SPA Pricing Education, Analytics & Decision Making Tools Webinar Series

Discussion: Uber Plans To Kill Surge Pricing, Though Drivers Say It Makes Job Worth It | NPR

Sometimes you call an Uber, and what you thought would be an $8 ride is going to be two, three, even four times more — the result of greater demand brought on by a blizzard, or a baseball game. Whatever the reason, surge pricing is not fun.

It turns out Uber is working to fix it — or, should we say, end it. The move likely will be great for riders, but not for drivers.

Automate It

While drivers see surge as a key feature of the job — and Uber advertises it as such to them — inside the company surge pricing is considered a market failure, a problem to be solved.

“That’s where machine learning comes in. That’s where the next generation comes in,” says Jeff Schneider, engineering lead at Uber Advanced Technologies Center. “Because now we can look at all this data, and we can start to make predictions.”

Schneider grants me an onstage interview at a Silicon Valley insider-conference called Structure Data. It is a well-known fact that, in the long-term, Uber is working on self-driving cars with no need for human drivers. I’m interviewing Schneider about his short-term priorities, and killing surge rates is top of the list.

Think of it this way: When a Beyoncé concert lets out, it’s a no-brainer that there’s a ton of demand. Drivers know that. What’s harder, Schneider explains, “is to find those Tuesday nights when it’s not even raining and for some reason there’s demand — and to know that’s coming. That’s machine learning.”

With enough of the right data inputs, computer algorithms can do the research that driver Nathan Sapp already does — only better, “so the surge pricing never even has to happen,” Schneider says.

Drivers would be informed of the extra demand. “And I think that’s one of the really cool things that machine learning’s doing for Uber right now,” Schneider says.


Top Comments

Indeed. I’m actually for letting Uber set the price. Why keep prices artificially low when surge pricing might get taxi drivers to help out with high traffic areas?
If Uber is just a matching service and drivers are not employees, then the drivers should be setting the price. Drivers and customers could negotiate/bid, it would be more like NASDAQ or BATS than big uber fixing the prices. Of course then the handicapped would be discriminated against, but that is often the case with Uber now.
I don’t mind Uber killing off Surge Pricing if they boost the rates at least some. Getting a 50% bump on a ride is AWESOME when it’s a $15 ride (now $22.50 with the surge) but at the same time I’m for constantly being able to go get people. I think there are two ways to go here:

1) Raise base rates. Instead of $1.35/mile in the market I’m in, raise it to $1.75 a mile – that’s a 23% increase but won’t really be a major hit to customers as your $5-$6 ride only gets ~$1 bump. Offer traffic/stand-still income as well for drivers. Nothing crazy, but that “waiting fee” or whatever that $0.24/min deal is might need to be raised a bit too, but that fee won’t be noticed much, if at all. If you use the service for long range rides then your overall ride will be more (23% increase on a $25 ride is $30.75), but you were already budgeting for a higher-priced ride anyways.

2) Cap surge pricing. If you want to stay competitive, cap surges at double the cost. 100% price increase still keeps a ride no more expensive than a yellow cab in my area but still ends up being a better deal as Uber doesn’t charge so heavily for waiting for a rider or for stops. If the surge model, as a result, is smoother in terms of escalation, people don’t hate paying the extra 20% or 30% on occasion since that would become the more aggressive surge price. If that doesn’t make sense: don’t surge the system as hard – change the algorithm to scale up surge so it take more demand than it currently does before raising costs. I think riders would be happy to pay a little extra for rides (I wouldn’t mind much) as long as they know they’re not going to drunkenly call an Uber when it’s 3x the cost. A $10 ride becoming a $16 ride at 2am is nothing to freak out over. I would see riders saying “well I would prefer NO surge but I understand why it’s there and I’m glad it doesn’t get out of control”. That’s a better from a PR standpoint AND doesn’t kill off demand so easily during surge times.

As a driver for just over a year, I personally think Uber can do away with surge and still keep drivers happy IF they do two things: 1) introduce tip option in-app. Lyft does it and nobody gives a damn on that system (70% of Lyft users offer a tip of some kind, whether it’s $1 or $5 or more). Drivers love it because it helps them cover gas costs from working. 2) cap drivers in a market – there isn’t a struggle to make money if you’re constantly busy. I’ve told countless riders that, when I can spend no more than 2-5 minutes between rides, I’m very happy with my income and I don’t care about surge pricing as I’m able to pull in a decent wage given the work I’m doing. If Uber were to NOT reactivate drivers that get deactivated or were to ban more so-so drivers (rated lower than average) then the good drivers get more business which makes them more money.


Read complete article here:

Uber Plans To Kill Surge Pricing, Though Drivers Say It Makes Job Worth It : All Tech Considered : NPR.