choose Careem over Uber just to save up points are worth it, albeit at a cost to Careem. The conversion is not too exciting, however, as you would earn 1 Skywards Mile for example for every US$ 2 (AED 7.3) spent. Meh.
Two key drivers for having a program, however, is the frequency of use and competition. I average on both Uber and Careem 6 trips per month, which is as frequent as visiting a supermarket for many people, so it is significant for returning traffic. With such frequency, being rewarded is now a customer expectation, but also a no-brainer for brands who want to connect with users. A small reward could go a long way to making customers feel a connection to the brand.
The second element is competition. There is little loyalty in the ride-sharing industry in general especially within city limits where all routes and services are almost the same. Users regularly have both apps open looking for the closest driver or lowest surge price which dynamic pricing has encouraged. By giving rewards or points worth something, it might sway passengers to focus on one rather the other, especially with Uber’s tier program. A blue tier would give you $5 from 500 points, but a platinum tier eliminates surge pricing on selected routes and gives priority at an airport.
With such on-demand companies moving into ancillary products beyond just passenger transport, a reward program also opens the doors for encouraging additional spend on more services such as ordering from Careem Box and Uber Eats instead of Fetchr and Talabat respectively. Of course, since reward programs are huge money makers for brands, partnerships are the next frontier where you can start earning Careem and Uber points with credit card spend or shopping at specific merchants. So expect much more to come!
As the two companies grow and more enter the market, this could also be just one more perk to drum up customer loyalty ahead of an expected IPO for both companies. But there is some merit to the program and we will keep watching it see how it fairs. Uber launched its program in the US and soon to roll out globally, and Careem already launched it to selected customers as well.