Interview Preparation

Uber has earned a reputation for scaling quickly with an almost ruthless acquisition style. But as the company matures and shifts focus from growth to profit, maybe attracting new customers is now a secondary goal. What if this cash back strategy indicates that Uber is now looking for customer quality over quantity?

Generally speaking, discounts lead to higher purchases because they provide customers with instant gratification, rather than the delayed gratification of cash back. However, those acquisitions come at a price. Khosrowshahi has said that bringing in Uber One subscribers initially led to losses because the discounts exceeded the value of their frequency. However, over time, that membership “creates a significant moat and significant growth opportunity,” Khosrowshahi said during Uber’s full-year earnings call.

Uber One members end up spending four times more than non-members, and retention is 15% higher among members, according to Khosrowshahi. The subscription service also accounts for a higher percentage of total bookings. As of March 31, Uber One members accounted for 27% of total bookings, and Uber hopes to increase that number to 50% or more in the US. Khosrowshahi said Uber One penetration already exceeds 50% in other markets.

If missing out on discounts doesn’t scare many people, the cash-back deal has the potential to deliver better margins for the business, increased customer retention by linking users to future services, and guaranteed future sales.

“Uber One members are profitable,” Khosrowshahi said during the company’s first-quarter earnings call. “And what we found is that it’s a very, very effective way, essentially, to drive frequency and increased engagement with our customer base.”

A brief history of Uber subscriptions

Uber One officially launched in 2021, but Uber had originally started a subscription service called Ride Pass in 2018. The $15-per-month service allowed riders in a handful of cities to set a fixed price for any ride they took. In 2020, Ride Pass became Uber Pass, a U.S.-wide subscription service that offered customers 10% off UberX, XL, and Comfort rides and 15% off Black, SUV, and Uber rides. Premier for $25/mo. With Uber Pass, customers also get 5% off Uber Eats orders over $15 and free delivery, as well as free delivery on grocery orders over $40.

When Uber One launched in late 2021, the offer was $9.99 per month or $99.99 per year for 5% off eligible rides and 5% off eligible deliveries, as well as free delivery on over-the-counter food orders. $15 and grocery orders over $30.