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The Daily Telegraph (LONDON)
July 24, 2007 Tuesday
CITY; Business Club
CASE STUDY Meter is running for cut-price cab firm A website that matches passengers with empty taxi seats needs to attract more customers and drivers.
Philip Smith.
AS A taxi driver, Mike Daniels knows only too well the frustration of returning from a long journey with an empty cab. "Taxis are only licensed to pick up kerbside fares in the area where they are registered,'' he said. "So a 40-mile trip to an airport, for example, is really a one-way journey. They have to go back empty unless they have a pre-booked fare.'' And an empty seat is money lost.
His business - Manchester Airport Taxis - set out to address the problem by allowing passengers to book taxis online.
Covering the North West, Daniels was looking to roll out his business to the rest of the UK. "I had bought the domain name airporttaxis.com and was thinking of franchising the business to cover all the main airports,'' he said.
But a chance meeting in a Devon pub made Daniels take something of a left turn. He was staying at a holiday village that former pig farmer and Business Club member Robert Persey had created out of his empty pens following the collapse of his business due to the foot and mouth outbreak.
Also staying at the site last July was IT consultant Malcolm Walklet. Together the three hatched a plan that not only gives taxis the chance to fill empty seats and allows passengers to book at a discounted rate, it should also, on paper, turn a healthy profit with little effort.
But time is not on their side. The three have given themselves until the end of next month to get cheapertaxis.com up and running with a critical mass of both drivers and passengers to make the business viable.
The business plan turns Daniels' original idea on its head: rather than drivers advertising their services, passengers instead advertise their needs. Those looking for a ride place the dates and destinations on the simple cheapertaxis.com website. That information is transferred to the sister site - taxisupermarket.com - where drivers register for access to a range of services such as insurance and finance as well as the list of potential bookings. The drivers then contact the passengers direct.
"The taxisupermarket.com site is a one-stop shop for the taxi trade,'' said Daniels. Cabbies pay a flat pounds 3 fee for each booking they take but the real revenue stream will come from the affiliate marketing deals - the business generated for third party associates as drivers click through from the portal.
"Affinity marketing is a growing area,'' said Daniels who, with 18 years' experience working the cabs in Manchester, now has a burgeoning business empire that includes an insurance brokerage for cab drivers.
Since its launch in May the site has yet to generate any income and profit is still some way off. "We are not motivated by income at the moment,'' he said. "We are looking at the longer term.''
So far, nearly all of the initial pounds 50,000 start-up funds - the bulk from Persey who is the majority shareholder, with nominal amounts backed by a mix of industry and technical expertise from Daniels and Walklet - is going on marketing and publicity.
"Reaching the taxi trade is easy,'' said Daniels. "We know who they are and where they are. We have a database of 10,000 taxi and private hire firms. Once we get a concentration of jobs we can ring or email them. It won't be a problem getting the taxi trade on board.'' That's helped by ads in the trade press and word of mouth on the taxi-rank.
The challenge is getting passengers to log on to place their request. With a predetermined fare - usually 50pc of the commercial rate - passengers should be flocking. "The chances are it will be picked up by their usual taxi firm anyway, so they will know the operator. There really is no risk,'' said Daniels.
For those less willing to play at brinkmanship, the passenger can decide - when placing the booking - when to remove the request, giving them time to book through conventional channels for peace of mind.
"Our plan was to launch this in the North West serving Manchester, Liverpool and Blackpool airports. But it's beginning to roll out across the UK by itself,'' said Daniels. "Although we focused our marketing on the North West, most of the jobs listed are from the South.''
That has a downside: drivers won't keep using the site unless there are passengers seeking rides. Passengers won't keep using the service unless they find cheaper and reliable taxi firms.
"The uptake from the drivers is 75pc, so 25pc of the jobs fall away or are not taken. Our aim is to achieve a 95pc uptake from the drivers,'' he said. Daniels needs to build volume - and quickly. Key to that will be getting the price right. It has to be low enough to attract customers but high enough to make it worthwhile for the taxi driver.
It's now in a critical period. There are 256,000 licensed taxi drivers in the UK, said Daniels, of which just 590 have so far registered on the site, and 550 passenger requests. Even so, Daniels is confident the drivers will register. "We've already caught the imagination of the taxi trade, now we have to get the public on board.'' Promotional events and sponsorship of the local radio station's drive time all help - but eat into that pounds 50,000 kitty.
"We realise the limitations of our small budget. Brand building can't be achieved on pounds 50,000. We know we can only take this project so far. But once it is established, and we have carried all the start-up risks, we will be looking to sell in about two years.''
EXPERT VIEW
Colin Farrington
Director general, Chartered Institute Of Public Relations
THERE are some self-imposed problems here. Is it sensible for founders to advertise an intention to sell "in two years''? It suggests "fly by night'', rather than a serious business.
Is this service being created on a whim without adequate customer research? Such operations can quickly collapse, given the low costs of entry into web-based service provision and many competitors for affiliate advertising. The key to success is a mixture of high customer knowledge and making sure that cheapertaxis.com is associated with reliability and low cost. Provided the service is good (and no amount of PR skills can save a poor deliverer for long), public relations can help to achieve this success and needn't be expensive.
Word of mouth, viral marketing, using opinion formers and celebrities to get media coverage, offering free trials to charities, schools and the elderly, partnering with car companies and exploiting affinity sites are all ideas a good PR adviser would discuss to help make those crucial breakthroughs.
Guy Beaudin
Business solutions
PC World Business
I WONDER if this service is benefiting taxi drivers more than consumers. Daniels needs to carry out basic market research so he can identify the barriers for potential customers.
How many people book a taxi more than 24 hours in advance? How many go to a search engine to find cheap taxi deals?
Without this information he will find it hard to progress the offering. It's hard enough getting a taxi at the time requested when you book directly with a local firm. As a third party, Daniels must address the risk of either having taxis arrive late or not being able to fulfil requests.
Cheapertaxis has to gain the trust of consumers and the best way is through its website.
The site needs to be slick, professional, accessible and highly functional but it isn't any of these. It should also clearly outline the savings and benefits for consumers as well as the service's limitations. That way people don't waste their time.
An investment in web development will go a long way in gaining the trust of customers.
Lou Macari
Head of business
consultancy, AXA
GREAT ideas often prove difficult to turn into viable business propositions. Achieving the volume of business required to operate profitably may demand a level of investment that is either not available or cannot be justified against the potential return.
However, building high brand awareness on a modest budget, while challenging, is not impossible and encouraging word of mouth through viral marketing and imaginative PR strategies can prove very cost-effective. One of the most difficult decisions for entrepreneurs is judging whether to give up on an idea. Am I throwing good money after bad or is success around the corner? By setting realistic targets and time scales, Cheapertaxis has introduced the important discipline of formally reviewing progress against the original plan.
I would urge it to involve someone outside the business in the process. This needs to be someone who will ensure the owner's passion does not blind their objectivity. A trusted business professional would be ideal.
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