What 'Second Movers' Can Learn From Lyft And Uber Lyft has moved in to fill the vaccum Uber's shenanigans created. Good pay is only one part of its plan. Will it become the No. 1 ride-sharing app?
By Alp Mimaroglu Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Recently I had an interesting experience with a ride-share driver in Los Angeles. I was asking him about which of the major ride-sharing services -- Uber, Lyft, Via, etc. -- he uses to find customers. He told me he's driven for all of them, but his favorite is Lyft.
Related: What Switching to Lyft Taught Me About Tech's Authenticity Problem
Personally, I've used all the ride-sharing services, myself. As a customer, I find that all of them offer different incentives and benefits. However, I'd never thought about how these companies treat their drivers. That led me to do some research. Just how much are ride-share drivers making?
According to data from The Rideshare Guy, a leading blog and podcast for rideshare drivers, these freelancers can easily make more than $30-plus per hour on average. For those that work 40 hours per week, that's over $1,200. And these are just averages (i.e., it's possible to earn more).
The amount Lyft drivers are earning is particularly noteworthy, because it could change the landscape of the ride-sharing industry. The recent developments at Uber, leading to CEO Travis Kalanick's resignation, have given Lyft, the No. 2 ride-sharing company, exactly the kind of opportunity it needs to carve out a larger piece of the pie.
By treating drivers well, Lyft is moving to capitalize on this opportunity.
Why is ridesharing becoming more competitive?
Being second isn't necessarily a bad thing. The "second mover advantage" is a well-documented business pattern that often emerges in competitive markets like the ride-sharing economy. The first mover has to take all the risks and make all the mistakes in uncharted territory, while the second mover has the chance to learn from the mistakes of its larger rival.
Related: Lyft Co-Founder John Zimmer: 'You Should Never Veer Off the Path of Your Own Values'
That's exactly what Lyft co-founder and current president John Zimmer told CBS in a recent interview. Lyft watched Uber and learned, Zimmer said, and his company has been capitalizing on the public sentiment. "We're now the fastest-growing ride-share service in the United States," Zimmert said, "and [we are] taking market share from those other guys."
As a result, in 2017 to date, Lyft has expanded its services to 150 U.S. markets and is now available in more than 350 locations nationwide.
What Lyft is doing right
The app that can provide the best experience for riders and drivers will ultimately win the market. For riders, that means enjoying seamless, safe and even enjoyable transportation from point A to point B. For drivers, it means receiving the right support to succeed, and getting paid properly.
When it comes to drivers, Lyft is taking the lead -- because the company knows its success depends on it. Here are a few ways it's taking care of drivers better than the competition:
Weekly/hourly income guarantees: Drivers in select cities can earn a guaranteed weekly income as long as they satisfy requirements. Lyft also offers hourly income guarantees, which have been known to exceed $30 per hour.
Actual benefits: In the gig economy, it seems that benefits have fallen by the wayside. Lyft's Accelerate rewards program offers benefits to drivers based on the number of completed rides each month. From cell phone discounts and tax support at the program's Silver level, to retirement solutions, this program truly rewards employees.
Help with driver expenses: As part of the Accelerate rewards program, drivers get savings on fuel and cell phone discounts, even if they only do a few rides per month.
Incentives for working busy nights: Ride-sharing services need drivers on the road to satisfy demand, especially on nights like Halloween and New Year's Eve. This is why it offers guaranteed hourly wages, bonuses for completing additional rides and more.
Why happy drivers means happy customers
Lyft's efforts are reflected in the numbers. Making up to $1,500 or even more per week is very possible, especially if drivers work during the right times and in major cities, like San Francisco and New York City.
This is part of the reason drivers like Greg Muender (who wrote for Medium about his affection for Lyft are happy. Clearly, the No. 2 ride-sharing company is doing great at this effort. There are three major ways this helps business:
1. More reliable drivers on the road. Paying more gets more reliable drivers to sign up to work, ensuring that rising demand can be met. This is crucial, given that Lyft must maintain its service quality as user numbers rise. When you pay more, why wouldn't drivers sign up to use your app?
2. Enhanced brand image. Companies benefit as well from treating employees right. In the first half of 2017, Lyft drivers passed $250 million in tips. This reflects well on the company they work for by showing it's committed to employee well-being, a crucial factor in a market where millennials prefer companies that give back.
3. Improved customer experience. You may have heard the stat that happy employees are more productive employees (12 percent more productive). When it comes to driver satisfaction, Lyft does well, with 75.8 percent of drivers describing themselves as satisfied. When drivers are happy, they'll provide a better riding experience for customers.
Entrepreneurs who need extra cash to grow their business can also look to Lyft and other ride-sharing services as a source of income. It beats taking out a high-interest loan. The experience can even be energizing, as drivers like Muender have noted.
What other "second movers" can learn
Lyft's success serves as a field guide for second movers in other industries. The vast majority of businesses, from small mom-and-pop shops to large venture-funded startups, are second or third (or umpteenth) movers who aren't in any way "first" in their markets. Indeed, most of these business owners think of themselves as small fry. They don't believe they can ever be big players in their market.
Related: Lyft CMO: Uber Is the Wal-Mart of Transportation. We Aren't.
Really? Maybe some of these "small fry" should spend a little more time looking at what's been happening with Lyft and Uber.
