As Uber’s legal and public relations problems increase, Lyft has to spend less and less money acquiring customers.
Uber has had many public relations disasters in the past year. Their CEO was ousted amid allegations of company-wide sexual harassment problems, and their ongoing search for a new CEO is fraught with drama. They are also in the middle of a high-profile lawsuit with Google for allegedly stealing trade secrets.
Another example: When taxi drivers were refusing to pick up people in protest of an executive order, Uber sent out an ill-timed tweet announcing that it had lowered prices temporarily. People thought this was incredibly tacky and opportunistic, and the hashtag “#DeleteUber” was trending for a while. During this period, Lyft saw a 60% increase in passengers.
Lyft and Uber have long been competing for each other’s customers, and it has been an expensive battle on both sides. Historically, each company has spent an incredible amount of money on new user incentives and promotions to try and entice users from competitors’ services and traditional taxis.
The multiple and varied public shitstorms surrounding Uber have paved an easier path for Lyft. In October 2016, Lyft had customer acquisition costs of $70 and Inc. estimates that by the summer of 2017 they had customer acquisition costs of about $10.
In short, last year Lyft was spending $70 to get a new user, and now they are spending about $10. They were able to reduce their costs so much because many people no longer want to use their main competitor’s service. Some might call this a lucky break for Lyft, but others might underscore the importance of maintaining good PR by having a clean company image. Customers don’t want to have to make tough moral decisions when choosing a product or service, so it pays off to do the right thing.