Meru Cabs – A Spectacular Growth Story

By Team 6 – Siddharth & Arvind Kota

Situation

The radio taxi service in India revolves around the 5 C’s – Company, Customer, Call centre, Cab &

Chauffeur.

It is recognized as an organized sector with a market size potential of 14.4 billion from 15,000 cabs

with a CAGR of 25%.

Meru stepped into this segment as a replacement to the ageing cabs capitalizing on the growth in

urban population and increasing incomes.

It started its operations and gradually expanded to 4 metros, namely – Bangalore, Delhi, Hyderabad &

Mumbai

The 2 business models followed are franchise owned or subscription based models.

Meru operates on a subscription based model with revenue coming in from airport trips, point to point

trips and cabvertisements.

The driver is the owner of the car paying a deposit and monthly rental to Meru. The company in turn

helps him with customer acquisition & assignment, Back end support and owns & maintains assets.

The 3 major competitors of Meru are Easy, Mega & Tab Cab.

Meru became the leader of the pack by virtue of its round the clock availability, transparent metering,

and ease of booking, safety and superior customer service.

Meru uses technology to the hilt in conducting its operations. Oracle based service architecture is used

to seamlessly integrate services.

However, in spite of positive response from the public, Meru is yet to break even owing to huge

capital expenditures and heavy investment in support infrastructure.

Points to be addressed (Problems):

Sustenance of its competitive advantage

To explore possibilities of customized offerings

Should Meru expand to other cities?

Management of drivers and encouraging them to maintain excellent service to customers

Increase the driver’s earnings and number of trips

Proactively anticipating and preventing service failure

Solution

Merus prime differentiator on the backend side is its heavy use of technology like MDTS GPS/GPRS,

Digital Fare meter, patented scheduling system etc. It must continue to invest in these to make the

operational efficiency higher.

However, in spite of technology there are few fail points:

o The waiting time can be brought down by improving the IVR facility. Even better would be to

motivate the users to use mobile apps as they are virtually free of human interference. With

the advent of increasing mobile technology in both urban and rural markets, Meru must

incentivize the mobile app users to propagate it.

o The car unavailability must be addressed by increasing the fleet size. However, there is

already an issue of shortage of drivers. Meru might have to solve this issue by opening

driving schools in rural markets to train & groom drivers. This will ensure a steady supply of

drivers for its usage. Also, taking assistance of microfinance institutions to assist drivers to

purchase vehicles will help in increasing the fleet size.

o Cab not reaching customers are already been addressed by training which has to be

intensified.

o Finally, complaints pertaining to longer route, driver behavior & cleanliness can be address

by mobile applications. Integration of GPS to provide traffic and shortest route options will

help a customer to understand his shortest route. This will be a transparent measure enhancing

Merus transparency commitment. Instant feedback is alos possible through mobile apps.

Meru can also explore the option of customized offerings by introducing a loyalty program scheme

similar to airlines. It would help increase the repeat customers at the same time providing Meru with

invaluable data to customize offerings.

In an attempt to differentiate itself and further reinforce its commitment towards safety, Meru can

introduce a tracker facility where the passenger can opt one of their relatives / colleagues to allow them to

track the cabs progress. Alerts and updates regarding pick up and dropping time will give a better

experience for kids and elders. Hence, more segments will be opened up for service.

Similarly, women friendly cabs with women drivers at an extra charge can also be introduced at specific

timings in the day to improve its differentiation.

Meru can also link with Pubs to provide taxi service as this will also help avoid drunken driving. This will

also increase it market share.

The towns and upcoming metro market is still an untapped market and it should move into these new

markets as it will help Meru apportion the fixed overheads to a greater capacity. This will also reduce the

burden of capital expenditure.

Meru can also look into introducing a low frills economy cab segment to upgrade the auto rickshaw users.

It can also attempt to introduce an intra city car rental service to improve its revenues.