Ridester has learned that Uber has come up with yet another option to give riders cheaper trips!
First it was uberPOOL, and if that wasn’t cheap enough, they came up with Express Pool which asked riders to walk a little bit to meet their driver at the nearest convenient corner in exchange for an even greater discount than the already steeply discounted uberPOOL.
But apparently those weren’t enough so now qz is reporting that they’ve come up with uberWAIT! That’s not what they’re officially calling it. Not yet anyway. But that’s what it boils down to.
Uber Tests Option to Give Riders Cheaper Trips
Uber is testing an option in San Francisco and Los Angeles that would give riders an option to wait a few minutes in order to get a cheaper ride. The option is being tested right now only among Uber employees in San Francisco and L.A.
Uber made no announcement about it, but it was spotted on Twitter, after an Uber employee posted it on his account. It was a screen shot of the Uber rider app, showing where he was presented with a new option.
The app told him if he requested now, he would pay $10.18 but if he waited four minutes he could get a two dollar discount, with a price of just $8.15. That amounts to about a 25% savings.
The Uber employee has since removed the post as, no doubt, Uber wasn’t quite ready to go public with it. But, we found a copy and are happy to share it with you here.
Taking a closer look, we see that he was requesting a ride at 4:56 p.m. He was given an upfront price of $10.18. Then, he was told if he would be willing to wait until 5:00 p.m. – just four minutes later – to make the request, he could save 25% or about $2.00. (You can see his original tweet on archive.today).
An Uber spokeswoman told Quartz in an email that, “Affordability is a top reason riders choose shared rides, and we’re internally experimenting with a way to save money in exchange for a later pickup.”
But, it was two years ago this summer, during the summer of 2016 that Uber first de-coupled the price it charges riders from the price it pays drivers. In implementing its new pricing scheme, commonly known as “upfront pricing”, Uber effectively worked out two separate rate arrangements. One, for riders and another for drivers. And they effectively raised rates on riders.
It makes us wonder if they may have raised rates a little too much and they’re now looking for ways to capture those low-cost passengers that they may have lost?
Originally, Uber had one rate for each city and drivers were paid a fixed cut of that rate on every trip. If the rate was $1.00 per mile and $0.15 per minute, Uber would calculate the cost of each trip based on the trip’s actual distance and time and they would pay the driver either 75% or 80% of whatever that total came to.
When they moved to upfront pricing, they now calculate the cost of the trip to the rider on a variety of factors – which include a guess as to how long the trip will last and how far it will go. And you guessed it… they usually guess high – causing trips to cost more than they would if they went by the actual time and distance and used their published distance and time and rates to calculate the final price. This has effectively increased rates on passengers while insuring that drivers would receive no pay increase.
Since they slipped in a stealth price increase on passengers, we’re wondering if they may have lost some business as people slowly began to realize the rides were costing more and more? If that’s the case, that might explain this latest move.
How Could This Benefit Uber and Drivers
It seems at first glance, that this could only benefit the riders who receive a discount. The question is, how does it benefit Uber. It doesn’t seem it could save them any money because when the rider does finally get matched up with a driver, the driver will still get paid at the usual non-discounted rates. And the rider will be getting a discount. It obviously doesn’t benefit the driver in any way. And on the surface it doesn’t appear to benefit Uber either.
However, when you consider that Uber gives billions of trips a year, shifting a certain percentage of those trips to a slightly later time, could allow them to spread out the demand over a larger time frame which would make it possible for the limited number of drivers on the road to complete all trips.
If you think about it, if you have 12 drivers in an area and 15 riders putting in a call all at the same time, then three passengers are either going to get a surge premium added to the cost of their trip or they’ll find some other way to get where they’re going. The surge premium could be just the key that tips them over the edge and causes them to look for another means of transportation. So understandably, Uber would like to avoid surges.
If there is no surge pricing but Uber tells the last three passengers there are no cars available at this time, or that it would take 20 minutes for a driver to show up, those three passengers will also be likely to then start looking for another way home.
But, if Uber could persuade those passengers to wait just a few extra minutes, with the offer a discount, then they probably won’t lose that fare. And when you multiply that by millions and millionsof trips, it adds up after a while.
When multiplied over the millions of trips Uber does every week, shifting demand by just a few minutes can even out demand so that drivers can handle all the trips more efficiently.
In the end it seems likely that this is primarily a bid by Uber to keep passengers on the platform rather than having them drop off and find alternative means of transportation.
How Will This Affect Drivers?
This probably won’t affect drivers much at all. If the past is our guide to the future, Uber will pay drivers their normal rates regardless of whether the rider is getting a discount (which makes it even more expensive for Uber). But drivers shouldn’t expect to see any cut in pay.
The primary possible consequence we can foresee at this time is that by smoothing out demand, it will probably have the net effect of decreasing the number and intensity of surges.