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Uber Eats Launch & Pricing Strategy

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Uber Eats Launch & Pricing Strategy

  1. 1. UberEats Pricing Strategy in San Francisco Jose E. Rodriguez
  2. 2. UberEats delivers the best of your city right when you want it. Our curated menus feature dishes from the local spots you love. And the ones you’ve always wanted to try. It’s same cashless payment as an Uber ride. So just tap the app, meet your driver outside, and enjoy
  3. 3. What is the goal? Goal Access competitors pricing model & determine selling price to maximize market share Start with Penetration Model Tasks Research target market’s frequency and wiliness to order delivery at different prices & determine break even points. Tools Internet Research, Excel, Tableau
  4. 4. Research Method 1st Hand Research •Survey Monkey •Industry Inside Friends 2nd Hand Research •San Francisco Census •Statista.com •Tech Crunch •Sprig •SpoonRocket •Farm Hill
  5. 5. Solution Process Penetration --> Cost + Customer Needs Customer Demographics Break Even Customer Benefits Offering: Penetration Expertise Cost + Market Price Lunch: $12.5 Dinner: 14.5 Competitive influences Enter with a price of $8 for lunch, which is 48.8% lower than current delivery Brake even in 1 yr Dominate presence in San Francisco with 16, 000 active users with 100K UBER app down loads UBER menu is extensive
  6. 6. CanUber Eats enter the Food Delivery Market at a delivery price comparable to its competitors to obtain favorable market share in order to later introduce a slight higher price to gain more profit Market Share • 5% Of Market Share Price Point Average – • $ 20% under competition Break Even • Break even in year one Problem Statement Criteria of success?
  7. 7. Industry growth: .35%/month Market Analysis Growth Direct Competitor Growth: 30%/mo
  8. 8. Market Analysis- Market Comparison
  9. 9. Market Analysis Range price Sprig Spoon- Rocket Eat24 Cavier UberEats Breakfast N/A $8.95 $14.50 $14.25 $13.24 Lunch $13.5 $13.25 $17.25 $15.50 $14.50 Dinner $14.5 $13.75 $19.00 $17.25 $16.25
  10. 10. Target Segment San Francisco Market Age: 18-65 Working professionals & families Current 35% using delivery service apps Lunch & Dinner
  11. 11. Survey Results: How often do you order? 2% 8% 24% 26% 16% 11% 10% 2% 0% 5% 10% 15% 20% 25% 30% Daily 4-6 times per week 2-3 times per week One a week Every Other week Once a month Less than once a month Never Share of respondant ©statista 2015
  12. 12. Survey Results: How often would you order? Lunch Price Orders per week $6.00 4.36 $7.00 4.36 $8.00 4.21 $9.00 4.21 $10.00 3.29 $11.00 3.07 $12.00 2.71 $13.00 2.43 $14.00 2.00 $15.00 1.50 $16.00 1.43 Dinner Price Orders per week $8.00 4.93 $9.00 4.79 $10.00 4.57 $11.00 3.86 $12.00 3.64 $13.00 3.14 $14.00 2.50 $15.00 1.79 $16.00 1.29 $17.00 0.93 $18.00 0.36
  13. 13. Top Down & Bottom Up SF Market •Population 18-65 •617,188 Segment: Age •Meals ordered/day •362,597 Market Size •Average Meal $14 •$1.85B •Average meal $15.47 •$1.21B •Meals ordered/day •358,628 •Total Population •797,976 Zip Code Zone: 1+2+3 Zone Segment: Market Size Average: $1.52B Just Delivery: $148M
  14. 14. Market Size: by ZonesZone1Zone2Zone3 Delivery %NeighborhoodPopulation
  15. 15. Penetration Price Point Model Z1 • 52.1 % demand food delivery • Price Launch • Lunch $8 • Dinner $10.45 Comprised of • North beach, financial district, Nob Hill, Russian Hill, Mission, Van Ness, Soma • Zone population of ~ 300K ZONE 1
  16. 16. Penetration Price Point Model Z2 • 29.6 % demand food delivery • Price Launch • Lunch $8.43 • Dinner $13.10 Comprised of • Marina, Persidio, Richmond, Sunset, Sea Cliff • Zone population of ~ 306K Zone 2
  17. 17. Penetration Price Point Model z3 ZONE 3 Comprised of • Glen Park, MiraLoma Park, Pacific Heights, Lake shore, Stone Town • Zone population ~200K • • 18.3 % Demand Food Delivery • Price Launch • Lunch $9 • Dinner $14.47
  18. 18. Pricing Model Demo ©statista 2015 • Fixed cost Based on Delivery Franchise Model with UberEats driver paid as employees not as individual contractors • Variable costs Based on UberEats and competitors pricing. Inside knowledge of Food pricing and food costs • Selling Price Based on competition pricing & maximizing market share (orders per week)
  19. 19. Recommended for Lunch Price
  20. 20. Recommended for Dinner Price
  21. 21. Insights Keeping delivery constraints in mind Different cost/prices for different zones Different pricing model for launch and long term
  22. 22. Recommended Price Based on Models 2. Price Recommendation: • Zone 1: Lunch $ 8.00; Dinner $10.45 • Zone 2: Lunch $ 8.43; Dinner $ 13.10 • Zone 3: Lunch $ 9; Dinner $14.47 4. Value to Customer: • Lunch $ 8-$9 > $ 11.84 • Dinner $ 110-14 > $ 14.50 1. Competitive Landscape: • Lunch: $12.5 • Dinner: 14.5 3. Survey Data: $6-$16 (Mean $11)
  23. 23. Recommended Price Based on Models We recommend having food delivery as low as $8 and as high as $14.47 1. Price low to capture maximum market share 2. Higher engagement of the San Francisco food delivery Market 3. Driver increase to execute larger delivery loads 4. Put food delivery into the hands of San Francisco residents
  24. 24. Who wants to order UberEats?
  25. 25. ©statista 2015 Appendix
  26. 26. Zone Break Even: Lunch & Dinner $- $100,000.00 $200,000.00 $300,000.00 $400,000.00 $500,000.00 $600,000.00 $700,000.00 0 2 4 6 8 10 12 14 16 Increase Dinner Price at this time Months Zone 2 • Current Dinner $13.10 • Dinner Break-even 4 Months Suggested time to introduce Cost/Mark up Price Model
  27. 27. Our pricing model: Lunch & Dinner $- $100,000.00 $200,000.00 $300,000.00 $400,000.00 $500,000.00 $600,000.00 $700,000.00 0 2 4 6 8 10 12 14 16 Increase Lunch Price at this time Increase Dinner Price at this time Zone 3 • Lunch Break-even in 8.5 Months • Dinner Break-even 2.5 Months Suggested time to introduce Cost/Mark up Price Model Months
  28. 28. Solution Process Penetration Acknowledge Operations requirements Penetration Intraprocess Automation & control Cost + Valuation control & Business Structure Break into Food Delivery market of 1.52 billions meals per year- Many mouths to feed! Optimize existing UBER drivers to mitigate new drivers and lag time Aggregate restaurants in each zone to finalize routes for price efficient routes Set food delivery price as penetration method Specify upcoming price difference in each zone at different times Zone 1, 2, 3 Increase UBER EATS drivers in each target zone from 7 drivers to 10 Obtain the San Francisco food Delivery Market with existing penetration price. Launch Marked/Cost Plus Pricing to increase profits after break – even is successfully executed
  29. 29. Excel Model

Notas do Editor

  • Active users of UBER:
    http://www.washingtonpost.com/news/wonkblog/wp/2015/01/22/now-we-know-many-drivers-uber-has-and-how-much-money-theyre-making%E2%80%8B/
  • Market Share

    Price Point Average $12

    Value or Profits
  • If I have time I will do the graph
  • If I have time I will do the graph
  • If I have time I will do the graph
  • 5. Demo: Demonstration of model in class goes smoothly, no problems 1 2 3 4 5 ____ Comments: ______________________________________________ 16. Procedure: Spreadsheet describes how to use model 1 2 3 4 5 ____ Comments: ______________________________________________ 17. Inputs: Spreadsheet indicates user input area(s) 1 2 3 4 5 ____ Comments: ______________________________________________ 18. Outputs: Spreadsheet indicates model output area(s) 1 2 3 4 5 ____ Comments: ______________________________________________ 19. Calibration: Spreadsheet indicates calibration procedure, if any 1 2 3 4 5 ____ Comments: ______________________________________________ 20. Structure: Spreadsheet is logically laid out for ease of use 1 2 3 4 5 ____ Comments: ______________________________________________

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