Question

Uber needs to improve their pricing strategy specifically the surge pricing because it’s confusing to the driver and the rider. What has led to this recommendation. Consider internal and external environments

Answer 1

Let us first understand what is Surge Pricing . In Surge Pricing applicable to the business of car ride where UBER is operational the cost of ride in an area goes up when demand for rides in that area goes up . So higher the Surge which is basically demand here higher the price and riders either pay more or wait .

Now in case of UBER the issue is their normal tariff is cheapest in the industry and is less than the normal auto rickshaw fares in cities like New Delhi . So the same customer who generally pays a ride price of INR 200 during normal period it is difficult for him to pay INR 500 for the same ride when there is a high demand . For other operators in the same business like OLA there is nothing called Surge Price they only have a reference price which is some times less than Uber's Surge Price in peak demand period . UBER gets a negative publicity because its surge pricing comes into effect when consumer is in dire need of a ride . There is no transparency about how the price is calculated like in local taxis or auto rickshaws . Consumer sentiment is further hurt as some times the price changes are erratic and with in minutes there are huge swings in prices as in share market . The pricing is confusing to the driver as he or she is not able to explain to the rider the calculations how the price has gone up . For drivers it is difficult to decide among OLA and UBER with whom they should have more loyality because earnings in UBER are uncertain .

Considering above it is of paramount importance for UBER that they reconsider their pricing strategy and makes it more transparent and stable for more riders and drivers loyality .