Uber ends surge pricing...starting with India!


Uber has been my go-to service for local road travel, ever since I tried them out after their Chennai launch in early 2014. So much so, that I do not have another taxi-hailing app on my phone! I know that can be a little risky sometimes, but to be honest, I've never had trouble finding an Uber when I needed one, in India or overseas. However, from what I keep hearing from friends and readers, and sometimes from own experiences, the surge pricing model that Uber adopts is a bit of an annoyance. However, all that should stop soon, once Uber implements their up front pricing model for surge rides.


Going forward, during surge times, Uber will display a fixed price as opposed to the usual surge pricing approach of a multiple of fees. India is one of the first markets where the new approach is being tried out, with New Delhi, Kolkata, Mumbai, Hyderabad, and Chennai as the pilot cities. I'm not sure if this is an experimental thing or a permanent change.

But all said, I think this makes sense in a market like India, which is price-sensitive to begin with, and the optics and perception matter a great deal as well.

Here's the press release from Uber:
Imagine buying an airline ticket without knowing the full fare until the end of your trip. Or booking a hotel room online and being told that the real price would be 1.3X. Yes, that sounds odd—but it’s what happens with many Uber trips today.
We moved to upfront, per trip fares—just like airlines and hotels—two years ago when we launched uberPOOL. Riders needed to enter their destinations so we could match them with other people headed the same way. This allowed us to calculate the actual fare in advance and show it to riders before they booked their ride.
Knowing how much a ride will cost in advance is clearly something riders appreciate: today uberPOOL accounts for over 20 percent of all rides globally. And we now want more riders globally to benefit from this feature.
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.

This change could well have been triggered by recent events in India around surge pricing - such as during the odd-even traffic rules in Delhi or the Karnataka government's recent stand around surge pricing in particular and taxi-hailing businesses in general.

The surge pricing model, where the rider has to pay a multiple of the displayed fare, is actually a great business model. It lets those riders who are willing to pay a higher fare in times of low vehicle supply, get their rides. A perfect demonstration of the basic theory of economics about demand, supply and price!

But I do get what irks users, and it really boils down to the optics. Riders will more likely be accepting of a total fare that's indicated to them up front, which forms the basis for deciding whether or not to accept the ride, as compared to having to calculate the total cost at the end of the trip. Particularly in times of heavy traffic, a fixed price may actually work out more efficient than a surge multiple based price. So while the overall price still remains the same, it is now presented as a fixed price as opposed to a multiple (surge) of the displayed fare.

That said, there are enough opportunities in the new approach, for Uber to take passengers for a ride - not just literally! I think you know what I'm talking about. And I hope Uber takes the high road on this one.

Comments

  1. SameerJune 28, 2016 at 1:40 AM

    The problem I see with this approach is that for some passengers (like me), who travel the same route and distance everyday, we might not know if the surge pricing is on.. so I might be paying different fares on different days.. so unless i do a fare estimate before the ride, I won't know if the surge pricing is on.. which can be more than a little annoying..

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