Ola launches subscription service, gives users flat fare on all rides

Ola is at present ahead of Uber in India and says it doesn't need to fight the game with spending dollars

Taxi hailing app Ola Cabs has launched monthly subscription packages on Ola share allowing members to pay flat rates on every share ride, which it hopes will get more customers to use its service and help fend off competition from global rival Uber.

The subscription service is also a local innovation to score over rival Uber's strategy of spending dollars to buy customers with discounts and drivers with incentives, says Ola co-founder Ankit Bhati.

At present, nearly half of Ola's revenues come from share users, Bhati adds.

In the US, Uber has a subscription service for Uberpool rides, but has not announced one in India.

Both Ola and Uber are in a business where network effect plays a dominant role. The service that has the maximum number of drivers and users will emerge as the ultimate winner. Uber has emerged as the winner in the US with its rival Lyft a distant second.

In China, Uber lost out to local dominant player Didi Chuxing after burning over $ 1 billion. Uber founder Travis Kalanick, who admitted defeat in China, is now putting all its resources, including a substantial part of $3.5 billion it raised from Saudi Arabia's Public Investment Fund to win India, the world's largest open market. 

Ola, which has struggled to raise $1 billion of fresh funds, is at present ahead of Uber in India and says it doesn't need to fight the game with spending dollars. Instead, the Indian company is looking to building a network that focuses on reducing incentives and improving service.

"If you keep playing the game of dollar-to-dollar (spending) there is no way out. You have to change the game here. It is about getting customer loyalty (and) how to make the use of Ola a more habitual every day thing in a person's life," said Bhati at the Nasscom Product Summit here on Thursday.

Ola already has Ola Select, a monthly subscription service for its members who get priority access to cabs and predictable fares with no surge pricing.

"One thing is that Ola is not fighting alone. We have done partnership with Mahindra and Mahindra and HDFC etc. So (we are building) the whole ecosystem together. Through this we are able to build a strategic supply (and) there is no incentive to give. Here we provide loans to buy cars and get them (drivers) on our board."

Both Ola and Uber claim to be technology firms that are committed to bridging the gap in transportation. They charge a 25% commission on each ride from drivers, which helps them earn revenue.

While both firms look at disrupting transport, they are also increasingly coming under regulatory supervision with states such as Karnataka and Delhi regulating prices. Uber has taken the Karnataka government to court calling its new rules to regulate app-hailing business as unconstitutional. The Karnataka High Court has reserved its judgement in the matter.