Question

Ready, Steady, Ride: Careem versus Uber in the Middle East The immersion of technology within our lives has made it pos¬sible not only to deliver customer value more efficiently in B2B and B2C exchanges but has also made it much easier to have peer-to-peer (P2P) transactions. This concept was brought into the transport sector by Uber, which created a digital app-based platform to connect people who needed a reliable ride with people looking to earn money from their car. Although the service they provide custom¬ers is not a new one, their innovative market¬ing and targeting strategies created a new burgeoning segment, with the result that its service concept has become a generic term: “Uberfication.” The concept expanded rapidly to other parts of the world, with Uber successfully establishing itself as the leader in most global markets. Uber has now moved to 376 cities worldwide and has a net value of $50 billion, making it the fastest start-up ever to get to that value in such a short amount of time. However, in the Middle East, Uber’s app-based taxi-booking concept was ad¬opted effectively and pre-emptively by Careem, a local start-up, before Uber could enter the region. It has since given tough competition to the global leader. In the Middle East, the Uberfication of the transport sector was started in 2012 by two entrepreneurs, Mudassir Sheikha and Magnus Olsson. The former McKinsey consultants launched the app-based ride-hailing service Careem in the city of Dubai in the UAE. Careem is among country’s most successful start-up stories, with a 30 percent growth month on month. In just four years, it has expanded to 44 cities across 10 countries in the region and claims to have over 6 million registered users. Sheikha and Olsson’s story is not very dif¬ferent from that of Kalanick and Camp. The Careem founders say that they were looking to do something meaningful and were looking for opportunities. As consultants, both of them traveled a lot for work and felt that there was a gap in the region in finding quick, efficient, and reliable means of transportation—some¬thing like Careem. In 2013, the competitive landscape of private taxi hiring in the MENA region changed as Uber also entered the re¬gion by making its debut in the UAE. By then, however, Careem already had the first-mover advantage. The Middle East Market Both companies had their own competi¬tive advantages. Uber was a well-established international company with a strong reputa¬tion and track record of success. On the other hand, Careem was the local favorite and launched first in the regional markets, so it was more trustworthy. In the UAE, the private-taxi sector is highly regulated, espe¬cially with regard to pricing and drivers’ licens¬ing requirements. For instance, in the UAE, the law requires private-taxi companies to operate with a minimum of 30 percent higher fare than public taxis. This makes the private-sector taxi services more of a luxury in this market, with both Uber and Careem trying to compete and differentiate against each other. Careem aims to be the largest “mover of people” in the wider MENA region, from Pakistan to Turkey. The brand name worked particularly well in the UAE and Middle East. The word “Car-eem” is a play on a car-based service, but it is also derived from the Arabic word “Ka-reem,” which means “generous.” This communicates the value proposition of Careem very effectively as a company that takes good care of its customers and tries to do more, with a big heart. This blended English–Arabic brand worked well to target the large multicultural expat population in the UAE and also helped to position it as a home-grown local brand for the wider Arab-speaking consumers through¬out the Middle East. Careem drivers are called captains, and it differentiates itself by saying that where other companies call themselves limo services, Careen has a ride for everyone. The market coverage strategy used by Careem is to offer differentiated services to different cus¬tomers by adapting to the local needs. For exam¬ple, in Dubai, “Economy” Careem offers budget taxis, “Business” and “First¬class” options are high-end luxury rides, and “MAX” cars are SUVs that can seat a larger number of people. “Ameera” offers ladies-only rides with a woman chauffer. “Careads” allow parents to order books free of charge through the Careem app. “Careem kids” offers cars with baby car seats. Careem’s operational model and its “generous” value proposition blends well with the Middle Eastern context. Key features of its model include the following: Customer call center: A large popu¬lation in the Middle East prefers to call instead of using apps, and Careem built an entire call center for bookings and re¬porting issues. Pay by cash: This provision addressed the population’s general antipathy to¬ward credit cards and their preference for cash transactions. Careem’s own location database: The GoogleMaps in the Middle East is not very accurate and there are frequent road works, so Careem built its own database of locations. This worked well for the later booking option, which is a unique feature of Careem. Book for someone else: This worked well in cases where bookings were made by secretaries for bosses or clients and also for school pickups. Captain call center: A centralized call center helped in coordinating and com¬municating with the customers, ensuring better security and privacy of customer information. Captain Loyalty: A four-tiered loyalty points system ensured minimum earning for the drivers and that there would be more cars on the roads for bookings and pickups. Uber has already found competition in many of the regions it seeks to expand into, often because of the very model it pioneered. Many of these aspects are difficult to incorporate in Uber’s global model. However, a score-based study in the UAE found that, overall, both Uber and Careem score similarly on aspects like the app, cars, booking process, prices, free rides, and community service. Uber scored more points for the app, prices, and free rides, and Careem scored better on certain as¬pects of the cars, the booking process, and community service. Although in the past the UAE has been the main battle-expand aggressively to more cities and ground for Uber and Careem in the re-even add more differentiated services in region, both companies are now looking to their offerings.

a. Using full spectrum of segmentation variables, describe how careem segments and targets the market for the transport sector.

b. Which market targeting strategy is Careem following? Justify your answer

c. Write a positioning statement for Careem

d. What are the potential issues for Careem after Uber entered the market? Will they continue to appeal to the same types of customers? Why or why not?

Answer 1

A. The segmentation variables may range from demographic to psychographic and income level factors. These variables help a marketer to divide the customer groups on a dominant characteristic and focus on the attractive groups from the standpoint of the marketer.

The segmentation variables adopted by Careem are as follows-

1. Based on the fare preferences of the people Careem segments the customer groups in terms of economy, Business and first class as well as max cars.

2. Based on gender segmentation it offers Ameera services for women clients.

3. Based on the age group segmentation it offers Careem kids for people travelling with children.

B. Careem has adopted differentiated targeting strategy as it seeks to target a large number of customer segments with differentiated needs.

C. The positioning statement of Careem may be as follows-

Careem offers the population of MENA region a convenient and reliable taxi rides with customized services according to the needs of different client groups and helps clients to reach their travel destination in a comfortable and cost effective manner.

D. The following issues may be faced by Careem after the entry of Uber in the MENA region-

1. Careem has to strictly watch its expansion plans as Uber may expand more rapidly in the region and gain hold in the unserviced locations.

2. Careem has to remain competitive in terms of pricing and other services such as free rides as not to loose customers to Uber.

3. Careem also requires to maintain the loyalty of its drivers to offer services to its clients all the time and in each area of service.

4. Careem also requires to gain customer loyalty through specialized offers to not loose customers to Uber.

Moreover, it is expected that Careem would successfully overcome these challenges as it has a strong reputation, driver loyalty and process designed according to the preferences of the people of the region.