Buzz Rides: A Dorm Room Name in College Transportation

Transcription

1 Cameron Winders Buzz Rides: A Dorm Room Name in College Transportation The Buzz Rides mission is to provide safe, eco-friendly, and free transportation to students. Buzz Rides started in 2013 at the University of North Carolina and expanded to Duke University in Our vision is to make Buzz Rides a household (or dorm room) name for college transportation. Market People have always had the inherent need for transportation. Specifically, people have a need to get to their destination and cannot fill that need via their own method of transportation walking, bicycle, car, hover board, etc. This may be because they do not have a method od personal transportation or cannot use it for various reasons. Parking could be inconvenient, their transportation method might not be with them, or they may not be able to operate a vehicle in a specific situation. Therefore, the need arises: I need to get somewhere and cannot transport myself. This need has existed for a while and solutions to satisfy it have continually been invented. For example, public institutions have tried to create a solution to this need via public transportation such as buses or subways. Additionally, private companies have tried to implement a for-profit solution such as taxi companies. Recently, other private companies have implemented solutions for this need that they believe to be a better solution than public transportation or taxis, such as Uber and Lyft. The market for transportation is obviously quite large. The need specified above, however, applies to those in need of transportation that cannot transport themselves. Therefore, we can slightly more easily segment this giant market. The first location to explore segmenting the market is urban cities. In urban cities, working professionals have the need for transportation for their job, whether that be in the city they reside in due to the hassle of owning a vehicle or parking or in other cities where they have to travel to for business and do not have their own vehicle. College students also have this need. Many college students do not have their own form of transportation due to the costs associated with owning a vehicle and/or the distance away from home. However, college students have the need for transportation on a consistent basis for school and extracurricular activities. Additionally, students that own their own vehicle also might not be able to use their vehicle when frequenting college nightlife. The college market is the initial target market for Buzz Rides. The beachhead customer is a student in their late teens or early to mid twenties that frequents nightlife and is looking for convenient, cheap transportation options. Buzz Rides will focus on the college market because this is the market that is consistently looking for ways to save money and is in need of transportation on a consistent basis. Additionally, the college market is the easiest and least costly market to enter with less competition than entering a large urban city. 1

2 Solution Our solution to this need is to provide the Buzz Rides customers free, convenient transportation. Buzz Rides will offer riders an on-demand taxi service through a mobile app similar to Uber, except we will not charge the customers for the ride. In order to make this solution a possibility and make Buzz Rides a profitable company, we will make revenue from advertising opportunities. The advertising revenue streams will come through physical and digital advertising. On the physical side, we will wrap our vehicle in advertisements, such as the Accenture wrap in Figure 1 in the Appendix. These advertisements will essentially be moving billboards as the vehicle drives riders around. The riders will see the advertisements and the people the car passes will also see the advertisement. For this product, we will charge between $2,000 and $2,500 per month, depending on the size of the market, the length of the contract, and advertiser s willingness to pay. We can justify this price point because based on our current operations at Duke and UNC, this has been the price range that advertisers have paid to advertise with us. On the digital side, we will implement interactive mobile advertisements. The rider will have to interact with the advertisement in order to request their free ride. We will be able to charge slightly higher than standard rates for mobile advertising, because the advertisements will be interactive and therefore create the best impression possible for a mobile advertisement. Thus, we can justify charging more than a different type of mobile advertisement, such as a banner advertisement. To give a more concrete idea of what the mobile advertisement would look like, it would be similar to Shazam s recent campaign with Coca-Cola in promoting Coke Zero, as shown in Figure 2. For advertisers, the need also exists to be able to get their brand in front of the right people. Buzz Rides would solve this need by being able to target specifically the college population. Additionally, each rider would have a profile with information which could further help advertisers market to their target customer. For example, a storage company could target college freshmen towards the end of the school year. This also helps Buzz Rides focus our sales as we know which advertisers to pursue. Because of these advertisers, Buzz Rides will be able to provide our ride services for free. Our ride service will be designed very similarly to Uber and Lyft. These companies have now set the standard for the taxi transportation industry. Through our minimum viable product at UNC and Duke, we have found that people have come to expect a ride as quickly as Uber and as seamlessly as Uber or else they no longer view a free ride as a better alternative. Therefore, we cannot be a worse version of Uber that is free. Buzz Rides needs to have technology on par with Uber, Lyft, etc. In our app, Buzz Rides will have to have the same functionally as well as high quality UX/UI design that riders have become accustomed to. 2

3 Sustainable Competitive Advantage Currently, there are companies trying to compete for the same emerging market of on-demand taxi services, such as Uber and Lyft. The sustainable competitive advantage for Buzz Rides will be that our rides are free. Personally, I spent $85.70 on Uber in February and over $325 on Uber in Therefore, for an average Buzz Rides target customer such as me, the financial difference of using Buzz Rides is significant. Uber and Lyft have done an impressive job at lowering their costs to the point that they are cheaper than taxis most of the time. Additionally, they have offered ride sharing services and options to split the cost with your friends. Even though Uber and Lyft have gotten their prices cheaper than taxis, being a free ride service will be the sustainable competitive advantage for Buzz Rides, because for Uber and Lyft, offering free rides would require an overhaul of their entire business model. Additionally, this overhaul of their business model would disrupt their current business model. Therefore, it would not make sense strategically for Uber or Lyft to take this same approach. Buzz Rides is not initially going after Uber or Lyft s target customer. Uber and Lyft s biggest user demographic is years old with 40 percent of their riders falling in this category. 1 Following the idea behind Clayton Christensen s The Innovator s Solution, Buzz Rides will start by going after the part of the market that is not the competition s target customer, then move up market to eventually capture these customers after gaining market share and continuously improving our services. Other alternatives besides Uber or Lyft include taking a taxi, using public transportation, or walking. These alternatives are not direct competition with Buzz Rides. Taxis are beginning to become disrupted by Uber and Lyft as more people get used to using their smartphone to order a ride just like they use their smartphone for so many other aspects of their lives. Secondly, taxis are now becoming a more expensive option. Using public transportation or walking fall in the same vein as they are cheaper alternatives to taxis, Uber, or Lyft, but are often inconvenient. Buzz Rides would be more convenient and even cheaper than public transportation, because the rides are free. Existing competition is not a direct threat, but any similar new company that would want to use the Buzz Rides business model could easily do so. At this point, there is no proprietary technology that Buzz Rides can rest its competitive advantage on. Therefore, another company could offer the same service and directly compete with Buzz Rides similar to how Lyft and Uber compete. To attempt to mitigate this risk, Buzz Rides will have to move fast to expand to campuses quickly and establish a brand. The Buzz Rides brand will be much different than current ride service companies. Uber has a very professional brand and Lyft has a semiprofessional brand, but focuses more on driver-passenger interaction. In everything that Buzz Rides does we will be a fun, social brand in the app design, advertisements, ride itself, and the 1 3

4 drivers to mention a few. Even though there is no proprietary technology, Buzz Rides will have first mover advantage over any potential new competition. In order to execute on this first mover advantage, Buzz Rides will need to emphasize some aspects of the team more than other high velocity early stage companies. The technology team will be paramount. The app needs to be of the highest quality and the data collection and utilization for us and our advertisers is of the utmost importance. Secondly, our design team will need to be emphasized as we establish our name and brand. Lastly, our sales team will obviously need to be an important part of our team early on. Our corporate structure would include a corporate team as well as an operational team at each college campus initially. Roadmap Buzz Rides began at UNC at the beginning of the school year. In early 2015, Buzz Rides became cash flow positive. The service expanded to Duke at the start of the school year. Our future plans, following an investment, include expanding to North Carolina State University and East Carolina University at the start of the school year. This will lead Buzz Rides to breakeven at the start of Buzz Rides will then expand to the University of South Carolina, the University of Georgia, and the University of Florida at the start of the school year. After this expansion, Buzz Rides will be able to organically grow, if so desired. (see Figure 3) The schools for the expansion were chosen based on several criteria. The schools had to be large enough to have sizeable demand and a sizeable market for advertisers; therefore, we identified schools with over 25,000 students enrolled. Out of these options, we looked to have a strong focus on undergraduates as they are our target customer, so we quantified this by choosing schools where at least 65 percent of the enrollment was undergraduate. Additionally, we looked at the nightlife culture to get an idea of demand by looking at schools with 4 days of consistent nightlife per week and relative proximity between nightlife options and student housing. Lastly, we focused initially on public institutions as there are less legal regulations and hoops to jump through from an administrative standpoint. The Buzz Rides expansion will be to try to mitigate the potential risks of failure. The schools were specifically chosen to attempt to achieve the highest probability of success at the schools. We determined the order based on the cheapest cost to expand. Lastly, success at these schools would further prove the need and particularly the need at larger institutions. 4

5 Financing Based on our roadmap and plan for expansion, we can project out our estimated financials, below is an excel output of our ridership and revenue projections separated by year and school. These projections are based on our current ridership and revenue at UNC and Duke. We then extrapolated the ridership and revenue numbers after determining how many cars we would need at each school based on enrollment and nightlife relative to UNC and Duke. From there, we estimated ridership based on number of cars and enrollment relative to UNC and Duke and revenue based on number of cars relative to UNC and Duke. (see Figure 4) To achieve these ridership and revenue numbers, we will need funding to expand to these schools and develop our technology. Buzz Rides is seeking an investment of $225,000. To expand to each of the 5 schools will roughly cost ~$35,000 per school but depends on the school. This will cover initial expenses such as vehicle costs, insurance, storage, app support, driver initial payments, sales expenses, etc. The remaining $50,000 will be used towards revamping our mobile app. The app will be developed in India to cut costs. $25,000 will go towards developing the rider app and $10,000 will go towards developing the driver app design, ios, Android, and web service. The remaining $10,000 will go towards the administrative panel. Buzz Rides will be seeking investment from angel investors as well as other traditional seed capital sources. Additionally, Buzz Rides will continue to apply for energy based grants, such as the $15,000 Clean Air Fuel Technologies (CFAT) grant that we received. Only ~$100,000 of the $225,000 investment is needed before the school year in order to develop our app and expand to N.C. State and ECU. The remaining investment will be needed for the next 3 larger schools by the school year. With this investment, Buzz Rides can begin its expansion plans, break even, and begin to achieve organic growth. Therefore, Buzz Rides can be well on its way to driving towards its vision of being a staple in college transportation. 5

6 Appendix Figure 1: Figure 2: 6

7 Figure 3: 7

8 Figure 4: 8