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Uber’s Travis Kalanick Explains His Pricing Experiment | NYTimes

Of the several entrepreneurs who are trying to shake up urban transportation, Travis Kalanick of the smartphone-summoned car service Uber has made some of the boldest moves. In my article about the strategic battle between Uber and its rivals, Mr. Kalanick explains that he sees the 20 to 25 percent sharp price cuts announced this week for its UberX service as a way to increase ridership. Here is more from the conversation, lightly edited for length and clarity.

Neil Irwin: So my basic question is simple, which is, what are you hoping to achieve with this latest round of price cuts to UberX?

Travis Kalanick: We’ve been doing price cuts on UberX since we first rolled out, which goes back to July 2012. Every price cut we’ve done we communicate as being temporary. The reason is because we want to be sure the drivers are still able to get the kind of income that they can get — the same or better income. So when the price cut happens we’re basically making a bet that the number of trips per hour will increase enough that the drivers make the same amount per hundred hours they’re on the road.

N.I.: How does surge pricing fit into this? Is part of the strategy to have lower base prices but more routine small surges, so it’s less a phenomenon of people feeling like they’re soaked when they face a higher price, and it’s more like a hotel room or an airline where people are used to the price always changing?

T.K.: It’s important for folks to have an understanding of what the baseline price is. If you set your base price too high, then that means there are many times of the day when you could be cheaper but you’re not. If you set your base price too low, you’re surging so often it’s not worth it.

You could imagine during busy times, like Friday night, tiered prices. So during the day there could be a lower price than the base price during the evening. They do that in many cities around the world with taxis.

N.I.: You continue to get a lot of blowback to surge pricing. People really don’t like it.

T.K.: The one thing to keep in mind is we’re incredibly transparent. It’s there in big bold letters [when you’re ordering a car]. You have to confirm it, and then type in the multiple to prove you understood it.

 

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Uber’s Travis Kalanick Explains His Pricing Experiment.

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