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Lyft’s monthly subscription experiment is going national. The ride-hailing company has been tinkering with subscriptions since earlier this year, and it’s now ready to roll it out to a much wider market. Ultimately, Lyft has high hopes of being grouped together with subscription powerhouses like Netflix or Amazon, especially as it gears up for an initial public offering in 2019.
So how does it work? Right now, riders who sign up for Lyft’s “All-Access Plan” for $299 a month get 30 rides costing up to $15 each. If a ride costs more than $15, the rider pays the difference. Other than that, it works like a normal Lyft ride. The plan applies to only some of the modes of transportation offered by Lyft — single-passenger trips and carpooling, but not bikes and scooters yet — but unused rides don’t roll over to the following period. For a limited time, All-Access Plan subscribers will also get 5 percent off of all additional rides.
Lyft began testing the new service earlier this year. At the time, the company offered a range of variably priced plans in an effort to find the sweet spot for high-frequency users who were interested in paying an upfront fee for a certain number of rides. Prices ranged as high as $450 and as low as $199, so the final plan appears to have landed somewhere in the middle.
“The All-Access plan is a great option for passengers who are frequently using Lyft – whether that’s getting to and from work, the gym or running errands,” said Katie Dill, VP of Design at Lyft, in an email. “This is the first step toward delivering on our goal of making car ownership optional and we’re constantly looking for more ways to provide passengers with the easiest, most convenient options possible,” .
For Lyft, the more diverse and varied its products, the more encouraged people will feel to abandon their personal vehicles for good and become evangelists for ride-sharing. Today, the ride-sharing market makes up less than 0.5 percent of all vehicle miles traveled. But Lyft insists that in 20 years, that stat will be over 80 percent. The company likens it to the shift to subscription services in the music and TV industries spearheaded by Spotify and Netflix.
“This is the first step toward delivering on our goal of making car ownership optional,” the company said in a blog post. The idea of liberating Americans from the yoke of car ownership undergirds much of Lyft’s rhetoric around product development.
For Lyft, it’s all about options
Last month, the company announced an expansion of its “Ditch Your Car” challenge, in which residents in 35 cities are asked to give up driving for a month in exchange for a certain amount of credit (varied from city to city) which can be used for Lyft shared rides, bike-share and car-share trips, as well as bus and subway fare passes.
Lyft CEO Logan Green mentioned that subscription plans were the future of his company back in March. “We are going to move the entire industry from one based on ownership to one based on subscription,” he said.
Indeed, subscriptions are seen by tech companies of all stripes as the best way to lock in fair-weather consumers over time. The appeal of a subscription plan is especially strong for a company like Lyft, which languishes in second place behind its much larger rival Uber. And it’s coming at a time when Uber and Lyft have grown to the point where they’ve become fairly indistinguishable from one another.
Lyft has said it will go public in early 2019 in the hopes of beating Uber to the stock exchange floor. And investors look favorably on subscription plans, seeing them as an ideal business model. The subscription market has grown by more than 100 percent a year over the past five years. The largest retailers generated more than $2.6 billion in sales in 2016, up from $57 million in 2011, according to McKinsey.
But there are challenges to subscriptions, mainly the high churn rate. Consumers quickly cancel services that don’t deliver superior end-to-end experiences, McKinsey says. Lyft says its subscribers can cancel at any time.