cmn_Ola

Online cab-hailing service Ola has started a new reward points programme for drivers called Ola Stars and  will be made available exclusively to drivers on the Ola platform based on their performance every month. The rewards-oriented initiative will include personal and professional benefits ranging from medical insurance, scholarship for children, skill development training to fuel discounts and car-servicing benefits.

Ola in association with New India Assurance will provide medical insurance worth Rs. 2 lakhs for drivers to cover hospitalization and other major medical expenses. It will also provide life insurance from ICICI Prudential Life with a cover of Rs 2 lakh for every driver. Ola has tied up with Star Health Insurance to provide for  personal accident insurance cover of Rs 5 lakh for the driver’s family in the cases of death due to accidents.

Ola drivers will get access to a special Ola-Indian Oil co-branded smartcards, through which all re-fueling transactions will be eligible for a cash-back at the end of the month; translating into a discount of approximately Re. 1 per liter of fuel. Ola has tied up with some of the most reputed garages which includes Mahindra First Choice and eligible drivers will be able to get their cars serviced on priority from these partners for as little as Rs. 500, with a turnaround time of less than 4 hours. Drivers will get upto Rs. 1000 per month as scholarship towards their children’s education and also get  get movie tickets worth Rs. 500 every month.

Last month Ola had tied up with India’s largest lender State Bank of India (SBI) to extend vehicle financing for its drivers under a new programme. Under the programme,  SBI will offer car loans to drivers on Ola’s platform with a daily repayment scheme as against the current practice of an EMI. Drivers on the Ola platform will also benefit from lower down payment of just 10%, 24-hour loan approval from SBI and easier documentation. SBI says that it will provide loans at an average rate of 13% and the daily repayment amounts would be about Rs 500- 600.

Note, Ola has not provided the details of the milestones or targets their drivers will have to achieve to get the benefits of the reward programme. We have written to Ola about the same will update once we have a reply.

Currently Ola operates over one lakh cars in about 85 cities in the country. It also recently acquired rival TaxiForSure for $200 million.

Driver retention costs 

It’s worth noting that Ola used to pay its drivers a bonus of Rs 5,000 for every 10 rides they completed to ensure uninterrupted service during the holiday season (which was quite popular among the drivers in the service) , as indicated by this DazeInfo report. The report further estimates that driver retention schemes like above could have cost Ola $2.4 million cash burn as drivers exploited the scheme in the following manner:

Reportedly, sensing a great opportunity to pocket extra earnings, Ola drivers came with a counter strategy to take advantage of Ola’s desperation to grow quickly. They formed a group of five drivers, bought new Sim cards and cheap smartphones, installed the Ola app and started booking the cab within themselves. While one of the five booked a ride from his alternate phone posing as a customer, another accepted the ride and the others switched off their Ola smartphones (which they are permitted to do on breaks and during network issues). The host cab and the other cabs then used to travel together for 3 to 4 kms (an approximately 15min ride) and end the ride causing it to seem like a genuine one. This would repeat every 15mins, with the drivers taking turns booking each other’s ride. They kept doing that till they finished their 10 rides before they could take any genuine rides for the day. For each bogus ride, the host driver had to pay the driver who was enacting a customer about Rs.150. Eventually, each posing driver shelled out about Rs. 1500/- for ten rides and earned Rs.5000 for completing 10 rides. That sums up to all the five drivers, getting a minimum of Rs. 3,500/- per day per driver.

Keep in mind that Ola has a fleet of 60,000 cars and If we had to think conservatively, even if 10% of Ola drivers took undue advantage of Ola’s this “customer acquisition strategy” and managed to finished only 10 rides in a day for 7 days, still, it totals to Rs. 24,500 by each of 6,000 drivers. That adds up to the figure we had mentioned to start with.

But our anecdotal interactions with multiple drivers say that the company now has discontinued the scheme and will now pay drivers a bonus of Rs 150 per ride for five trips completed between the hours of 6 a.m. and 12 p.m. and again from 6 p.m. to 11 p.m. The above costs could also indicate why Ola is looking to formalize rewards to drivers and perhaps reign in some of its driver retention costs.