Daniel Allen explains the potential market impact of our rideshare effect research.
The wild popularity of rideshare apps, like Uber and Lyft, has changed the way that people get around. To see the measurable impact of these services, our analytics teams at Epsilon-Conversant analyzed travel marketing spend with our proprietary data assets for the Rideshare Effect whitepaper.
We sat down with Daniel Allen, VP Sales Analytics at Conversant, to talk about how this shift will affect both car rental companies and rideshare services.
MC: Can you talk a bit about the impetus for this research – where did it come from? Why was the car rental versus rideshare analysis a focus area?
DA: This topic has been in the works for a long time. Our Conversant team has been working with Amit Deshpande on the Epsilon analytics team. Originally, the topic came out of a few of the sales engagements we had in partnership with Conversant and Epsilon. Our team wanted to showcase some of our core strength and value areas when meeting with potential clients at large car rental companies. Namely, our ability to understand individuals—the profile attributes across Epsilon and Conversant allow us to identify those individuals across devices and channels, understand how they interact with different brands and determine the types of messaging they respond to. We discussed the emergence of Uber and Lyft as potential competitive threats to car rental companies as their customers migrate to rideshare services.
This information was important to share with car rental companies. A lot of these large companies have had success recently too, so there was a gap in the true understanding of rideshare as a competitive threat. They did not have all the data needed to understand what’s happening in the market. Because our robust transactional data assets provide marketers with the ability to understand aggregated, individual consumer preferences, we were uniquely positioned to provide insights into the areas that both car rental and rideshare companies should be considering as this marketplace continues to change. We measured and effectively identified shifting migration patterns of traveler spending across subcategories.
MC: What were the main patterns that you found in the data?
DA: From the research, we could confirm our initial hypotheses that customer migration patterns were occurring in the marketplace. Continued data analysis surfaced additional insights into this consumer behavior.
One of the key findings from the analysis is that 63% of car rental customers reduced their spending year over year, which validated the original impetus of the research. At a high level, that was nearly a $3.2 billion shift. We detected this was happening, and we wanted to find out the specifics.
In terms of the shift, we also identified the migration that’s happening over time. High-value car rental customers have shifted to rideshare, and there has been a 68% increase in their rideshare transactions. That frequency is the key. While car rental companies are seeing a lot of success in terms of dollar value, there seems to be a frequency pattern happening that both sides can capitalize on.
MC: So why should car rental companies care about rideshare services and vice versa? Where is the overlap in customer base?
DA: 56% of previous car rental customers stopped using car rental service altogether based on our year-over-year analysis. When you think about that disruption for car rental companies, it’s very important to consider what their retention strategies look like. They need to understand what’s making customers defect and stop using their services.
We started to break that down by reviewing the types of people that are in the areas of overlap, identifying high versus low car rental users and high versus low rideshare users and understanding who these people actually are. Individuals that have high spend in both tended to be people that were affluent or had kids; they fell in the “chic society” segment, which are people that are more business- and culturally-oriented. These are all audiences that can be reached in the Epsilon-Conversant platforms. In this case, you want make sure that you’re retaining the individuals.
MC: How can rental car companies react to this shift?
DA: There is definitely a group of people that are high rental car customers and have started using rideshare services. The key is to identify them and execute retention strategies that illustrate the value of car rental. Loyalty programs are one way to do that. For example, if they aren’t a member of your program, how can you incentivize them join? Activate your CRM, and implement strategies to drive higher rates of transactions for the people that are high-value customers but have a high propensity to switch. Car rental companies also have a broad set of offerings. Think about which of those you want to communicate to potential switchers in your brand.
Epsilon-Conversant is in a unique position to understand people on a one-to-one level. We identified 9.4 million people who were rideshare customers with zero spend on car rental. It may not be cost effective to talk to all of them, but it’s important to understand why they’re rideshare users. Based on that understanding, they can leverage opportunities to use car rental instead of rideshare.
MC: And what should rideshare services do?
DA: It’s a high frequency, low cost service with a low barrier to entry from the customer perspective. Rideshare services need to drive usage and understand how people use rideshare services. Due to the nature of the platforms, as a tech company, rideshare companies can understand the opportunities to message customers in times and environments that make the most sense for those customers. They can analyze the data on current customers: When are they using rideshare services the most? How can you remain top of mind during those peak opportunities to engage? These platforms are still emerging, and there’s still a lot of opportunity. How can they communicate the benefits of rideshare and make the usability easier for those 9.8M consumers who use car rental services but don’t use rideshare?
Rideshare companies also need to develop a better understanding of users from a broader travel perspective: Where are they traveling? How are they traveling there? Are there opportunities for them to use rideshare once they get there? It’s important to communicate the benefits of using rideshare over car rental in these situations.
MC: Rideshares made up just 2% of all travel spend but 30% of travel transactions, meaning rideshare is a high-frequency but low-cost service. What impact does that additional exposure have on this sector of the travel market?
DA: High frequency of transactions implies that there is a lower barrier to entry for consumers in this area of the market. There is potential for this migration to accelerate because of the high level of exposure that individuals are having with rideshare companies on a regular basis. People have more opportunities to interact with the brand, more “mind share.” There is certainly an opportunity for the network effect and acceleration to happen because of the frequency of transactions.
MC: What was the most unexpected finding from the analysis?
DA: Given the maturity of rideshare companies, it wasn’t surprising that this dynamic was happening, but the scale is potentially alarming. We’re seeing the combination of people that are loyal rental car customers migrating at a high rate—63% of car rental users reduced spend year over year—and a high frequency of purchase in the rideshare category. The potential of that migration to accelerate has huge implications for how that market is going to look in the future.
And, we’re already seeing rideshare companies capitalize on the frequency of transaction, horizontally building on services like Uber Eats. New services like these and others may not currently be thought of as direct competitors in the transportation market.
There’s also a large pocket of people (2.3M) that were high rideshare purchasers with no car rentals. These people are hard to move back under the existing dynamic. In the future, it will be interesting to see how car rental companies respond as this continues. They continue to change their models and their tech and platforms by experimenting with ideas such as self-driving cars, car sharing, events, tours and vehicle sales. Enterprise, Hertz and others are already trying some of these tactics.
MC: What has been the biggest takeaway for you while working on this project?
DA: This went from a hypothesis to actual results proven by the data. While the technology plays a key role in what we do, it’s also the people we have that analyze the data and can predict what’s coming. We can deliver experiences that are powered by human behavior and driven by data. Being part of a company that enables and empowers our clients to act upon that dynamic and change is really empowering as a marketer.
To learn more about the findings and tips for navigating the changing market, download the full whitepaper.