How can Uber balance expanding into new markets versus improving service quality in existing ones?

Introduction

Balancing Uber's expansion into new markets versus improving service quality in existing ones is a critical trade-off that directly impacts the company's growth trajectory and long-term sustainability. This scenario touches on core aspects of Uber's business model, including market penetration, service quality, resource allocation, and competitive positioning. I'll approach this analysis by examining the key factors influencing this decision, proposing a structured experiment, and outlining a decision framework to guide our strategy.

Step 1

Clarifying Questions (3 minutes)

• What's the current ratio of revenue from existing markets vs. new markets?

• Why it matters: Helps understand the financial impact of focusing on either strategy.
• Hypothetical answer: 80% from existing markets, 20% from new markets.
• Impact: If existing markets dominate revenue, improving service quality might be more critical.

• What are the top 3 service quality issues in existing markets?

• Why it matters: Identifies specific areas for improvement and potential quick wins.
• Hypothetical answer: Driver availability, ETA accuracy, and customer support response time.
• Impact: Guides the focus of service quality improvements and experiment design.

• What's our market share in existing markets vs. potential in new markets?

• Why it matters: Indicates growth potential and competitive landscape.
• Hypothetical answer: 40% in existing markets, with 5-10% initial share projected in new markets.
• Impact: Influences the balance between defending current position and pursuing new opportunities.

• What's the average customer acquisition cost in new markets vs. existing ones?

• Why it matters: Helps assess the efficiency of expansion vs. retention strategies.
• Hypothetical answer: $30 in existing markets, $50 in new markets.
• Impact: Higher CAC in new markets might favor focusing on existing market service quality.

• What's our current NPS in existing markets, and how has it trended over the past year?

• Why it matters: Indicates current customer satisfaction and loyalty trends.
• Hypothetical answer: NPS of 30, down from 35 last year.
• Impact: A declining NPS might prioritize service quality improvements in existing markets.