Uber has earned a reputation for rapidly expanding with an almost aggressive acquisition style. But as the company matures and shifts its focus from growth to profits, attracting new customers may now be a secondary goal. What if this cashback strategy indicates that Uber is now pursuing customer quality over quantity?
In general, discounts lead to higher buyouts because they provide customers with instant gratification, rather than delayed gratification for cash back. However, these acquisitions come at a price. Khosrowshahi said it was initially a loss to bring in Uber One subscribers because the discounts exceeded their frequency. Still, over time, “this membership creates a significant moat and significant growth opportunity,” Khosrowshahi said during Uber’s all-year earnings call.
Uber One members end up spending four times as much as non-members, and retention is 15% higher among members, according to Khosrowshahi. The subscription service also makes up a higher percentage of total bookings. As of March 31, Uber One members accounted for 27% of all bookings, and Uber hopes to increase that number to 50% or more in the U.S. Khosrowshahi said Uber One penetration is already above 50% in other markets.
If missing out on rebates doesn’t scare many people away, a cashback deal has the potential to deliver better business margins, stronger customer retention by connecting users to future services, and ensuring future sales.
“Uber One members are profitable,” Khosrowshahi said during the company’s first-quarter earnings call. “And what we’ve found is that it’s a very effective way, basically, to get repeat and more engagement with our customer base.”