Roadmap to Solve the Chicken and Egg Issue in your Taxi Business
The chicken and egg problem has been a long puzzle to biologists and philosophers, and they were finally able to crack the problem by a simple insight. The same applies to the world of business. This paradoxical problem can be resolved by just a few simple steps in Uber-like taxi business.
Any business which connects two sets of people that have a symbiotic relationship is bound to have the chicken-and-egg problem. In the context of business, the phrase might not resonate with its meaning in the field of philosophy. This holds exceedingly true when the profits of the business depend on the relationship and depth of penetration between the two segments of users.
Let’s take e-commerce for example. An e-commerce marketplace cannot survive with just buyers or sellers. If the sellers are in excess with no buyers, the business will fail. If there are too many buyers and not many sellers, it might result in a market monopoly.
What causes the chicken and egg problem?
There are two important factors that fuel the problem.
The first one is the availability of too many service providers. This would mean that a new service provider might not be able to easily displace both the segments of people who are already used to a certain app or service.
The second one is when you are a pioneer in creating a market. Both the segments are familiar either with your brand or with your service. At this point in time, increased magnitude of hesitation from either one of the sides can result in the chicken and egg problem.
Chicken and egg problem in the taxi industry
Of late, we have seen a lot of services that are similar to Uber that are being launched in the market. A lot of aspiring entrepreneurs have chosen to replicate the model of on-demand cab services by acquiring clones of Uber.
Just like how it was discussed earlier, the problem is in place there because of two possible reasons. One of them is that there is a pre-existing competition. The other one is because you are the first one to introduce the service to the market.
How exactly do we counter the chicken and egg problem in the taxi industry?
It is said that life is too short to make all the mistakes on your own, and you have to learn from the mistakes of others! To learn how to counter the chicken and egg problem, let us learn from one of the biggest household names and the pioneers of on-demand taxi services — Uber.
Start Small and Start Slow
One of the ways to solve the problem is by starting small. Once you acquire the traction and have tasted success, you can replicate the model to other territories.
If we look at Uber, it just started with one location — San Francisco. It slowly expanded to other cities and today, it boasts of a worldwide presence.
The same can be said about Facebook when it started with just one university, and later expanded to the Ivy League universities before becoming a worldwide success.
This is one quick contradiction, right? There is no fall back on what we have just said! One of the options is to start small and keep growing. The other is to plan an explosive start. The intensity of the start should power your business to a magnitude that your competition will find difficult to catch up with. While this might not exactly solve the chicken and egg problem, it will surely accelerate the process of solving it.
How to Jump Start?
It is always easier said than done! Jump-starting is not just about making a big entrance but also charting out your goals and checkpoints in such a way that you are heading in the right direction. In the case of developing the digital aspects of your business including the site, app and needed admin & dispatch panels, you can make use of the ready-made solutions like Uber clone solution from the app development company like Appdupe.
Here are a few other tips that will help you have a perfect jump start.
Team Up With an Established Brand
If you can’t get people to reach you, you have to get to a place where there are people! Capitalize on the user base that an established brand has built and partner with them, so you can slowly absorb their user base into yours.
There might also be businesses that have the user base advantage but might not have the necessary support and technology it takes to establish a great enterprise. You can capitalize on those businesses and give them the essential infusion of technology and profitability.
Make it Easy to Join Your Service
Keeping the ‘privilege’ of joining your business exclusive to a select few — like how Facebook did — might help in the long term. However, if you need to jump start you will need to ensure that joining your business is extremely easy. When we are talking about being easy, we are not just talking about the process but also the investment involved. Uber was able to do that by making it extremely easy for the drivers to join without much of an investment.
Subsidize the Initial Adopters
There are no better marketers than people who use a service. There is no better marketing factor than cost-effectiveness of certain service. Combine the marketers and the marketing message, and you will understand the importance of delivering subsidies to the initial adaptors. We have seen Uber do the same both with drivers and riders. The drivers had lucrative incentives, festival bonus, and referral benefits while the users enjoyed free rides and occasional festival benefits. This helped them take on the competition quite easily and effectively.
Take The Initial Burden Upon You
If you had to take the burden of one of the sides between which you’re mediating, it would be easy to solve the problem. If we take the example of Uber, it did not have enough drivers and they had to employ their own drivers initially. As and when they started to get a lot of riders and drivers, they not only changed their business model but also diversified their offerings into multiple services in the same domain by launching Uber Pool and Uber SUV.
Address Auxillary Problems
Sometimes, you can become a big brand by solving a few auxiliary problems. This can help aggregate users because as much as people look forward to services, they also look forward to auxiliary solutions like information.
If we take the example of Zomato, it started as an information portal where a user could create an account and view the information regarding different restaurants in the localities. These entries were made by other users. In terms of advertising, the restaurants initially had to pay to get featured on the banners.
When they realized that users were highly dependent on the information provided, they quickly shifted the gears and added delivery services as well as the Zomato Gold membership services to collect revenue from the users. This has, along with the featured banners, become an additional avenue for profits.
The chicken and egg problem has been a long puzzle to biologists and philosophers, and they were finally able to crack the problem by a simple insight. The same applies to the world of business. This paradoxical problem can be resolved by just a few simple steps, not just for the cab industry but for any other industry that faces this issue!
Have an idea to startup a taxi app like Uber, Contact Appdupe.
Jennifer Atkinson is a Growth hacker & marketer for Uber clone product. She loves to find new business ideas and helps startup entrepreneurs with business consultation. She has a specialty in writing about startup ideas, feasible business recommendations etc. She enjoys sharing her ideas and experiences with readers and believes that she can make a better place for startup entrepreneurs.