Surge pricing offers customers timely service

Surge pricing offers customers timely service

In recent years, the newest form of transportation for young adults has become ride-booking service companies such as Uber and Lyft.

With such a high demand comes short wait times and increased rates, which angers many customers and sometimes drivers, as well.

What many do not realize is that without surge pricing, these companies would not work the way they are intended to. Increased rates during high demand both allows people to weigh their options to decide if the ride is a necessity and entices more drivers to get on the road.

The goal of Uber is to have a ride at your door as quickly as possible, but that can be nearly impossible in areas of heavy demand like large cities. Uber tries to tackle this problem by implementing a surge rate between two to eight times to attract more drivers. When a customer goes onto the app and sees the surging pricing, they can then make the decision to request a ride or find another means of transportation. This, in effect, brings the demand back down, because many customers choose to find another ride.

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Those customers that decide to request a ride anyway are pleasantly surprised with short wait times and accurate ETAs, because many more drivers are on the roads to glean the surge pricing profits. Having more drivers on the road also helps bring the demand and the price back down.

Despite Uber’s efforts to get customers a ride as soon as possible, many still do not appreciate the high rates. Uber was able to test the efficiency of their surge pricing when it failed for almost a half an hour on Christmas Eve in New York City.

Because the price was still at the normal rate, requests skyrocketed, but there weren’t enough drivers on the road and only 25 percent of the requests were met. The requests that were fulfilled were met with poor ETA accuracy. Uber then compared this to a busy night in the city after a sold-out concert at Madison Square Garden. Surge pricing was implemented and rates increased to four times the normal price.

What Uber found is that the number of requests only increased slightly between the two events, but 100 percent of rides were met with accurate ETAs.

Uber released the results of their natural experiment after the concert to show customers just how useful surge pricing can be.

Many drivers complain of poor ratings due to surge pricing and upset customers, and Uber does its best to prevent this by requiring the customer to accept the surge pricing and type out the value of the surge. Uber also provides automated texts when the surge goes down.

While surge pricing does have many benefits, there also may be times where it is inappropriate, such as the Sydney Hostage Crisis.

Many customers were furious and appalled that the rates still went up. Uber issued surge refunds to all customers, offered free rides to everyone in Sydney and then changed their algorithm to account for emergency situations. The emergency price is now calculated by looking at previous non-emergency prices for the past two months.

Uber CEO Travis Kalanick says the policy “intends to strike the careful balance between the goal of transportation availability with community expectations of affordability during disasters.”

While higher prices are always going to be frustrating to customers, Uber’s surge pricing allows the company to shift with changes in supply and demand to better serve their customers.

Many clients may choose not to request a ride, but the surge attracts more drivers and allows people to get where they are going as quickly as possible, whether or not it is with Uber.

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