💰Uber Cash: The secret to Uber’s growth and loyalty game

The story behind Uber Cash: How it evolved into a secret weapon for growth marketing - unlocking endless possibilities for reducing CAC and increasing LTV.

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Aug 19, 2023

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Loyalty programs have become pillars of customer retention, yet also continue to evolve. While points systems like Marriott Bonvoy and Delta Skymiles still reign the industry, cracks have emerged in traditional points-based systems. In response, companies are pioneering new virtual currency models to drive loyalty and growth.

This essay will examine the rise of virtual currencies through Uber Cash’s innovation. By analyzing Uber Cash's growth impact and product lessons, along with the industry trends, we'll see how meeting user needs creatively unlocks the next evolution in loyalty programs. But first, let us meet the author:

You can reach Levi on Twitter on LinkedIn. He's eager to chat with growth marketers facing data challenges.

And one last thing before we go into the deep-dive, do not forget to subscribe to Productify and get such deep-dives into your Inbox directly:

The Dominance and Decline of Traditional Points Programs

Picture loyalty programs in your mind's eye. What comes to focus? For business travelers, tales of compulsively booking Marriott may spring to mind, chasing elite status. Or road warriors flying United through Newark to hoard miles. The brand stickiness propped up by points seems natural for reward-seekers.

For product leaders, such loyalty kindles strategic thoughts on retaining customers and driving spending. A product that stokes devotion becomes a coveted prize, as evidenced by loyalty programs headlining earnings calls. During COVID's business lull, United, Delta, and American Airlines leveraged their programs, each borrowing $6-10 billions against future loyalty. Some analysts even claim loyalty programs now eclipse the core business itself.

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For decades, points reigned supreme for engaging customers. American Airlines launched the first large-scale points program in 1981 with AAdvantage. Soon hotel chains and retailers followed. When the mobile frenzy started, Starbucks caught the early train, blending personalized offers and mobile payments into its points system, seeing rewards members drive nearly half of all sales.

But the mighty can still fall. Initially, complex points systems worked by offering aspirational redemptions. For hotels and airlines it’s the luxe vacations and flights of fancy in business class. For Starbucks it’s the free drinks that you could max out customizations.

But over time, cracks began to emerge in this once undisputed model. The core frictions stemmed from devaluation and complexity.

Devaluation eroded trust as businesses tweaked programs to improve margins. Keeping pace with fluctuating points grew tiresome, and most expired unused. This brewed distrust and wavering loyalty among consumers.

Other forces stirred too. Cashback gained traction as e-commerce exploded, accelerated by COVID shifting shopping online. Cashback offers guaranteed value and clearer psychology around money.

Kohl’s moved from longstanding points program to cash program in 2020 source and source

The rise of digital payments and mobile wallets also laid the infrastructure for new loyalty structures. Tools like Apple Pay and PayPal normalized mobile spending and ownership of virtual balances. This makes closed-loop digital currencies feasible - when consumers are already spending with one tap via their phones, earning and redeeming digital cash becomes a natural extension. Together these dynamics strained the classic points model.

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Loyalty programs started becoming growth marketer’s favorite weapon

While point-based loyalty programs worked for driving general retention, for multi-product or multi-service companies, it became harder to do targeted growth (i.e incentivising the user to take a particular path and creating a habit out of it.)

With the emergence of roles such as growth marketers and growth hackers, there was also an internal demand to come up with more dynamic tools that drive the ability to experiment and drive user behavior. This led to the first evolution away from purely points: staged-loyalty programs.

In case of staged-loyalty, the user starts at Level 1 and then goes through a predefined path to level up. Each level provides a new set of advantages in the ecosystem. For a food delivery app, staged-loyalty could be used to drive more orders, or specific items from a certain restaurant and so on, and if the user follows the predefined path, the user can level up to unlock even more benefits (discounts for example).

Booking.com uses staged-loyalty to drive the travellers to book certain number of stays in a limited amount of time to unlock new levels:

At each level, the traveler has continuous pre-promised access to benefits. This could be access to permanent discounts at properties, % off rental cars and so on. As a growth marketer, if I wanted to push for more homestay bookings, I could use staged-loyalty to either set of goal for travel (Example “book 9 stays including 2 home states before 27 Jan 2025”) or include discounts on home stays at each level that increase as traveler levels up.

Gojek, the biggest Indonesian Super App with multi-million monthly active users, utilises points with staged-loyalty (called GoClub) and it gives unique ability to users to level up while earning points. In case of GoClub, members earn XP when completing a certain transaction in the SuperApp

The Rise of Virtual Closed-Loop Currencies

Virtual closed-loop currencies emerged to address points programs’ pitfalls. Companies like Uber, Shopify, and Hopper now employ digital currencies where users earn and spend rewards as cash within their ecosystems.

The approach fuses simplicity and flexibility. At its core, users earn cash back on purchases, accumulating digital funds to be spent on future transactions. One-time bonuses might be offered to acquire new users, similar to initial cash drops from Cash App.

On the spending side, virtual currencies enable seamless redemption toward anything offered. This proves powerful in diverse marketplaces like those run by these companies. And unlike fluctuating points, the cash value remains fixed - $1 always equals $1.

Transparency is a major benefit over points: Customers understand the exact worth of their rewards. Kohl’s cited lost trust in points as a reason for switching to cash-based rewards.

On the other hand, virtual currency taps into ownership bias (i.e., endowment effect in economic terms). People are more likely to use rewards seen as "theirs" rather than fleeting discounts, making users more eager to redeem. By innovating with closed-loop liquidity and trust, these virtual currency pioneers addressed weaknesses eroding traditional loyalty programs.

Uber Cash: A Swiss Army Knife for Growth

While conceived as a loyalty play, Uber Cash’s success actually stems from its versatility as a growth tool. By positioning it for user acquisition first and loyalty second, Uber Cash strengthened every facet of the growth flywheel.

Most importantly, it evolved into a secret weapon for growth marketing - unlocking endless possibilities for reducing CAC and increasing LTV. With just a few clicks, growth marketers can now drop free cash into user accounts, create personalized challenges, offer cash back, and more.

Uber Cash became a Swiss Army knife driving growth across six key areas:

1. Acquire Users With Cash Drops

Cash drops are ingeniously simple yet powerful. By simply giving users free Uber Cash - such as $25 for placing the first order - we've seen triple-digit lifts in new users acquired and the amount spent compared to traditional promotions.

Surprisingly, lower cash amounts often outperform higher promo values. The perceived value of "free cash" triggers different psychological responses than discounts. Ownership of the Uber Cash creates a feeling of value through loss aversion and the endowment effect.

This new acquisition strategy also drives higher long-term retention too. In A/B tests, the repurchase rate doubled for users who received Uber Cash drops compared to promotion-only users. There seems to be a halo effect at play - people treat free cash as a gift and have a more positive perception of Uber.

Cash drops turn the typical marketing playbook on its head. Instead of requiring users to take a desired action first before rewarding them, we reward them upfront. This act of goodwill makes users more open to trying Uber initially and engaging more over time.

2. Build Habits Through Challenges

After acquiring users, the next step is shaping behavior through positive reinforcement. We've implemented "challenge campaigns'' triggered when specific usage milestones are hit. For example, a user who orders for the first time may get a challenge to order two more times to earn $10 Uber Cash, kickstarting the engagement flywheel to move sporadic users into regulars. A new Uber One member could get a challenge to try grocery and premium rides within a month. These challenges are personalized based on where the user is at a particular customer journey.

Uber Cash challenges change user perception. Instead of discounts that framed trying new products as risky, Uber Cash makes it rewarding. Users see challenges as a way to unlock "free money". Once users complete challenges, the Uber Cash they earn can be spent seamlessly on rides, Eats, grocery, and more. This builds the habit of thinking of Uber first for all transportation and delivery needs and kickstarting the engagement flywheel.

3. Cross-Sell and Upsell With Cash Offers

Now that we've acquired and engaged users, the next growth opportunity is increasing their lifetime value. Here's where product-specific Uber Cash offers come in.

Given Uber's expanding product portfolio, getting customers to use multiple products is a major goal. Our data shows multi-product users retain better and have higher lifetime value. They see Uber as more versatile and top-of-mind.

Uber Cash creates the perfect carrot to encourage cross-selling and upselling. For example, an UberX-only user may get an offer like:

"Try Uber Electric Comfort (think Tesla rides) on your next airport trip, get $5 Uber Cash"

If there’s an opportunity to upgrade, we’d also offer them more cashback (aka cashback accelerators) than normal, just like the experience below (reads “Reserve ride to airport. Get 10% back in Uber Cash”)

The cash reward incentivizes trying higher-value products. Once they try it, users get hooked on the upgraded experience or learn something they otherwise wouldn’t discover on their own. The Uber Cash also gets deposited in their account to spend again on anything, creating a positive feedback loop.

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4. Productize Experiences

To maximize ongoing awareness and usage of Uber Cash, we’ve focused on baking Uber Cash into regular experiences rather than one-off campaigns. The biggest shift over the last year was making Uber Cash a core member benefit of Uber One subscriptions. Members earn cash back on every ride, priming them to spend it on Eats or other needs.

We also built Uber Cash directly into benefits like members-only delivery guarantees. If your delivery is delayed, you automatically get $5 in Uber Cash as an apology. This demonstrates our commitment to do right by customers when issues occur. Users are happy to receive Uber Cash knowing they’ll use Uber again in the future.

Another example was embedding Uber Cash across scenarios like refunds. Refunds historically have been treated as a cost center, bleeding revenue due to customer complaints. However, refunding to Uber Cash turns complaints into opportunities for future spend within the ecosystem.

Through all the different touchpoints, members and non-members alike no longer view it as temporary "credits" but an ongoing program throughout their interactions with Uber.

Productizing also unveils and helps users understand the increasing scale of possibilities with Uber Cash. They can earn it through subscriptions, spend it on Uber teen rides, splurge it on a party alcohol order, redeem it for electric vehicle upgrades, and more. Our goal is to make Uber Cash a seamless, integrated part of the user experience.

5. Delve Into Powerful Partnerships

Ecosystem play grows the overall pie rather than just taking a slice. While some of the biggest partnerships predate my time at Uber, early investments proved prescient: for a product like Uber Cash, the earn and burn cycle is key. The more we help users earn Uber Cash through partners, the more opportunities they have to spend it. This grows overall transaction volume and loyalty.

Credit card companies are an obvious win-win - we can acquire their high-spending users while they get more card spend.

$35 Uber Cash for Amex Platinum Cardholders - Eye of the Flyer

Source and source

Our Amex consumer and corporate card deals allow users to receive monthly cash drops and earn Uber Cash back on business rides and meals for personal use. For Amex, Uber becomes a frequent transaction hub to drive card preference.

We see this playbook already working in practice. Kohl's recently shared that 25% of customers shopping at new Sephora mini-stores inside Kohl’s were net new to Kohl's. They allowed customers to earn Kohl's Cash while shopping via Sephora, which proved an ingenious user acquisition strategy. This demonstrates the power of partnerships to achieve win-win.

This is why we’re also expanding partnerships across many categories beyond financial services. Air Canada, for example, has a program where users can turn miles into Uber Cash directly in-app. More earning opportunities allow the Uber Cash ecosystem to flourish.

Partnerships demonstrate Uber Cash’s power as connective tissue linking brands across industries to provide value. It’s another example of win-win-win for users, partners and Uber.

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6. Build a Platform and Unleash Creativity

Ultimately, the beauty of Uber Cash is that it provides a flexible platform for teams across the company to get creative and drive growth. My team invested heavily in building a scalable platform so that marketers can tap into their creativity without technical teams.

The possibilities are endless. Our influencer marketing team rewards creators with Uber Cash as an added incentive to partner. The research team uses Uber Cash as a thank you for study participants. Even our driver team got innovative, rewarding top Uber Pro drivers with Uber Cash to use as consumers.

Growth marketers on local Eats teams have also devised clever programs that tie into regional loyalty brands. Our team in Japan built an integrated cashback program leveraging the existing Rakuten loyalty ecosystem. Taiwan's team partnered with local credit card and food delivery brands to allow earning Uber Cash. Such regional initiatives leverage our local expertise through a global product.

When our colleagues are empowered, they come up with innovations beyond our imagination.

Lessons from Building a Versatile Growth Tool

When I joined Uber Cash, it was viewed as a financial product navigating regulatory complexities as an open-loop wallet and also as a payment cost saving tool. However, the more I spent time with our growth marketers (at Uber this team has a special name called “strategic operations”), I saw greater potential to evolve it into a growth engine while becoming the de facto loyalty program. Ambitious goals, but two key lessons paved the way:

1. Demonstrate Concrete ROI through Experiments

The first lesson was finding ways to demonstrate clear ROI through repeated experimentation. I focused on growth use cases since loyalty takes longer to quantify. Showing Uber Cash could acquire users cheaper would open doors more than positioning it mainly as cost savings.

I pitched teams across Uber about giving new users Uber Cash to replace existing new user promotions, the standard practice until then. Some products weren’t a good fit naturally: Uber rides business already dominated the market in most regions, so priority wasn’t on new user acquisition. The burgeoning grocery business showed initial interest but balked at the unrestricted nature of Uber Cash; they wanted more precise targeting of only grocery orders.

The eater acquisition team took a chance on me. They were willing to budget and run tests knowing that they would bear the brunt of any potential revenue loss.

Encouragingly, The hypothesis held, driving first-time orders and spend. This unlocked more experiments to fine-tune approaches based on consumer response elasticity. This success led to even more experimentation around other potential use cases and the exact cash amount, allowing us to map out the reward elasticity and response curve.

The initial willingness to experiment catalysed hundreds of eventual Uber Cash use cases. Starting small but demonstrating value opened minds.

2. Evangelize Grassroot Efforts

The second lesson was embracing bottoms-up, grassroots efforts. I quickly realised growth marketers would be crucial for Uber Cash adoption. They are the lifeblood of growth experiments, so Uber Cash had to fit their needs.

I interviewed internal users and learned of an untapped pain point - a lack of versatile growth tools. Although Uber had internal systems for issuing traditional discounts, ML-driven models had largely taken over the complex budget allocation and user targeting. On the other hand, Uber’s operations teams were constantly poring through data, identifying opportunities, and then engineering incentives to balance the marketplace. The crucial insight here was that growth marketers never lacked creative hypotheses and ideas about customer segments and how to reach them; they lacked the means to test theories.

Knowing this insight, I decided to build a self-serve tool that would allow ops teams to easily issue custom amounts of Uber Cash to target segments. This put experimentation directly in marketers’ hands. The interface was also a low-code solution to accommodate the lack of technical acumen; people could upload target user lists via CSV or SQL, customize the dollar amounts (fixed or percentage based), and automate the campaign via CRM / in-app channels.

We then onboarded users individually, brainstorming and testing creative applications side-by-side with our end-users. We even built a tracker to have teams share past experiments for wider visibility. The tipping point came when three new product launches featured on stage at the external product event had Uber Cash directly embedded in them, cementing its overnight success across the company.

Enabling individual creativity, not relying on top-down systems, propelled Uber Cash's success. Patience in demonstrating value through experiments combined with empowering internal ownership enabled ambitious goals to take flight.

The Next Evolution of Virtual Currencies

The tide of virtual currencies seems destined to rise, marking the next chapter in loyalty programs. Uber Cash shows that meeting user needs creatively can unlock growth, retention and a more delightful user experience. Looking ahead, I foresee several trends:

First, virtual wallets will continue gaining steam. Cash-based systems' versatility for growth and rewards trumps old points models. New brands will make digital currency power everything from acquisitions to memberships to customer support. Companies will embed earning and spending opportunities throughout the customer journey.

Indeed, virtual-wallet-as-a-service (VwaaS?) is are emerging in fintech. Companies like Catch provide cashback-as-a-service for e-commerce, helping merchants save on payment costs while rewarding users who choose no-fee bank transactions. Ansa Ansa builds similar virtual wallets tailored for frequent micropayments at coffee shops and QSRs.

Second, virtual currency marketing will grow more segmented. Uber already targets niche loyalists like business travellers, rewarding corporate expenses with Uber Cash for personal use. Programs will grow more personalized, catering to families, eco-conscious users, and other micro-segments. Even Catch and Ansa identify unique sets of loyal customers, then leverage virtual currencies to help merchants generate more revenue from those niche segments.

Third, currency platforms will enable new monetization like sponsored rewards. This fuses advertising, user acquisition, and value extraction. For example, Shopify merchants can pay to offer temporary "boosts" - turning $5 Shop Cash into $25 if users spend on boosted products. Square’s Cash App, although not a closed-loop currency, features sponsored boosts too, essentially affiliate marketing slots.

Advertising on virtual wallets may one day rival social media. However, verticals must align - restaurants likely care more for diner acquisition than online delivery. For that matter, retailers and CPG brands present stronger opportunities for Uber Cash. Once consumers check in frequently on challenges and associate virtual cash with rewards, the wallet becomes prime digital real estate for ads - just as Instagram and TikTok monetized eyeballs. With thoughtful implementation, it's a win-win-win for advertisers, platforms, and customers.

For companies exploring virtual currency, critical questions arise:

Can we demonstrate the value of holding our digital cash? Is it worth building or buying virtual-wallet-as-a-service?
What is our earn-and-spend cycle? Do we have enough spending opportunities and ways to incentivize engagement (think cross-sells and up-sells)?
Can cashback be economically viable, if gated behind a paid membership? How will we monetize the currency with new revenue streams (partnerships, advertising)?

Equally important for growth teams:

Have we exhausted common channels?
Do we have a sense of target users? Business travellers?
Should we build or partner with existing virtual currency brands like Uber Cash or Shop Cash?

For teams focused on payment costs:

Do we enable small, frequent transactions? Can subscriptions shift away from credit cards (Target Red Card shows that they can)?
Do users want direct savings over cashback?
How will real-time payment networks like FedNow change rewards (hint: offer users cashback)?

Although the future remains unwritten, the ingredients for success are clear. Virtual currency allows meeting customer needs creatively - the heart of loyalty - provides transparency and flexibility. With thoughtfulness and care, programs can be crafted to engage throughout a user’s lifecycle. Virtual cash may just strengthen bonds more than points ever could.

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