One of India’s first radio cab companies, Meru Cabs, recently went all out against competitors Ola and Uber in an aggressive marketing campaign. Siddhartha Pahwa, CEO, Meru Cabs Private Limited, talks about this sudden offensive and the transformation of Meru Cabs from a call centre-led business to an app-led one with 4.8 million people using its app today
BY NEETA NAIR
Q] A year ago when Meru released its first commercial, you were taking on the ‘kaali peelis’. Now, it is Ola and Uber. Is the ‘kaali peeli’ not competition anymore?
No, we were not taking on the ‘kaali peelis’, we were just talking about the consumer behaviour of waving to hail a cab. We wanted to change that and succeeded. Even this time, we are not taking on anyone, we are just educating consumers about the right fare. The initial signs show that consumers are asking relevant questions, which was the whole objective of the commercial. So it is working.
Q] What’s the alternative that you are offering through the ‘True rupees per kilometer’ campaign’?
The idea came up when a friend’s eightyear- old daughter told me that her Dad doesn’t know the table of six. Every time they travel, he says they take a cab that costs only Rs 6 per km but ends up paying Rs 200 for 10 km. So, the user needs to be told that he is paying much more than what was promised to him. We also wanted to say that Meru is not expensive. Meru charges Rs 20 a kilometre, which broadly comes to the same amount. In order to drive change in the consumer’s habit, we decided to give him a 20% discount on booking through the Meru app. Even travelling in your own vehicle would cost you at least Rs 25 for the same distance. So consumers can now think of giving up their second cars and only use cabs as a mode of transport.
Q] Meru was not known to give offers and discounts, unlike competition. Have you succumbed to pressure?
When we started this service, people were not used to any private cab service. The only option available was a ‘kaali peeli’. The demand was so high that giving extra discounts wouldn’t have made sense. Over a period of time, we have been able to optimize our cost. Our intent is that if we are making money, why not plough it back to the consumer? But do we believe in having a discounted price forever? No, because that will bring down the overall value. For example, we were offering 25% discount for payment through wallets because we wanted the trend of cashless payment to develop. Now we are giving discounts on app bookings, because we want people to check our pricing. So, when we want to drive a certain behaviour or target a set of consumers, we may give discounts.
Q] You have put out an aggressive advertising campaign, but no TVC. What is the strategy behind that?
Television is a good medium when you want to explain a story, and it suited our ‘Hath Na Hilao, App Dabao’ campaign idea very well. Our campaign now is very straightforward, it just needs you to do your calculation properly and therefore we thought a Print and Outdoor campaign supported by Radio is going to be more appropriate than a TVC. About 20% of our marketing funds have been allocated to create awareness on the digital medium. So, it’s a 360-degree campaign excluding a TVC.
Q] You recently raised investments to the tune of Rs 150 crore from Brand Capital. What percentage of that would be spent on marketing?
Meru has been generating internal accruals and has attained cash breakeven more than nine months ago. Whatever money we are generating, we would like to push it back into marketing. So 60% to 70% of it will go into brandbuilding and category-building for us. The balance would be spent on penetrating more into the existing market and entering new markets.
Q] Meru has also started car pooling. Why aren’t you monetizing that?
In 10 years, sharing of assets and resources will become important. According to a PwC research, 37% of the global economy will be a shared one by 2022; therefore, we have started the concept of car pool. Car pool is a peer-topeer ability to share your own personal vehicle with others who are travelling in the same direction. Consumers can use our platform to find co-riders who will be paying the fare to the car-owner and not to Meru. This is the future of transportation in India. In future, we may consider fixing a price for every transaction via Meru but right now we are not monetizing it.
Q] Why are you not offering this service in Meru Cabs as opposed to personal vehicles?
Meru is a cab. It is not a sharing service. The idea is to cut down on the number of vehicles plying on the road. Many organizations help their employees in carpooling, but then it gets limited to only those organizations. Our intent is to take it to a larger scale.
Q] You have in the past accused Ola and Uber of causing pollution. How eco-friendly is the Meru service?
We strongly believe that you should not create a problem to solve one as that would make the industry’s growth suboptimal. There are already technologies available that allow use of cleaner fuel. But unlike us, our competitors use diesel cars which cause pollution. One hundred per cent of our cars in Delhi and Mumbai run on CNG. We are constantly in touch with car manufacturers and the National Green Tribunal. We are not against competition, just that we don’t want different standards and guidelines for different people. If you are in this industry, whether you are an aggregator, an operator, whether you own a car or not, the quality of service that we should deliver to the passenger should be the same. For any industry to grow, there has to be healthy competition. Using capital with the intent of predatory pricing to make sure that you spook competition will never help the industry grow; good quality service, good pricing, value proposition are the things that will. Today, the penetration of cars in India is only about 4% while globally it is about 30%. We don’t want more cars on the road; we want more commercial vehicles so that each can cater to at least seven or eight families on a daily basis.
Q] While private players are sparring amongst themselves, taxi unions are protesting against all the private cab aggregators…
While the ‘kaali peeli’ cabs are not embracing any new technology themselves, their mindset is that we private operators are doing something wrong. My appeal to them is that Meru has an opportunity and is giving you a platform - take advantage of the technology by attaching your cars to our system. This approach has worked quite well in Kolkata, where some of the yellow cabs and AC cabs have come to our platform and are getting good business. It can happen in Mumbai and many other cities too.
Q] In what areas does Meru have an advantage over competition?
Because of better control over assets and vehicles, Meru cabs are present at the first curve outside most airports. So, you can just walk out of the airport terminal, sit into the car and get going. You don’t have to call any driver, or wait for him to arrive. Secondly, you can book a Meru even seven days in advance. The third advantage is our drivers. In our system, we give cars to drivers for a three-four year period, after which they own the cars. So, what we get is consistent supply and a commitment from the driver, along with complete exclusivity. It ensures that our cost of operation goes down significantly and we don’t have to really subsidize the driver to make him run the vehicle. These are the three advantages which sustain us despite the onslaught in the market.
Q] What kind of year on year growth do you foresee?
We are growing by about 35%, which is either in line with the market or marginally ahead of it. We have been holding or marginally growing our market-share,
which is a very good sign. We believe the industry is going to continue to grow at about 25% for the next 5-10 years. And if we continue to grow at the market growth rate, hold on to our share, we will roughly be about a billion dollar business by 2022.
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