Uber’s new pricing masterstroke: No surge lightning bolts or is it?
Think of walking into a market in the evening, to buy tomatoes for Rasam. You’ve never done this before. The vendor tells you, “Tomatoes cost Rs 40/kg”. Do you go ahead and buy? What do you measure this against before purchase? Any previous experience of vegetable shopping and the approximate cap that you have available, to shell out for that item. (Scenario 1)
Now think of the same scenario. Except that the vendor tells you, “Tomatoes generally cost Rs 20/kg. But today there’s less supply because of a truck strike. So they cost twice the usual price - Rs 40/kg. Are you ok?” (Scenario 2)
More people will tend to shell out the 40/kg demand in scenario 1, when there’s no real benchmark vs the second one.
Scenario 2 is what Uber’s Surge Pricing used to be, till today.
Scenario 1 is what they’ve now turned it into. (Link)
So in April we began slowly introducing upfront fares for regular uberX trips in cities across the US and more recently in India, with more to follow. To date, hundreds of thousands of riders have experienced upfront fares as part of this rollout.
Upfront fares are calculated using the expected time and distance of the trip and local traffic, as well as how many riders and nearby drivers are using Uber at that moment. And when fares go up due to increased demand, instead of surge lightning bolts and pop-up screens, riders are given the actual fare before they request their ride. There’s no complicated math and no surprises: passengers can just sit back and enjoy the ride.
Uber has some amazing spin around this change, about greater transparency and upfront pricing, comparing it to hotel rooms and airplane tickets.
New City/Route. Unknown destination. Traffic/Time. You are quoted with a price that someone thinks is fair. Now where have we heard this before? *cough* Madras Auto-drivers *cough*
In any case, Uber’s routing isn’t the best in town either - the algorithm generally takes a longer detour even for a minute’s shorter route, misses plenty of shorter routes, one-ways and what not. Or this one where my fare varied by 10 bucks with a one meter shift in my pick up point.
From Uber’s point of view, this is brilliant. More people will they definitely take “surge” trips as they have no benchmark price to refer against — other than ‘expensive’ alternatives.
As a customer, not so much. Your Uber driver just turned into an auto-driver with better information on traffic and demand.