A few days ago I’ve sent you an article about a new taxi-hailing app company that started operating in Boston. Its name is Fasten. There only one thing how it’s different from Uber, Lyft and such: instead of charging drivers a %% of rides like Uber and Lyft do, Fasten charges driver is only $1 off each ride.
Here’s what’s wrong with this: it’s playing the game of being the cheapest all over again.
I know a lot of people who are fans of Uber. They think that Uber and such are something new. So I ask them: so, you’d be totally fine with going on to a gas station by the highway, hailing a car and getting in with your two kids?
The answer is always the same: absolutely not. Tom, are you crazy?
Then I ask them: you do realize that with Uber you are doing the same thing, right?
The response I get back is usually silence.
For some reason a lot of people think that being able to do something via a smartphone makes it new, when in reality there’s nothing new to it whatsoever.
It’s the same with the ways these app companies are trying to compete with each other now: they think they are doing something new. In reality, they aren’t doing ANYTHING new.
In case you’ve missed it, here’s what Fasten’s CEO said about their business model: “What we want is rides. The only way to do this is make it more affordable for your riders.”
If you’ve been following me for a while, you know that this is a complete and utter ignorant BS. There are tons of ways how you can get more rides. Being the cheapest is only one of such ways.
It is also the way that has the most disadvantages. The biggest disadvantage of being the cheapest is that your customers will never be loyal to you, just like they aren’t loyal to Uber or Lyft.
Another problem with being the cheapest is that it does make you lazy and stops creativity. A great example of that is Walmart and their grey floors. In case you didn’t know, the reason the floors in the Wal-Marts are grey is because it’s harder to see dirt on them, so they don’t have to be cleaned often. That’s the kind of problems you deal with when you are trying to be the cheapest. All you think about is cutting corners and it never ends well.
This is why being the cheapest is not a sustainable business advantage. If you are old enough, you remember that before Walmart there was Sears. Before Sears there was Kmart.
Right now Walmart is being crushed by Amazon. Amazon itself has no margins and it is only a matter of time when it will be crushed by someone else.
A great question to ask yourself is: what kind of game do you want to play? It is okay if your game is all about getting money out of investors and telling them fairy tales. Just make sure that you are aware of what you are doing.
If, however, you are interested in making cash today, being the cheapest and trying to compete with apps is definitely not the way to go.
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