Uber and CVS are two of the latest companies this week to launch subscription services comparable to Amazon Prime’s hugely popular membership structure, as they jostle for customer loyalty.
To counteract declining drugstore revenues as customers turn to online shopping for prescription medication and personal care items, CVS launched CarePass, which entitles subscribers to a bundle of services including free delivery on most prescriptions and online purchases, access to a pharmacist helpline, a 20 percent discount on all CVS-branded products and a $10 coupon.
Membership costs $48 annually or $5 monthly, and is currently being piloted in Boston. It’s another example of a brick-and-mortar expanding its e-commerce arm while trying to maintain its massive national footprint, with over 9,800 stores in 49 states, the District of Columbia, Puerto Rico and Brazil.
Meanwhile, Uber’s new subscription plan, RidePass, launched Monday and hopes to lock customers in with the offer of flat rates for a monthly fee of $14.99. In the ridesharing industry, customer loyalty is a fickle thing - if it can be said to exist at all - where users switch between similar, competing apps to find the lowest fares.
The subscription plan is rolling out in five cities, including Austin, Orlando, Denver, Miami, and Los Angeles (where the monthly charge is $24.99) the subscription service allows customers to save 15 percent on overall monthly travel, Uber says.
For more than two years, Uber has been piloting ways to offer riders more consistent prices to take the guesswork out of ride-hailing. The company noticed that its customers who use the app for daily commuting were the most put-off by the unpredictability of Uber’s surge pricing, where a customer might pay a low price for a ride to the office in the morning and be charged considerably more for the ride home during rush hour.
“One thing we hear a lot from riders is that changes in price - however small - can make it tough to plan their day with Uber,” the company wrote in a news release on its website.
Under the new Ride Pass subscription plan, there is no limit to the number of rides customers can take per month. Drivers are still paid the full fare based on time and distance before the applied discount, and the company covers the difference.
It’s another example of Uber introducing a product that needs heavy subsidies to cover the full cost, with the hoped-for trade-off being customer loyalty and new customer acquisition, which would offset the steep short-term outlays. In 2016, Uber piloted its first subscription plan, Uber Plus, to select users in six cities, offering 20-40 rides monthly at reduced flat fares for $20 a month. The company then expanded the service to over one million riders in 25 cities across the country, even though it had to cover the difference between the discounted fare and the regular price.
Uber clearly made this decision from a customer-centric standpoint, but it remains to be seen whether it will hold financially. Companies are known to shoulder extra costs in the interest of new user acquisition - but to also subsidize existing users, like Uber is doing, can put even a promising business in the red.