Lyft’s expansion in India: Business Model Canvas and Value Proposition

10 min readMar 1, 2021

Lyft is an American on-demand transportation provider company. It provides on demand ride, ride sharing, car rentals services. It is currently operational in the USA and Canada. Lyft is the second largest ride sharing company in the USA with almost 30% market share.

Founding story

Lyft was founded with the name Zimride by Logan Green and John Zimmer in 2007. They met through a mutual friend, when John Zimmer revealed to one of his friends, that he is searching for opportunities in the ride-sharing business for long trips. They decided Lyft would be the go-to service for people finding friends for sharing rides.

At first, Logan and Zimmer presented Lyft as an auxiliary of Zimride, without giving it a whole different identity. However, when they realized the rising popularity of ride-sharing, they dropped Zimride altogether and Lyft was the main service they advertised in the year 2012.

From starting its operations in 2012, with an amazingly impressive strategy and a full-fledged plan that astonished everybody since its launch, Lyft has seen impressive growth. It is operational in 644 cities in the USA and 12 cities in Canada.

The idea of “Finding Friends with Cars” disrupted the ride-sharing industry.

Journey till today

Lyft became known for the large pink furry mustaches drivers attached to the front of their cars. Riders were also encouraged to sit in the front seat and fist bump with drivers upon meeting. Later they dropped this idea. Lyft introduced the feature to share rides costing less in 2014. In 2015, It became the first ride sharing company allowed to pick up passengers at Los Angeles International Airport. In 2017, It expanded its operations in Canada.

Today, Lyft is a public company traded on NASDAQ:LYFT. It went public on March 29, 2019 at a valuation of $24 Bn and share price at IPO was $72. Lyft has raised a total of $4.9B in funding over 22 rounds. Their latest funding was raised on Mar 1, 2019 from a Secondary Market round. Lyft has acquired 11 organizations. Their most recent acquisition was Halo Cars on Feb 22, 2020.

Business Model

Lyft started with connecting drivers and riders online. It used to take commissions from drivers per ride. It takes 20–30% commission from drivers. It slowly introduced different cab options like Lyft, Lyft plus for premium cars, Lyft Line for sharing rides. As competition grew their products and services also changed. Currently they are providing on demand transportation service as well as car rentals. Currently options for ride are Lyft, Lyft XL, Lyft Black, Lyft Black XL, Ebike etc. Over the time they have partnered with different vehicle providers for providing these services.

Lyft started when there was already a major player in the market: Uber. Uber is still the largest ride sharing company in the USA. It is operational in 69 countries and provides other services like food delivery, package delivery, courier etc. When Lyft was launched it was introduced as a friendly ride sharing company while Uber was more of a professional ride sharing company. It helped Lyft in gaining popularity and market share. Lyft considered their driver as a friend of the rider. They also called themselves ‘friend with a car’.

Though Lyft has been growing day by day, It is not profitable yet. It assured its investors and mentioned at the time of IPO that It will soon become profitable.

When Lyft was launched, Its founders already had a vision to introduce driverless cars in future. It is currently working heavily on research of driverless cars. It is partnering with other companies to integrate their services on its platform as well as building its own self driving tech.

Expansion in India

If we were to consider the expansion of Lyft in India, Their business model will almost remain the same. There are already companies like Uber and Ola operating in India with similar models in many cities of India. Though there are some factors they must consider before launching in India.

India is going through digitization. Penetration of smartphones is becoming deeper and deeper. Demonetization and COVID pushed more users toward digital payment. But still there are people who prefer cash payment. Currently UPI is the most preferred payment option for users in India. So, It must introduce the option of cash and UPI payment in India. Credit cards users are also increasing in India and Lyft already has that payment method.

To start its operations in India, It can start with major metro cities like Bangalore, Delhi, Mumbai etc. These cities have major IT companies and many startups are coming from these cities. It can target those young working people and later expand to other metro as well as non metro cities. It can also go for corporate tie-ups in those cities.

Many cities in India have auto rickshaws as one of the most used local transport vehicles. It is more economical than a taxi. There are many individuals traveling

in short distance who don’t want to share a ride with others and want a more economical option, for them Lyft can introduce the option of two wheeler/bikes. So, It must introduce auto rickshaws and bikes as the ride options.

It is certainly going to face lots of competition from local transport as well as existing ride sharing companies like Ola and Uber. But It has the advantage to learn and study how Uber expanded its operations here, evolved over time and what they are missing.

BUSINESS MODEL CANVAS

Let’s look at how Lyft works for its customers.

Lyft for riders:

Open the app/website and register
Choose whether to rent a vehicle or order a cab or schedule a cab
Enter pickup and drop location
Choose which type of vehicle you want
Confirm the ride
Wait for pickup
Track live location
Rate driver and add review
Pay the fares

Lyft for drivers:

Open the app/website
Select Lyft for driver
Background verification
Start getting ride request
Given user’s pickup location accept or decline
Get optimized route in map
Complete the ride
Get paid

Now let’s start with the business model canvas.

Customer Segments:

There are two types of customers, drivers who will provide service through Lyft’s platform and riders who are using your services and paying the money.

There are different type of riders: those who don’t have a car and want to travel somewhere, those who already have a car but don’t want to drive for some reasons so they need external transportation service, those who is looking for an cost efficient transportation option like ride sharing and those who want to rent a car.

There are different types of drivers: those who have a vehicle and want to earn money using it full time or part time, those who like to drive or make friends while earning some money, those who don’t have a car but know how to drive and looking for an income source.

Key Propositions:

As mentioned above, Lyft is a ride hailing platform. It has a website and android and iOS app for providing these services.

Riders get to rent vehicles using Lyft. They can book a vehicle with a driver to travel from one place to another or as Lyft likes to call a friend with a car. Riders can also schedule the ride within a period of a week. Riders will usually find cost less than what local transport costs. While booking the cab these information is present upfront: estimated fares, estimated arrival time of the driver, estimated time of reaching the destination. This really helps users in case there are budget constraints or time constraints or any other issues. Once users choose to ride, the app will allow users to track the live location of the driver and constantly update arrival time. At the end of the ride, there are many convenient payment options. You can choose to pay directly from a credit card and go cashless.

Lyft generates income for drivers. Drivers have flexible working hours. They can start taking rides anytime and stop anytime. Drivers can make more money when demand increases and hence price surges. They are also provided insurance in case of any accident or damage of vehicle. There are reward programs for drivers performing well.

Channels:

Users can find about Lyft from directly going to their website, using android or iOS app, through different social media platforms. They can also find about Lyft from different advertisements. Existing users can refer others. Lyft also gives discounts and coupon code to attract more users. They communicate about offers through all above options and direct SMS or email to users.

Customer Relationships:

It’s really important to have a good relationship with your customers for customer retention and acquisition. Rating and review systems establish trust and increase brand authenticity. Users feel comfortable with drivers and fellow riders. As we already know, Lyft promoted themselves as a friendly ride sharing option which builds a sense of community among the users. It’s extremely important to resolve user queries and problems fast and very efficiently. Lyft provides the real time customer support. All of these help in building long term relationships with users.

Everyone likes discounts and coupons. It’s also important to reward your customers on some occasions for their loyalty. Social media plays an important role in today’s time for anything related to customers, users or brand.

Considering the pandemic, Users take safety measures very seriously. It’s really important to implement solutions in such situations immediately and with measurable parameters. Lyft has mandated wear masks, sanitise the vehicle and maintain good hygiene for drivers. It has also added a few safety measures which users need to follow before taking the ride.

Key Activities:

There is so much going on in the company everyday. Promotional and marketing activities to reach more and more people and building brand. Need to solve existing users’ problems, analyze what they need, what they like, what they don’t like. Finding how to attract new riders and drivers. New driver on boarding, background verification etc. Development and maintenance of the platform. Research and development for further growth and a sustainable future.

Key Resources:

For all the activities mentioned above, You need many living and non lining, physical or intellectual resources. Drivers and vehicles are the most important resources to run this business. This is a tech savvy business. So, Your key resources include different technologies and software. To use and maintain them, you need an engineering, research and analytics team. You must have resources dedicated to custom care. You face a lot of regulatory challenges for expanding your business. You need resources for the same.

Key Partners:

To turn your idea into business, you need people, money and many more things. Investors who are keeping money flow are key partners. For smoothe payments Lyft needs to partner with some payment processors. Lyft has to partner with insurance companies for providing insurance to drivers and other employees.

To build a platform you need technology. There are many technology partners like Google. Google map API is used for live location tracking, Google cloud for storage, etc.

Lyft is a ride hailing business, so obvious key partners are drivers and vehicle partners. Lyft has a partnership with SIXT for car rentals. Waymo and Aptive are partners for driverless cars. It is working with other vehicle partners for different vehicles like cars, e-bikes, etc.

Cost Structure:

As a company grows, its costs go up. Cost of on boarding new drivers, It may include cost of providing vehicle, background verification cost, insurance cost etc. Cost of user acquisition. Employees salaries and insurance costs. Marketing and advertising costs. Cost of development and maintenance of platform. Need to build new offices and other infrastructure with time. At the same time Lyft needs to invest in research and development. As Lyft is earning money, paying tax is also one cost.

Revenue Stream:

All the revenue of Lyft comes from commission. Lyft takes 20–30% commission from each ride. By providing a variety of options for rides, it earns more revenue. Lyft uses a heat map to estimate the demand. So, when demand increases it earns money by price surging. Lyft takes some commission from car rental partners. Other revenue streams could be corporate partners.

Value Proposition Canvas

Here, I will be discussing the Value Proposition Canvas for the Riders.

Let’s start with why users use Lyft. Users need to travel from one place to another for various reasons. There are many options for transportation but following features may attract people to use Lyft:

Friend with a car gives sense of community, makes riders feel comfortable and safe
Comparatively lower fares than local cabs
Different vehicle options based on the need: Lyft standard and shared cabs, Lyft Lux and Black Lux for luxurious car, Lux XL and Black Lux XL for accommodating more riders, Scooter or bike for more economic and individual ride, Ebike for those who like to exercise
Easy car rentals
Scheduling ride in advance
Refer and earn reward
Discounts or free rides on some occasions
Ease of payment

Now let’s look closely at the customer journey, customer gains and pains.

Riders’ Journey:

In general, riders will go to a place from where they can find transportation. Then wait for an unknown amount of time. Find a vehicle and inquire the cost. They may or may not know the estimated time to reach their destination.

Riders’ Gain:

One click order or cancel
Safe, comfortable and convenient
Different mode of transportation to choose from
Estimated cost and pickup time mentioned at the time of booking
Verified driver and their ratings as well as reviews are available
Driver’s estimated arrival time and live location tracking
Easy payment options
Fast customer support
Schedule ride in advance
Service in areas might be unfamiliar for rider

Riders’ Pain:

Price surge when demand increases
Hygiene and safety concerns
Low cab availability in pick hours
Pick up time is more than expected
Driver unable to find pickup location
Drivers not accepting ride requests

Having discussed the customer side of value proposition canvas, We will now discuss the business side.

Gain Creators:

Driver’s background check: It helps building trust and create safe and comfort for riders
Review and ratings: It creates transparency and authenticity of brand
Live location tracking: Help riders share their live location with others, get idea of where driver is
Different payment options: Ease of payment
Rewards and discounts: Makes riders happy and attracts new users

Pain Relievers:

Connect with nearby driver: To avoid delay in pickup
Safety measures: Considering pandemic safety is major concern
Lower cost than traditional taxi: Economical option
Driver rating and reviews: Allows user to share their experience and suggestions for improvement

References:

I would love to hear your thoughts and suggestions in the comments :-)

Lyft’s expansion in India: Business Model Canvas and Value Proposition

BUSINESS MODEL CANVAS

Value Proposition Canvas

Written by EKTA BHORANIYA

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