Uber has decided to discontinue the 5% ride discounts previously offered to members of its Uber One subscription service. In an email sent to customers, the company announced that starting from the next billing cycle, subscribers will instead earn 6% in “Uber Cash” on eligible rides, which can be used for future Uber and Uber Eats purchases.
This move by Uber carries some risks as the company aims to boost bookings among subscribers. The discounted rides were a significant factor driving adoption of the Uber One subscription, which grew 100% in 2022 to approximately 12 million members, according to Uber’s full-year earnings report. While the switch to a cash back offer may increase profit margins, it also runs the risk of losing customers who were primarily attracted by the discounts.
Some Uber One subscribers expressed disappointment with the change and indicated their intention to cancel their subscriptions. The removal of the 5% discount may also drive some Uber users to Lyft, as Lyft Pink membership still offers a 5% discount on rides.
The decision to move away from ride discounts contradicts CEO Dara Khosrowshahi’s previous statement during the company’s first-quarter earnings call, where he highlighted the goal of Uber One as providing discounts to drive frequency among their best customers.
However, Uber assured subscribers that other benefits, such as the $0 delivery fee and up to 10% off eligible Uber Eats orders, will remain in place. This provides relief to those who primarily signed up for the membership to enjoy discounts on food delivery.
The change comes nearly a year after Uber discontinued its free loyalty program, Uber Rewards, which allowed riders to earn points for future discounts and other perks. Uber has not officially commented on the reason for the recent change, but the company’s emphasis on using benefits across its full suite of products indicates a desire for cross-pollination and increased engagement within the app.
While discounts typically lead to higher customer acquisition rates, Uber’s shift toward a cash back strategy suggests a focus on customer quality over quantity. Khosrowshahi has previously stated that Uber One subscribers initially caused losses due to the discounts provided, but over time, the membership creates a significant growth opportunity and higher customer retention.
The new cash back offer has the potential to improve margins, enhance customer retention, and ensure future sales. Uber One members spend four times more than non-members, exhibit higher retention rates, and make up a significant percentage of overall bookings. Uber aims to increase the penetration of Uber One to 50% or more in the U.S., as it has already achieved high penetration rates in other markets.
