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Why Grab’s refusal to budge on promos might just be its route to success

Consumers in Singapore are having a field day with rides costing as little as a dollar being offered on the newest ride-hailing operator, GOJEK. But despite the promotions offered by GOJEK, existing competitor Grab has said that there will be no promotions being added to its platform despite the aggressive push by its Indonesian competitor.

In a statement to Marketing, Grab Singapore’s head Lim Kell Jay said that the team at Grab is fully focused on its customers and are working to improve their experience based on their feedback. He added that over the past months, the team has worked towards creating long term value for its customers such as a series of product enhancements to improve core experience, and several initiatives.

“Apart from expanding the SCORE subscription programme that enable our users to enjoy savings from a wider spectrum of brands annually, we have also launched GrabClub that offer a selection of monthly passes with discounts on Grab’s everyday services and made GrabRewards more rewarding for our most loyal customers. These plans represent Grab’s commitment to our customers, and we will continue to work hard to rebuild our relationship with them,” he added.

In a TODAY article, Lim said that while there will be new offerings on the platform which are currently already being tested, promotions will not be a key driver for business. According to him, the company is working towards long-term value for its consumers.

While this is a stance the brand has taken for the longest time, Grab has not had the easiest of times pleasing its consumers in recent months. Following Grab’s acquisition of Uber’s Southeast Asia operations earlier this year, the ride hailing company continuously made headlines for breaching competition laws.

And while it still emphasised its goal to improve the lives of consumers, a recent report by Forrester noted that good intentions are not enough for renowned digital businesses. Forrester said that Grab, unfortunately, triggered an “explosive emotional reaction” when it failed to comprehend the impact of generating a feeling of powerlessness among drivers and consumers. The reaction caused Grab’s position to be undermined and “spread like a virus”, it said.

With GOJEK now winning the hearts and wallets of consumers with its undeniably attractive prices, does Grab’s stand alienate its pool of passengers even more?

According to president, SE Asia Pacific and Japan at Landor, Nick Foley, Grab faces an ongoing uphill battle. This is largely because the company focused too much on “transactional dynamics” at the start, rather than truly take the time to establish what the brand meant for consumers. This ultimately led to price wars which then conditioned consumers to every day low fares that were never sustainable.

“Once you’ve commoditised a brand it is difficult to premiumise it. Ultimately history will remember Grab and Uber as an aberration that took place early in the 21st century and forced taxi companies to get their act together,” he said.

Price wars: A race to the bottom?

Industry players Marketing spoke to also agreed that at any point, competing on price and surviving on promotions is a race to the bottom.

Supporting this claim was Graham Hitchmough, regional chief operations officer of Bonsey Design, who said that years of stiff competition in the Indonesian market between Grab and GOJEK has clearly showed that a competition based on price promotion is a perfect example of race to the bottom.

Ad hoc fare reductions are by their nature unsustainable and simply encourage brand promiscuity and switching in customers – which is exactly the opposite behaviour that Grab and GOJEK want. What these brands now need to establish and build is a “sticky” service ecosystems that extend into more and more areas of customers’ lives.

“Some level of promotional activity will still be inevitable around the take up of the new services, but it will not be the norm. GOJEK may well use price promotion initially to stimulate trial and awareness,” he said, adding:

If consumers are continually encouraged to consider and select only on price, it won’t help either Grab or GOJEK get to where they want to be.

Managing director of FITCH, Simon Bell, added that being an established brand in Singapore, Grab “has chosen wisely a strategy based on quality service and new offers” such as GrabPet (rides for pet owners). While the market is no doubt competitive, as a leader Bell says “Grab seems to be smartly using its own playbook”.

“But I’m sure this decision has not been made on a whim. Data is king. By now Grab would have had large amounts of customer information to make logical and considered choices – that represent value to both drivers and commuters,” he added.

As market brand leader, Grab has no need to pursue this direction. Having now chosen a course, it can sit back, watch and react as needed.

Building loyalty and service

Luke Lim, group CEO of A S Louken, highlighted several ways Grab should focus on to avoid a competition merely on ride rates.The app’s user experience and ease of use, he says, has now got to be a defining factor and be improved – on top of quality in service and response. Apart from users, Grab has to ensure governance of its drivers, for trust and quality of ride.

Speaking to Marketing, Robbi Wu, head of commerce, Carat Asia Pacific said that service platform companies such as Grab will “always” have the challenge of creating loyalty as the actual user experience is tied to a third party. A shortage of proprietary intellectual property leaves the company in the open to competitive disruption.

Agreeing with the experts above, Wu said that Grab understands the challenges and looks to deepen its inter connectivity and service offering as a defence against new challengers.

“As many will agree, providing long-term value as a user is a strong motivator for retention. Short-term promotional strategies may prove to be a viable means of garnering attention in the marketplace, and helping to position new challengers as an antidote for any discontent in the market,” he said, explaining that for Grab this means looking at where concessions could be used to target the weakest parts of their business and taking a good look at how core values of the business are translated into action.

Meanwhile, statistics by Meltwater shows that social sentiment around GOJEK’s entry into the market has been neutral thus far. However, in terms of share of voice, GOJEK was a notch higher at 53% while Grab was at 47% of media coverage. Among the list of trending topics included “Grab”, “Jek driver lip lai”, “Singapore” and “Page”. There have not been much chatter about GOJEK’s service and sharing of consumer preferences.

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