In today‘s cut-throat world of on-demand services, customer loyalty is everything. As the old adage goes, it costs five times more to attract a new customer than to retain an existing one. This is why Uber, the ridesharing and food delivery juggernaut, has invested heavily in its Uber Rewards program. For frequent Uber users, the program offers an enticing proposition: the more you ride and order, the more perks you get.
At the heart of this rewards ecosystem lies Uber Blue, the entry-level tier that serves as a gateway to benefits. But what exactly does Uber Blue entail and how does it fit into Uber‘s larger strategy? Put on your consumer psychology hat and join us as we dive deep into the mechanics of Uber Rewards and the significance of Uber Blue.
The Uber Rewards Ecosystem
First, let‘s set the stage by breaking down how Uber Rewards works. The program is free for all Uber users to join. Once enrolled, riders earn points on every eligible dollar spent on both Uber rides and Uber Eats food delivery orders. As you accumulate points, you graduate to higher echelons of the program, each with its own set of increasingly valuable benefits.
Here‘s the rewards tier breakdown:
| Tier | Points Needed | Benefits |
|---|---|---|
| Blue | 0 | Earn points, receive Uber Rewards emails |
| Gold | 500 | Priority support, flexible cancellations, priority airport pickups, special offers |
| Platinum | 2,500 | Price protection, priority dispatch, high rated drivers, complimentary upgrades |
| Diamond | 7,500 | Premium support, highly rated drivers, free Uber Eats delivery, surprise upgrades, dedicated phone line |
The point-earning structure incentivizes spending more on Uber‘s premium offerings:
- UberX, UberXL, Uber Comfort: 2 points per dollar
- Uber Green: 2 points per dollar
- Uber Black, Black SUV: 3 points per dollar
- Uber Pool, Express Pool: 1 point per dollar
- Uber Eats: 1 point per dollar (2x and 3x boost promotions sometimes available)
It‘s a straightforward system on the surface, but the psychology behind it is anything but. Uber is tapping into some powerful behavioral economics concepts to drive engagement and spend.
The Psychology of Rewards Programs
So what is it about loyalty programs like Uber Rewards that make them so effective at influencing consumer behavior? It boils down to a few key principles of human motivation:
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Goal gradient effect: The closer we get to achieving a reward, the more effort we‘re willing to put in. As Uber riders see their points accumulate and realize they‘re only a few rides away from reaching the next tier, they‘re more likely to choose Uber over competitors.
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Endowed progress effect: When people feel they‘ve made some progress toward a goal, they‘re more committed to seeing it through. Uber Blue members may initially feel the rewards are far off, but with every ride they‘re making progress. This increases the likelihood they‘ll stay engaged to earn more points and benefits over time.
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Artificial advancement: Uber cleverly sets the bar for entry into the program very low. By starting everyone off at Uber Blue, it creates a sense that you‘re already on your way to earning rewards. This artificial advancement taps into the endowed progress effect and makes the next tier feel highly achievable.
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Idiosyncratic fit: Rewards are most effective when they align with a customer‘s individual habits and values. Frequent Uber riders and Eats customers are much more likely to appreciate Uber Rewards than occasional users. The program is tailored to the company‘s power users.
Dr. Cynthia Cryder, Associate Professor of Marketing at Washington University in St. Louis, studies consumer behavior and notes the power of well-designed loyalty programs.
"By offering a clear path to earn points and graduate to higher tiers, Uber Rewards motivates repeat behavior and higher spend," said Dr. Cryder. "The program also creates a sense of exclusivity and status as you reach the upper echelons. It‘s a powerful recipe for loyalty."
Uber Rewards By the Numbers
Uber has stayed mum on just how many riders are enrolled in Uber Rewards, but third-party data suggests the program has made a significant impact. A 2019 report by Edison Trends found that Uber Rewards members spend an average of 8.6% more on rides after joining the program. Additionally, the analysis showed that in August 2019, 18% of Uber‘s total sales came from the top 1% of Uber Rewards members.
While Uber Blue members don‘t contribute the lion‘s share of that spend, they represent a crucial foundation. Uber‘s Head of Loyalty and Rewards, Conor O‘Donovan, emphasized the value of Uber Blue in a recent interview with Skift.
"We know that all of our Uber Rewards members are valuable, no matter what tier they‘re in," O‘Donovan said. "Uber Rewards is about recognizing and appreciating our most frequent riders. While the Blue tier doesn‘t have a long list of benefits, it allows us to identify these loyal users early and start building affinity for the program."
Uber‘s Competitor Loyalty Landscape
Uber‘s foray into loyalty was largely seen as a reaction to rival Lyft‘s launch of the Lyft Rewards program in December 2018. While structured differently – riders earn a small bonus after every X number of rides – the overarching goal of incentivizing loyalty is the same.
Uber has the advantage of a more comprehensive program that rewards both ridesharing and food delivery through Uber Eats. With DoorDash and Grubhub encroaching on Uber Eats‘ market share, folding Eats into Uber Rewards helps defend its position. A 2021 report from Edison Trends reveals that Uber Eats customers who are also enrolled in Uber Rides spend an average of 8% more on Eats orders compared to non-rewards members.
Traditional players like taxis and restaurants have long struggled to match the stickiness of app-based loyalty programs. From a consumer perspective, the ability to easily track and redeem points in-app offers unparalleled convenience.
"Uber and Lyft have really raised the bar in terms of seamless loyalty program integration," said loyalty expert Emily Collins of Forrester Research. "The ease of racking up and cashing in on rewards right in the app during the normal course of your day is hugely appealing for consumers. Brick-and-mortar businesses across industries are taking notice and working to replicate that frictionless experience."
Uber Rewards Partnerships and Promotions
To further sweeten the deal for all tiers of Uber Rewards members, the company has brokered several notable partnerships. In 2019, Uber teamed up with Marriott Bonvoy to allow Uber Rewards members to earn points on hotel stays. The same year, Uber Rewards partnered with AMEX for a promotion granting Platinum cardholders automatic Uber Rewards Gold status.
These types of collaborations and offers help Uber drive buzz and expand the perceived value of the program beyond just the core service. It‘s a page straight out of the airline playbook. For years, carriers have struck deals with retailers, dining partners and other brands to allow loyal flyers to both earn and redeem miles in more places.
Looking ahead, Uber shows no signs of slowing down on the partnership front. The company‘s recent acquisition of alcohol delivery platform Drizly suggests we could see an expansion into rewarding booze-buying behavior.
The Driver Side: Uber Pro
Of course, Uber‘s rewards strategy isn‘t just about riders. To attract and retain quality drivers (who are technically independent contractors, not employees), Uber launched its Uber Pro program in November 2018.
Like Uber Rewards, Uber Pro operates on a tiered benefits system. However, instead of earning points on dollars spent, drivers earn points for completing trips with high ratings and low cancellation rates.
The Uber Pro tiers shake out as follows:
| Tier | Points Needed Per Quarter | Benefits |
|---|---|---|
| Partner | 0 | Basic Uber perks |
| Gold | 300 | 3% cash back on gas, priority support |
| Platinum | 600 | 4% cash back on gas, faster airport pickups, free roadside assistance |
| Diamond | 1000 | 5% cash back on gas, special recognition, dedicated phone line |
On a structural level, Uber Pro differs from Uber Rewards in a few key ways:
- Status is earned on a quarterly basis rather than through continuous, rolling progress
- Benefits are more focused on earnings and expense management rather than creature comforts
- There‘s a higher bar for reaching upper tiers (Diamond requires 1000 points per quarter, equivalent to 4000 points per year)
These differences reflect the distinct needs and motivations of drivers compared to riders. While riders respond well to experiential perks, drivers are laser-focused on their bottom lines.
The reception to Uber Pro has been largely positive, with many drivers reporting increased earnings potential. However, some critics argue that Pro perks don‘t make up for Uber‘s overall lack of worker protections and benefits compared to standard W-2 employment.
Harry Campbell, founder of The Rideshare Guy blog and podcast, sees Uber Pro as a net win for drivers but not a cure-all.
"Uber Pro is a step in the right direction in terms of giving drivers more opportunities to earn," Campbell said. "Upfront trip info and the destination filter are especially valuable for strategic drivers. But there‘s still a lot more Uber could be doing to address driver concerns around fair pay, transparency, and deactivations."
The Profitability Question
For all the buzz around Uber Rewards and its impact on customer loyalty, the elephant in the room is whether the program is sustainable for Uber long-term. With Uber still losing money quarter after quarter, any initiative that reduces take rates (the portion of each fare Uber keeps as revenue) faces extra scrutiny.
Uber has been tight-lipped on the specifics of how it determines customer value and sets rewards funding aside. But industry experts estimate loyalty program liabilities typically range from 5-10% of revenue.
"With Uber Rewards and Uber Pro, Uber faces a delicate balancing act," said Sunil Gupta, Harvard Business School professor and author of Driving Digital Strategy. "It needs to fund rewards at a high enough level to be attractive and influence behavior, but not so high that it completely erodes margins. Finding that sweet spot is key to making the economics work at scale."
Whether Uber can strike that balance remains to be seen. But for now, the company seems committed to leveraging rewards as a core pillar of its growth and retention strategy. CFO Nelson Chai highlighted Uber Rewards as a bright spot in the company‘s Q1 2021 earnings call.
"Uber Rewards continues to drive increased retention and engagement across our user base," Chai said. "As we invest in the program, we‘re confident it will continue to differentiate our platform and drive further loyalty."
The Path Forward
As we‘ve seen, Uber Rewards and the Uber Blue tier are far from arbitrary. They‘re carefully crafted to tap into deep-rooted psychological triggers and steer user behavior in a way that benefits Uber‘s bottom line. But the program doesn‘t exist in a vacuum. Its success hinges on a complex web of factors: competitor moves, driver sentiment, investor patience, and more.
In the short term, frequent riders should take advantage of Uber Rewards while the getting‘s good. Enjoy those Uber Blue perks and strive for Gold and beyond. Just don‘t be surprised if the goal posts shift over time.
The Uber Rewards of the future may look quite different than today. We could see more paid loyalty tiers, an expanded set of earning and burning partners, or new types of experiential rewards. The key for Uber will be to continuously evolve the program to keep customers engaged while protecting slim margins.
One thing‘s for certain: as long as riders keep flocking to on-demand services and the competition remains fierce, expect loyalty to be a major battleground. Uber fired the first shot with Uber Rewards, but the war for hearts, minds and wallets is just getting started. Buckle up and enjoy the ride!
