October 1, 2020

3 Reasons Why Your Ridership is Falling

Nikhil Venkatesa

We're six months in to the COVID-19 pandemic, and it doesn't look like we're coming out of it anytime soon.

The taxi industry has been hit hard by the pandemic, with bookings for both ride-hail companies and legacy taxi providers having dropped by as much as 80% - 90% in Q2 2020 as compared to the same period in 2019.

Bookings have been steadily rising from that sharp drop in Q2, but the data is showing that ride-hail companies are recovering faster than taxi providers.

This isn't surprising to see. Just as reports have shown how COVID-19 has accelerated existing trends in company work environments, retail, education, healthcare and entertainment, the same is true of the taxi industry.

The shift in consumer preference from taxi providers to ride-hail companies has been happening over the past decade. And with more customers making the digital jump in the pandemic era, that shift is only going to continue.

But why are riders making this shift, and why is taxi ridership falling?

Ask any taxi provider this question and they'll give you a different answer. Most of them will argue that Uber and Lyft's lower prices are the biggest reason for riders flocking to them.

We looked at actual research to show you three key dimensions by which riders evaluate ride-hail and taxi services.

The Research

In late 2017, researchers at UCLA and the University of Oregon conducted a study to identify differences in service quality between taxi and ride-hail services and provide insights for why riders prefer ride-hailing services over taxi providers.

These researchers tracked data from over 1500 ride-hail and taxi trips in Los Angeles. They looked at these trips through a number of different service qualities - price, wait time, trip time, trip route, availability of payment methods, and many more.

What they found is incredibly insightful.

It turns out that riders prioritize their choice of transport service along three dimensions: price, reliability and accountability.

How exactly do these dimensions affect the rider experience? Read on!

Price

For the study’s researchers, the price dimension isn’t just about which service was more affordable. It’s also about price consistency (whether prices for the same trip stayed the same) and predictability.

In the study, the research team conclusively proved that taxi fares were consistently more expensive than ride-hail trips.

They saw that ride-hail trips were 40% cheaper than taxi trips on average!

Participants in the study also voiced their issues around consistency and predictability around pricing between the two services:

  1. Taxi fares were more unpredictable than ride-hail fares  
    Riders preferred to see their fares upfront before they booked a ride so they knew how much the ride would cost. The taxi services used in the study did not offer upfront fare information to riders, which made their fares more unpredictable.
  1. Taxi fares were more variable than ride-hail fares  
    Riders found that taxi drivers preferred to take routes that they were familiar with instead of following the route recommended to them by their navigation systems. This meant that drivers often took circuitous routes that drove up the final fare.

On the other hand, ride-hail drivers followed the routes prescribed to them in their apps. Ride-hail fares did not change regardless of the route the driver took to each destination.

Participants also found the payment process for taxis was more cumbersome than for ride-hail services. While this is not directly related to the price difference between the two services, it does have an additional cost associated with the extra time spent at the end of a ride.

Reliability

Another dimension that held major differences between the two services was in how reliable they were for riders. The researchers in the study tracked reliability by looking at pickup success and wait times for both transport services.

Pickup Success

Ride-hail trips in the study had a 99.7% pickup success rate.

Taxi trips, on the other hand, had a roughly 80% pickup success rate.

That means 1 out of 5 taxi riders ended up not getting a taxi after they had booked one.

Some reasons for the lower pickup rate for taxis included:

  1. Taxis did not arrive within one hour after they were booked.
  2. No taxis were available and dispatchers asked riders to cancel.
  3. Dispatchers did not pick up calls from riders after a booking was made.

Wait Times

On average, ride-hail riders waited for 5.7 minutes between booking and pickup.

Taxi riders waited four times longer, with 24.3 minutes spent on average waiting between booking and pickup.

Wait time for taxi riders was made more frustrating by unreliable updates from dispatchers. Since riders couldn't track their taxi's progress in real time, they were left to rely on dispatcher estimates, which frequently proved inaccurate. Ride-hail services didn't face this issue since every minute of ride-hail rides could be tracked by riders in their passenger apps.

Accountability

The third dimension that researchers saw major differences between ride-hail and taxi services was related to their feedback mechanisms.

Riders found ride-hail services more accountable than taxi providers, primarily because of the driver rating systems that are standard for every ride-hail service.

This mechanism ensured ride-hail drivers gave riders positive experiences almost all the time. Even when riders had negative experiences, the rating system ensured that poor drivers were removed from the system.

Taxi providers do not have a rating system for their drivers, and most taxi providers do not have a system for tracking feedback that is visible to their riders.

Riders also appreciated the quick refund mechanisms ride-hail services have when a driver refuses a ride or gives a poor or unsafe ride experience.

Start turning your ridership numbers around

Now you understand three key dimensions that determine rider satisfaction with their chosen mode of transport — price, reliability and accountability.

While you may not be able to focus on addressing prices since taxi prices are regulated by city governments, you can improve your service's reliability and accountability.

And higher prices are not the end of the world for your business. People will always pay a premium when it’s reflected in their purchase. Whether that premium is for safety, cleanliness or a better overall rider experience is up to you.

Not sure where to start? We'll focus on specific strategies around these dimensions that you can implement in our next post.

Want a quicker, faster and more sustainable way of turning around your ridership numbers? Our team at Mobile22 does just that. Contact us today to get started!

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