Why Uber was Grabbed by Grab in South East Asia

by Nigel Hollis | April 09, 2018

I have been working on a presentation about what regular brands can learn from the disruptors like Amazon, Airbnb and Uber. In the case of Uber one lesson might be that being the first mover in one country does not help when you go up against the incumbent in another.

If you look at Uber in the U.S. it stands out as the dominant brand: meaningful, different and salient. But that does not mean that its one size fits all business model translates to other cultures without the wheels coming off. Uber has retrenched from China, Russia and now South East Asia. Uber has agreed to sell its South East Asia ride-share and food delivery businesses to local brand Grab.

Tempting as it is to assert that the failure is all down to differences in culture it is not. Most people have more than one app on their phone and when there is little difference between the services the game is all about how fast you can grow availability and salience. And as we have seen in other similar categories, if you are not number one player then acquisition of a smaller brand is a good way to play catch up. So it makes sense for Grab to acquire the number three brand in the region.

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If we look at Indonesia, the largest country by population in South East Asia, in 2017 according to BrandZ Uber lagged both leader Go Jek and Grab by a significant degree. Go Jek launched in 2010 with the slogan, “Karya Anak Bangsa” (Made by Indonesians) and by 2017 was known to every Indonesian interviewed about their use of taxi services, but Grab had gained significant ground between 2016 and 2017, with awareness growing from 54 percent in 2015 to 84 percent and usage climbing fast. And our data suggests that of the two brands Grab has the strongest growth potential from a consumer perspective.

Uber lagged behind the two local brands. Although it too had grown awareness, usage of the app lagged the other two brands. In part this might be because only one in four Indonesians claim to have more than two ride-hailing apps on their phone. And that being the case, being number three in the market is just not good enough. Still, better to have tried and failed, Uber will take a 27.5 percent stake in Grab and that brand has plans to fuel further growth with bicycle-sharing and on-demand shuttle services planned in addition to the usual motorcycles.

My suspicion is that the three are brands seen as interchangeable by most Indonesian consumers. In the absence of any real differentiation – functional, emotional or cost – the main thing people want is to quickly, easily and safely get from A to B and simply choose the service that will fulfill that need quickest. Success is largely down to building mental and physical availability as quickly as possible.

This said, once you allow for the difference in size between brands, Grab does seem to have some attitudinal advantages over Go Jek. In 2017 Grab was seen to be more meaningful and scored relatively higher on desirable, kind and trustworthy, and as abrand people are very likely to recommend. It will be fascinating to see how this all plays out and what this year’s BrandZ Top Most Valuable Brands ranking has to tell us.

So what do you think? Is my assessment correct or, if you live in the region, is there a different perspective to offer? Please share your thoughts. 

4 comments

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  1. Ipsita Ghosh, April 18, 2018

    I loved your article.  Since early days, I felt Grab needs to focus on building a more differentiated brand for it to be sustainable in the long term. However, even before the recent acquisition, Grab was emerging as the lead brand across all markets focusing on building salience and cashing in on their physical availability which in turn helped further build their mental availability. So for a developing category building brand love from the onset may not be as important. Uber, when it entered the SEA market, had a very consumer-centric model. Their business model was solely built keeping the consumer tensions at the heart. For instance, while accepting a booking, the driver was not aware of the final destination –  a real consumer need, as taxis had a very high refusal rate. Grab had a more inclusive model and started with first including taxi operators, as Grab Teksi (read taxi), negating the conflict which Uber faced in the initial days in this market, of Taxi drivers protesting and in some extreme cases threatening and harming Uber drivers and passengers. When Grab entered the market, Uber was not only the leader but also had a very loyal following. To win consumers over, Grab despite their pro- driver model, focused on understanding the pulse of the consumer.   Spoke to the consumer in the ‘moment’. So during peak hours when Uber had surge pricing, Grab focused on that moment with their promotional pricing and consumers switched. Introduction of their promotion on ‘ride guarantee’ also highlighted a latent need – The end consumer is not aware of the key difference between both the models of the brands. While Uber drivers were not aware of the final destination Grab drivers were and as a result, had more instances of refusals. However, this fact was cleverly masked by converting this into an end benefit for the consumer where the consumer rides for free if their ride is not accepted. They even penalized drivers for not accepting rides though the onus of accepting the ride was still the drivers. Reward system: Consumers love getting rewarded – this is no secret and be it credit card companies or beauty salons, everyone is rewarding the consumers to a. come back b. spend more and c. stay loyal. Grab used this strategy to increase not only their base but also ensure a higher proportion of solus Grab users. For a new category, with brands still in the ‘developing’ stage, with no clear brand differentiators, and brand relationships that are transient, Grab is a classic example of how to build a strong brand despite having a transactional relationship with the consumer. But, its time they started focussing on the emotional aspect of the brand more so as they expand into different categories - defining why is critical. 

  2. Anita , April 11, 2018

    Really interesting POV, Nigel and completely on point. 

    The technology and the thinking behind Uber was genuinely disruptive and in markets where they had a first mover advantage, it was easier to grow. However in markets where local players had built a narrative around their brand - case in point GoJek's Indonesian voice or Grab's distinctive visual branding, Uber probably didn't evolve their messaging and branding as quickly. I also wonder how much of an impact their governance issues, employer branding and #deleteuber had in Asia - in markets where they are not differentiated to begin with, these issues would only make the going tougher.

  3. Anand, April 10, 2018

    Hi Nigel,

    Interesting perspective. You are right on consumers not really considering beyond the top 2 in markets with more competition inspite of the brand having high awareness. In the Indian context where it is a two horse race we do see three key factors that can differentiate one brand vs other (Source: Study done by Millward Brown in 2017) - Better Service with 66% mentioning that as the key reason, Better App and easier interface to use (56%) and Easy Availability of cabs (54%). Brands need to work on these key areas to have a preference over others, Service also leads to chances of recommending to others.

    Infact the market has been flooded with promotions and discounts but it is ranked 8th on the list of aspects that will make me consider a brand.

  4. Guy Powell, April 09, 2018

    HI Nigel,

    Thanks for the article.  I agree that it's now up to growing the emotional part of the brand when there is no relative functional difference.  There may be some operational advantages in terms of analytics, but that generally only applies to existing customers to keep them coming back.  The issue is acquisition and then poaching/conquesting and that can get expensive.  It will be interesting to see what happens over the next year or two as the major brands' shares firm up.

    Thanks

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