Uber using rewards to combat local Lyft rivalries

Uber is expanding its rewards to cover more U.S. cities, yet the program continues to stay complicated and stingy — consumers may need to spend up to $500 on eligible rides and Eats purchases just to get a $5 Uber Cash reward.

The Uber Rewards program was announced in November to provide consumers with a loyalty incentive to use its ride share services and order food with Uber Eats. The initial cities/regions included were Miami and Tampa in Florida, all of New Jersey, Denver, New York City, Philadelphia, Atlanta, San Diego and Washington, D.C.

According to TechCrunch, the program has expanded to now cover 25 major cities or areas such as Boston, Dallas, Fort Collins in Colorado, Houston, Indianapolis, Kansas City, Los Angeles, New Orleans, Orange County and San Francisco in California, Pittsburgh,Lehigh Valley, Gettysburg and Erie in Pennsylvania, the Rockies and Western Massachusetts.

Akos Stiller/Bloomberg

Uber is under heavy pressure in the U.S. from ride sharing competitor, Lyft, which announced in September that it just served its one billionth ride. The company reported that it doubled its ride count from 500 million in less than one year and facilitated 50 million rides per month.

“It’s more about the business they find themselves in — transportation. Much like the airlines, it’s about filling the seats. It also provides Uber with a more predictable cash flow, which is a priority in the short-term for their IPO and in the long-term is about building the base of riders,” stated Richard Crone, principal of Crone Consulting.

While Lyft is taking share from taxi cabs, much of its growth is coming at the expense of Uber’s U.S. business, since Lyft operates only in the U.S. and two cities in Canada (Toronto and Ottawa).

According to a December report in Bloomberg, Lyft had a 28 percent share of the U.S. market, twice the amount it had in 2016. Lyft also launched its Business Rewards program in November that provides a $5 personal ride credit for customers making five Lyft rides for work on their business profile — a much richer program than Uber’s version. Lyft also announced its Lyft Rewards consumer program would be launching soon.

Lyft is laser-focused on the U.S. and stealing share from Uber. While Lyft does have offices in London (the Blue Vision Labs acquisition) and Munich, Germany for software development, it has yet to make public its international expansion plans beyond the 2017 rumors reported by CNBC that it planned to go global.

In the Uber Rewards program, consumers begin as a Blue Member for a six months earnings window where they earn points for taking Uber rides and ordering from Uber Eats, according to the terms and conditions of the Uber Rewards program. For every 500 points earned, a consumer will receive $5 in Uber Cash that can be used for rides and Eats orders (redemption for scooters, bikes and taxis are excluded).

Earning reward points is complicated and there are many restrictions. For example, the program is available only the U.S. and consumers can’t earn rewards on tips to the driver or delivery partner, cancellation fees, upfront purchases of Ride Passes or using services such as taxis, scooters and bikes. Further, the type of ride share will determine how many points are earned.

For example, Using Uber Pool or ordering from Uber Eats earns 1 point for $1 spent (exclusions still apply such as tips). Using Uber X earns 2 points for each $1 spent. Finally, the top earn rate of 3 points for each $1 spent is when Uber Black and Uber Black SUV (the luxury service) is used. Clearly Uber is trying to incentivize consumers to use its premium services. For cash strapped consumers using the basic Uber Pool or ordering on Uber Eats they will have to spend $500 just to get a $5 Uber Cash reward.

“Uber is being conservative with the rewards since they have to give away part of their margin to fund the program,” commented Crone.

Achieving Gold status requires earning 500 points in the six month earnings window. Once Gold status is unlocked, the user automatically becomes a Gold Member during the earnings window and for the next six months. Platinum status requires earning 2,500 points and Diamond status requires earning 7,500 points. While consumers get to keep their new status for six months after they have achieved it, they still need to re-earn it for the following six months or else they go back to Blue status.

“This program is about attracting the next set of riders to the market and making them loyal customers. This will appeal to millennials who are postponing purchasing a car or don’t want one at all. For those consumers, achieving Platinum or Diamond status on Uber is something to brag about,” noted Crone.

There are perks associated with the different levels, some of which can be very good. Gold members get flexible cancellations and priority support. Platinum members get all of the gold benefits plus price protection on a route and priority pickup at airports. Diamond members receive Platinum benefits plus complimentary upgrades, special access to highly rated drivers (Uber X only), premium support (the highest priority) and three free Eats deliveries.