July 7th, 2016 | By: Katie Parrott | Tags: Customers
We wanted to find out, were these people telling us they liked the product just to be nice? Or was there something else that was going on?
Jeff Stefanis and his co-Founder Amber Wason were pedal to the metal on development of their electric bike startup Riide in early 2015. They had perfected their design, they had partnered with a top manufacturing company to build the bikes, and they were offering test rides around Washington, DC as a way to introduce DC commuters to the idea and turn testers into buyers.
There was just one problem: nobody was buying.
“Our conversion rate from test rides to buying was about 3%,” Jeff remembers. “Which is not great.”
The low conversion rate confused Jeff and Amber at first, because it seemed to directly contradict the feedback they were hearing from testers. “When we were talking to people about the product, everybody loved it,” Jeff remembers.
At that point, Jeff and Amber did a surprisingly simple thing that completely changed the trajectory of their company.
They talked to their customers.
More accurately, they talked to their not-customers. “We talked to all these people who had taken a test ride and not purchased a bike,” Jeff says. “We wanted to find out, were these people telling us they liked the product just to be nice, and that was the reason they weren’t buying it? Or was there something else that was going on?”
Riide is pioneering what they call “electric bikes as a service.” The idea for the business started to take shape for Jeff when he moved to DC to start college in 2009. It was his first time living in the city – and he quickly found himself exasperated with the state of transportation.
“I fell in love with living in the city, but the one thing I just couldn’t quite get past was why it took as long to go one mile in Washington DC as it took to go ten miles back home,” he remembers.
Jeff experimented with different forms of transit. Driving was miserable and stressful. Uber was just way too expensive to make sense for daily commute. Public transit didn’t really go most of the places he wanted to go – plus the schedules were confusing, and the trains were never on time.
Then, Jeff stumbled on an idea that would become the genesis of Riide. “Electric bikes had changed transportation in China and in Europe, and I was just baffled about why they hadn’t become popular in the US,” Jeff remembers.
With his vision to popularize electric bikes in the United States starting to take shape, Jeff did what countless would-be Founders have done before him. “I started talking to people who were smarter than me.”
One of those smarter people was Jeff’s now co-Founder, Amber. Unlike Jeff, Amber had tons of experience with transportation. While working for an urban transportation consulting company, she had been part of the team that had transformed public perception of the DC city buses by introducing a new system called the DC Circulator.
I started talking to people who were smarter than me.
“What they effectively did was rebrand city buses, give them a fresh paint job on the outside, made the interior a little bit nicer, and then named the lines similarly to the DC metro, but it completely changed public perception with regards to bus travel,” Jeff explains.
When Jeff met her, Amber was working as DC Director of Marketing for Flexcar – a car sharing company that merged with Zipcar in 2007.
At Flexcar, Jeff says, “Amber’s job was really focused on how do you educate consumers, how do you educate a population about this new type of transportation that’s familiar, yet very different at the same time?”
Amber’s experience in that kind of customer education has turned out to be key for Riide. While many of us have memories of cruising around the neighborhood on bikes when we were kids, and a decent number of us hop on bikes for fitness – Americans aren’t exactly known for being the biggest bikers when it comes to their regular commute.
“90% of our customers are brand new to bike commuting,” says Jeff.
With that amount of unfamiliarity around the concept your company is built on comes a lot of customer education. “People have questions like, ‘What am I going to wear to work? Where am I going to lock my bike up? How am I going to transport my things?'”
Easing new riders’ concerns was about much more than just PR: it turns out the concerns would-be customers had had a direct impact on their purchasing decisions. And the more Jeff and Amber talked to potential customers, the more the picture around why they were testing and not buying started to come into focus.
“We started hearing concerns like, ‘I’m going to be terrified it’s gonna get stolen, and then I’ll wind up never riding it,’ and ‘I don’t know how to maintain a bike, how am I going to fix it when it breaks down?’”
We put our money where our mouth was…because we really believed in the quality of the product that we’d built.
At this point, Jeff and Amber started designing solutions directly around the concerns they were hearing from would-be customers. To combat the concern about theft, they added theft insurance and a high-quality lock. And for the maintenance concerns, they did something even more radical: they started offering unlimited maintenance on all Riide bikes – free of charge.
“City commuters are really busy people, their form of transportation can’t add another headache to their life. They need to get to work on time, getting where they’re going needs to be quick and easy and convenient. And if there’s all these maintenance headaches, then it doesn’t work for them,” Jeff explains. “So we put our money where our mouth was, and we started offering unlimited maintenance, because we really believed in the quality of the product that we’d built, that they weren’t going to require a lot of maintenance, and even if they did, we were committed to stand by our product.”
With the safety and maintenance concerns squared away, there was still one final hurdle Jeff and Amber had to overcome when it came to consumer hesitance about Riide. And it was a big one.
“We kind of knew that there was sensitivity around price, because people kept saying things like, ‘This is great, I’ll have to save up and ask for this for Christmas,’ or ‘I’ll have to ask for this for my birthday.’” Jeff remembers.
Originally, Riide bikes were priced at $2,000 upfront – a figure Jeff and Amber were confident was better than anything else in the market. “To get a really good electric bike was somewhere between $3,000 and $4,000. We were selling ours for around $2,000,” Jeff remembers. “So the payback period was one to two years if you compared it to public transit. Our whole hypothesis was, ‘We want to make this competitive with public transit.’ So we priced it at a level that was equal to one to two years of public transit, and then after that people would be saving money with every trip they took.”
It made sense to Jeff and Amber, but once they started talking to people, it became pretty clear pretty quickly that it didn’t make sense for their riders.
“Asking someone to pay around $2,000 upfront was just a really heavy lift, especially given that most of our customers are brand new to bike commuting. Even if somebody spends $6,000 per year on transportation, asking them to come up with $2,000 all at once – that was really hard, and not a way to reach as many people as possible.” Jeff remembers.
We looked at our unit economics and we said, ‘Alright… do we still have a business? Do we still have a margin?’
What Jeff and Amber realized was that it wasn’t enough for Riide to beat out public transit in the long run – customers needed to see the savings translating into monthly dollars and cents.
“What we learned was that if we are truly aiming to be a replacement for public transportation, our business model has to be similar to other forms of transit. Every other form of transportation, people pay for either by the trip or by the month – a ride on a city bus, or a car lease, or even if people buy a car they usually have monthly car payments. So Riide needed to be priced that way as well.”
Like that, Jeff and Amber had their answer. They introduced a new program called RidePass, where riders pay $79 per month for their Riide bike – directly competitive with a monthly subway pass in cities across the US.
When I ask Jeff how it felt to shift gears into a totally different business model than what he’d thought they were going to use, he laughs. “One of my early mentors used to always say that he’s more interested in getting the right answer than being right himself,” he says. “I think there’s a lot of truth to that.”
As far as where the $79 figure came from, here again, talking to would-be customers was key. “We really had to figure out what number consumers were comfortable with, so we did a lot of surveying around price sensitivity and around what made sense for people,” Jeff remembers. “That’s how we backed into the number of $79 per month, testing different price points and that was the one that made the most sense for people. Then we looked at our unit economics and we said, ‘Alright, at $79 per month do we still have a business? Do we still have a margin?’ And the answer was yes.”
If you’re wondering whether they tweaks Jeff and Amber made to their business model have made a difference for Riide, the answer to that question is also a resounding yes.
After they introduced RidePass, Jeff says, “We started giving test rides again, and our conversion numbers went way way way up, and then we knew we were onto something.”
There are 250 Riide bikes on the road today – and a lengthy wait list for the company’s next production run. The company recently opened an office in their second city – San Francisco: a city where you have to think the crowded BART and hellishly hilly landscape make the concept of Riide something worth looking into.
Looking toward the future, Jeff says he sees Riide as part of a bigger picture of how people will move around in cities years and even decades from now.
“Our goal is to fundamentally change the way we get around cities,” he explains. “When we look at what we see as the future of transportation, we generally agree with companies like Uber and Lyft that in the future we’re not going to own cars in cities. So if you don’t own a car in a city, what does your transportation fingerprint look like?”
The best part of starting the business is interacting with customers and hearing how the product is changing the way they get around their cities.
Riide’s bet is that, in some ways, it will look a lot like it does today. “Right now, nobody takes just one mode of transportation – nobody just drives, nobody just takes the metro, nobody just takes a bicycle. It’s all multi-modal,” Jeff explains, “And we think that will be true in the future as well, that you’ll have different types of trips, and different go-to transit methods for those different trips”
Riide’s goal: to become busy city dwellers’ go-to method for a specific – and essential – type of trip. “For daily trips, the daily commute, the trips where you want to go where you’re going, point to point, without stopping for anybody else, whenever you want – we really see electric vehicles playing a huge role for those trips, so that’s where we’re focused.”
The big vision is in place, but Jeff and Amber know that in order to get to where they want to be tomorrow, they need to meet customers where they are today. And for that, they’ll keep talking to customers.
“The best part of starting the business is interacting with customers and hearing how the product is changing the way they get around their cities,” Jeff says. “Giving people to ability to experience it, talking to people one on one – it’s important to us. It’s what it’s all about.”