Taxi 1 vs Taxi 2

I just read an excellent article about 2 taxi-drivers in Uganda that applies perfectly to us here in Jamaica.

Here is a link to original article: http://appfrica.net/blog/archives/480 which actually has to do with "free-economics" or freeconomics, the act of giving away something for free in order to built trust and gain future business.

In essence he says that a poor business-man gives nothing away for free now because he believes that he will gain nothing for himself in the future. It truly applies to the Jamaican situation.

An excerpt from the article: Can Freeconomics Work in African Markets?[Part 1] by Jonathan Gosier

A Tale of Two Taxis

Many businesses chase immediate cash instead of things like customer loyalty and dependancy. they seem to operate to operate under the impression that their actions won’t catch up to them, and they probably won’t…until there’s a competitor.

I’ve heard a number of stories about how one mobile phone provider here in Uganda (they recently changed their name) would abuse their customers to no end. Then one day they realized their users were leaving in mass numbers for a few newer competitors that were cheaper, more reliable and more attentive to their needs. Now the first company has rebranded itself in an effort to improve it’s reputation with the public and win back that business.

The important thing here is not what’s going on but why. Companies here are often ‘reactive’ instead of proactive, waiting until they’ve chased people away before they attempt to improve. All too common among the entrepreneurs here is the eagerness to chase a few quick dollars instead of looking at the ‘bigger picture’. I’ll give you a simple example…

I don’t have a car so I have two main special hire taxi guys on call that I use for all my trips around town. Taxi 1 and Taxi 2.

Taxi 1 is young and ambitious. I can tell he wants to make money. He’s punctual, he’s a safe driver and somewhere along the line and he gets me to where I need to go quickly. His english is great, his car is reliable and he knows the city well.

Taxi 2 is a little bit older buts also ambitious. His stage is farther away so I know it will always take him longer than Taxi 1 who’s staged just down the street from my house. He’s also relatively punctual and a safe driver. He’s not the best with his english, which often leads to misunderstandings, but he’s polite and offers great service.

Now, initially I used Taxi 1 a lot for the apparent advantages he had over the other guy but I began to notice that his pricing was irregular. Sometimes the same trip would be 10,000UGX to get to a place but 15,000UGX to get back. He’d quote me high on trips that I took everyday with other drivers, so I knew the going rate was cheaper. Even after weeks of hiring him to drive us, he still pulls the same tricks to get more money. If I protest he’ll come down a bit but he still makes the first offer high, something usually reserved for the taxis you haven’t built a relationship with. He seems to forget the fact that he’s not the only game in town.

Taxi 2 has his disadvantages but he never over quotes me anything. In fact, he seems to price by an internal meter or rule book. He simply goes for what’s fair instead of what will get him the most money in the moment. There’s no foreigner-tax, it’s just good business.

Taxi 1 may not know it but he’s doing himself a huge disservice. If he didn’t go ‘high’ with is prices, I wouldn’t feel like he’s ripping me of and he’d get much more of my business. Instead, he’s reacting for the moment because he knows I probably have more cash than his normal clientele. But I can’t trust him. Instead of doing the smart thing in order to keep my business, he tends to just go for the quick pay off. It’s short sighted.

Needless to say Taxi 2 has won all of my business as a result and Taxi 1 will never get a call from me again. It’s simple economics. I will spend my money where I feel I’m being respected and I’ll look out for a business that looks out for me. I think that understanding generally transcends cultural barriers.

That story illustrates the mentality that undermines ‘Free’ as a business model in Africa. Delayed gratification seems to be a foreign concept to Taxi 1. Taxi 2, however, understands that although he could continue to fend for himself by attempting to get the most out of every single passenger, it might also be in his best interest to keep the clients who do pay well coming back for more. Taxi 1 wants as many customers as he can possibly get to pay as much as he can possibly get out of them. Taxi 2 charges everyone the same, does a good job and people like me latch on. Now he’s building up loyal clients. In the long run he’s probably making more than the other guy, too.

At the same time, to be fair to Taxi 1, bidding is generally part of the culture here. And it’s that part of the culture that can work against simple business practices. When given the choice between money now or more money later, smany people here are blinded by the short term. But it’s important for me to point out that this comes out of the necessity to meet basic needs. To eliminate this mentality, the overall economic conditions of these markets must improve.