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I'm starting another thread on fake surge and the disconnect between Uber charges to pax and payment to driver- both topics that have been discussed ad nauseum (a tip of the hat to my friend ad nauseum). But I think I'm adding something to the conversation and I'm sure many on here will chastise me if they disagree ;-). Disclaimer - All of this is conjecture based on experience and observation as I have no secret pipeline or crystal ball to how or what they think in San Francisco.
First, I think surge as we once knew it is gone. That by definition most surges we see are now fake surges doled out to us based on predictions as much as actual demand. And the surges we see have little correlation to what the pax pays. It's not just that we don't see surges as often as we used to but the concept has so changed that what we used to know as surge is no more.
We used to define surge as a price multiplier that was applied when demand exceeded supply of ants to help bring in more ants. There was a direct correlation to the price spike the pax saw and the surge multiple we drivers saw. While this formula worked pretty well to help meet demand as it developed, the companies saw they were losing customers as surges rose higher and higher. They also figured out that some drivers (being the clever rascals that we are) figured out how to manipulate localized surges by keeping apps off (en mass) when it was event based and a surge was predictable. This drove the surge up even more. Great for the drivers that got the sudden spike but again bad for business overall when pax got annoyed at the sky high rates and left the platform.
Now enter more sophisticated app programming and Up-front pricing. I believe Uber (and to a lesser degree Lyft) have studied driver and rider patterns and manipulation techniques to the point where Up-front pricing replaces surge. This allows them to jack up pax pricing where and when they believe the passengers will accept it. Now they don't have to jack up rates based solely on supply and demand but on an understanding of where they can get away with it without losing the customers. I'm sure supply and demand still is considered but they no longer just blindly jack up pax pricing without considering rider attrition.
They also have studied drivers and are using a variety of incentives to help get drivers out when and where they need them to reduce or eliminate the need for surge.
They still have shortages and will offer surges (or Prime Time) but I don't think that the 2X multiple we might get paid correlates any more with the price the pax sees. I was a rider a couple weeks ago in Columbus, OH while working a trade show. I got pricing from my hotel to a specific destination about 4 miles away. I then checked another location also 4 miles away. I checked about eight different times and got nine different rates ranging from $6.89 to the alternate destination to as high as $23.56 to my original (at rush hour). At no time did it call it a surge though, it just gave me the rate.
Uber is now less concerned with the profitability of individual rides but looks at the bundle in aggregate. Demand may push the quoted rate up but their research that my destination won't pay it might push it back down. Or demand might be low but my destination will support a higher rate so wala - a higher rate.
I believe Lyft is doing some of these things but not nearly as sophisticated.
All of this is designed to keep pax rates as high as the market will absorb and as low as the market requires while minimizing paying drivers surge rates.
What do you think?
First, I think surge as we once knew it is gone. That by definition most surges we see are now fake surges doled out to us based on predictions as much as actual demand. And the surges we see have little correlation to what the pax pays. It's not just that we don't see surges as often as we used to but the concept has so changed that what we used to know as surge is no more.
We used to define surge as a price multiplier that was applied when demand exceeded supply of ants to help bring in more ants. There was a direct correlation to the price spike the pax saw and the surge multiple we drivers saw. While this formula worked pretty well to help meet demand as it developed, the companies saw they were losing customers as surges rose higher and higher. They also figured out that some drivers (being the clever rascals that we are) figured out how to manipulate localized surges by keeping apps off (en mass) when it was event based and a surge was predictable. This drove the surge up even more. Great for the drivers that got the sudden spike but again bad for business overall when pax got annoyed at the sky high rates and left the platform.
Now enter more sophisticated app programming and Up-front pricing. I believe Uber (and to a lesser degree Lyft) have studied driver and rider patterns and manipulation techniques to the point where Up-front pricing replaces surge. This allows them to jack up pax pricing where and when they believe the passengers will accept it. Now they don't have to jack up rates based solely on supply and demand but on an understanding of where they can get away with it without losing the customers. I'm sure supply and demand still is considered but they no longer just blindly jack up pax pricing without considering rider attrition.
They also have studied drivers and are using a variety of incentives to help get drivers out when and where they need them to reduce or eliminate the need for surge.
They still have shortages and will offer surges (or Prime Time) but I don't think that the 2X multiple we might get paid correlates any more with the price the pax sees. I was a rider a couple weeks ago in Columbus, OH while working a trade show. I got pricing from my hotel to a specific destination about 4 miles away. I then checked another location also 4 miles away. I checked about eight different times and got nine different rates ranging from $6.89 to the alternate destination to as high as $23.56 to my original (at rush hour). At no time did it call it a surge though, it just gave me the rate.
Uber is now less concerned with the profitability of individual rides but looks at the bundle in aggregate. Demand may push the quoted rate up but their research that my destination won't pay it might push it back down. Or demand might be low but my destination will support a higher rate so wala - a higher rate.
I believe Lyft is doing some of these things but not nearly as sophisticated.
All of this is designed to keep pax rates as high as the market will absorb and as low as the market requires while minimizing paying drivers surge rates.
What do you think?
