How Uber Works – Uber Business Model

Be the next big e-startup with an on-demand business model Like Uber

Ever wondered how giants like Uber and Zomato had developed businesses that created a marketplace for itself? Answer to this is simple, they developed an on-demand business model that helped them skyrocket their business.

If you are looking to enter the e-startup scene, an on-demand business model is the gospel for your startup. As you ponder over this thought, there would be numerous questions in your head and here, we are with all the answers.

What is an on-demand business model?

There are several definitions of an on-demand business model in the market, but, in simple terms, any business that provides instant delivery or scheduled delivery of services or product at the customer’s preferred location 24/7/365 through state-of-the-art digital tools can be called an on-demand business.

Though business timings and delivery schedules are not rigid and can be customized, this business model focuses on the consumer needs with due diligence towards the key stakeholders.

One of the most proficient leaders of the on-demand business model and pioneer of the on-demand economy is Uber. If you are thinking of a ride-hailing business, who would you idealize? The obvious answer is Uber. So, the question here is,

What is actually the Uber? And How does the Uber-model work?

What is actually the Uber?

Uber technologies.inc is an American conglomerate that pioneered and developed the most comprehensive on-demand business model through its model “Uber for X”, starting with Uber for taxis.

It began with “Ubercab” in 2009, with its first of a kind online ride-hailing service and soon this phenomenon spread like wildfire and a new economy named “on-demand economy” was born.

Since then Uber has penetrated almost every on-demand business one can fathom and by 2019, Uber has an estimated userbase of more than 110 million users with a whopping 67% market share for ride-sharing and 24% market share in food delivery business in the United States alone.

How an Uber business model works?

For a better understanding of an Uber business model, let us assume an on-demand business model for the Uber app.

You can create dedicated apps for customers and drivers to connect them directly by the nearest “X” algorithm method that connects users with the services nearest to their location. For such technological creation and support, you should collaborate or hire an on-demand app development company.

Many tech-based firms in the marketplace provide a fully-featured technology stack with all the necessary on-demand business-related digital tools.

Let us make it simple by breaking down the working structure of the Uber business model into key factors.

uber business model

  • 1Key Stakeholders

    With an on-demand business model you can keep your key stakeholders to be fully integrated into the process. Key stakeholders for this business model are:

    • Riders are the consumers that will book their rides through your app.
    • Drivers will use your technologies to reach more riders and earn more.
    • Technical service providers that will provide you with digital tools
    • Service providers will be your ally in ride service management.
    • Central management will be you at the center of your business
    • Investors are the key resources for financial and decision making support.
  • 2Key Activities

    Key activities include the creation of a digital platform for all your taxi ride bookings that your consumers can book through your app and web portals. Further, other important activities are:

    • Creation of a technical structure through the technology stack.
    • Partnership with drivers for fulfillment of ride requests.
    • Manage and provide ride requests through digital tools.
    • Convenient and smooth transaction through payment gateways.
    • Consumer Engagement through social media and other forms of marketing.
  • 3Key Resources

    Resources are those reservoirs of support and expertise that help your business stay afloat. So, the key resources of your on-demand business model are:

    • Technical platforms like apps and web portals across operating systems.
    • Digitally equipped drivers with the latest smartphones.
    • Well-organized partners with web portals.
  • 4Revenue Streams

    The bottom line of any business is “Revenue” and that is the ultimate finishing line you are running for. Hence, the revenue streams for your on-demand business model are:

    • Technical platformTaxi Bookings through app and website
    • Luggage services to be charged through pricing structure
    • Car-pooling services that offer services to more than one rider.
    • Surge Pricing based on peak hours and fuel prices.
    • Commission on each service for your business revenue.
  • 5What do riders get out of it?

    Riders/users of your digital service are stakeholders of your business model and they benefit from it in the following ways:

    • Riders are allotted nearest drivers with shortest routes.
    • Fare estimation before the ride-booking and free cancellation.
    • Convenient and preferable services offered through apps.
    • Benefit of competitive pricing and cheaper rides
    • Multiple payment options like wallets, debit/credit cards, etc.
    • Live tracking facilities for ongoing ride.
  • 6What do drivers achieve from it?

    Drivers are the backbone of your business model and the more they achieve from it, the more you will have the taste of success. Drivers can achieve many benefits like:

    • Drivers can earn more through more rides than usual.
    • Convenient registration and easy validation.
    • Ease of choosing their own work timings.
    • Drivers can choose a convenient option for payment.
  • 7How this business model helps in building customer relationships?

    Prolonged relationship with customers ensures sure shot at business for longe period and this business model helps you with the same by:

    • Social Media and Website promotion.
    • Increasing the brand impact through marketing.
    • Constant customer support.
    • Fully functional review and feedback system.
  • 8What are the digital tools offered by the on-demand business model?

    With technical structure based on the on-demand business model, digital tools that can support the business needs of your taxi-booking business are achieved and they are:

    • Dedicated apps for riders and drivers on the Android and iOS platforms.
    • Central admin dashboard for overall management.
    • Web portals for drivers and riders.
    • Portals for partners for better ride management.
  • 9How this business model segments the customers?

    This business model targets specific users through innovative technologies and helps customers like:

    • Riders without private cars
    • Riders unable to drive by themself.
    • Riders looking for cheaper ride options.
    • Riders who seek convenient and luxurious services.
  • 10What type of drivers can work in an on-demand business model?

    As we already discussed that drivers remain the driving force behind the success of an online taxi-booking or ride-hailing business. It is important to know what type of drivers to partner with.

    • Drivers that look forward to earning more through own car.
    • Drivers that want to work for flexible hours.
    • People looking to earn a living with status and security.

Signing Off:

As we discussed the structure of an on-demand business, you must have now been able to grasp the structural framework of an on-demand business. On-demand businesses are not limited to just taxis and food, they have managed to enter several other services like Handyman, laundry, healthcare, flowers, etc.

Now, before you dive in the ocean of e-commerce and online business, take a breath, do your research, develop an on-demand business model and then dive in!

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