The chicken and egg problem seems a bit out of the box phrase, especially when we are talking about business. But, the rising competition in any business may be on-demand for taxi booking apps, food delivery, etc. has led to the severity of the chicken and egg problem. Any multi-channel business, that is, it integrates two sets of people that have a symbiotic relationship is bound to face the chicken and egg problem.
What Kind Of Business Faces The Chicken And Egg Problem?
Let's take the instance of an e-commerce business like Uber, it is a multi-sided business. It connects the two sets of people; they are the passengers and the drivers. They both have to be in proportion to benefit each other and the business too. If the number of drivers exceeds the Customers, then the business may be a failure.
The same goes for e-commerce businesses like Amazon, eBay, etc where if there are many sellers and fewer buyers or vice versa, it's bound to face the chicken and egg problem.
You cannot start with either one, just buyers or sellers on your platform. In this context, sellers and buyers are referred to as chicken and the egg and hence the problem arises is called the chicken and egg problem.
What Are The Causes Of Chicken And Egg Problems?
The two main factors which fuel the chicken and egg problem are:
• Too Many Service Providers: if the marketplace is overcrowded with service providers, it makes little or no space for the new service provider. This means the new service provider will not be able to displace both the segments of people who are already accustomed to an app or service.
• When You Already Hold A Good Market Share With High Brand Popularity, both buyers and sellers are aware of your brand, increased hesitation from either of the sets can lead to chicken and egg problems.
Chicken And Egg Problem In The Taxi Industry:
Of late, the taxi industry is crowded with a number of taxi booking players leading to disruption. The advent of Uber, Lyft, Ola, didi, etc, and their huge success have lured many budding entrepreneurs to try their hand in developing their taxi dispatch software. Now, this has led to the chicken and egg problem in the Taxi Industry.
Major players of the taxi Industry like Uber etc have also encountered the chicken and egg problem and have battled it out successfully. Not all the players will succeed and one major reason for failure is the inability to sort out the chicken and egg problem.
The taxi booking apps are the platform for riders and drivers. Each of them will find the platform worthless without the presence of others. So, this creates the chicken and egg problem in the taxi booking industry.
One big question, how to solve the chicken and egg problem in the taxi booking industry?
Strategies To Solve The Chicken And Egg Problem Of The Taxi Booking Industry:
When you wish to build a taxi booking app like Uber, you need to find out the solution to the chicken and egg problem.
It's a tricky task to wade out ways to solve the chicken and egg problem in your taxi booking business. We have made a thorough analysis of the approaches adopted by giants like Uber, Ola to tackle to and after the study, we have come up with certain proven ways to solve the chicken and egg problem.
Let's Read Them Below
• Slow And Steady Wins The Race: "slow and steady wins the race" goes an old age adage. And it holds true in combating the chicken and egg problem in the taxi industry. One best way is to start small and take it steadily and slowly. For example, you launch your taxi booking app first at one location, as you taste success, you can replicate it in other territories as well.
Uber, the taxi giant did the same. It launched first in San Francisco and then boasted of its global presence. Going small and slow can also mean to focus on a single segment of customers or producers. Like Amazon and Flipkart started by selling only books later expanded it rapidly.
Tinder, the dating app is again a befitting example of the concept of starting small and slow. When it was launched, it had many college campus tours to convince the girls to download such apps. After that, they showed the app to the boy's fraternity.
So it's always advisable to start slow and focus on a single segment and build it and jump to other segments.
• Take A Jump Start: make your launch a big affair was known by people. But that's not all. While a solid jumpstart can give you expanded visibility, charting out goals, and checkpoints to see your driving in the right direction.
If You Need An Accelerated Growth, You Can Give Your Taxi Business A Jump Start By Following Ways:
1. Partner With An Already Established Brand With A Large User Base: the best way is to opportunistically partner with an established brand that already has a larger user base on one side of the platform while you slowly develop the other side. See, for instance, initially, Google partnered with Netscape to become its default search engine back in the 90s and tied up with Yahoo as well to power searches on the platform.
2. Make It Super Easy, Cost-Effective, And Risk-Free On One Side To Come On Board: Uber made it damn easy for the drivers to join their platform. Drivers too are super eager to join Uber because all they need to do is accept a phone call from Uber and it's done. Uber made it easy, risk-free for drivers to join. So, such low risk, easy joining in your taxi dispatch app can let it grow and you can build one side.
3. Subsidize The Initial Adoption For One Side: free offers are always attractive. A subsidy can give you the initial nudge you need. Video console companies like Xbox or Sony PlayStation sell at a subsidized rate and the company takes royalty on the games that follow. Similarly, Uber adopts a subsidized program to speed up adoption. You too can adopt such a strategy to speed up the process in your taxi dispatch app.
4. Take Up The Initial Burden Upon You: solve the initial problem by taking up the burden of one side on yourself. Like Uber had no drivers initially, so it went ahead with its own driver, and later with time it engaged more drivers and riders, it diversified its business model. So, you can take lessons from Uber and apply the same.
5. Offer One-Sided Service Initially: to tackle the chicken and egg problem, go with a single side offering first. You can do so in the following ways:
a. Build A User Base On One Side With A Focused Offering, Then Introduce The Second Side: start with providing a simple service initially and the go-ahead to build a large user base. Just like Uber, it started with simple taxi-hailing services. Later it went ahead with expanding it to Uberpool, bike, outstation, etc.
b. Start As An Information Portal: another potent way to fight against the chicken and egg problem is to start being an information provider. Zomato started initially with providing information about the nearby restaurants etc and later expanded its food delivery service. So, it's not always taking a step ahead. Tiny steps aggregate to build a massive success for you.
Final Thoughts:
Venturing into an on-demand taxi booking business is not easy. There exists cut-throat competition with a struggle to gain a larger market share. The entry to the industry is also a great barrier because of the chicken and egg problem. In this blog, we have discussed in detail the potent ways to deal with the chicken and egg problem and how to resolve it to take your taxi booking business to newer heights of success.
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