Surge Pricing for Ride-Hailing Businesses: Is It Beneficial?
Posted on: 06 June 2019 by Marina Thomas
As the demands of passengers are changing, so is the services provided by the taxi businesses. Receiving support from today's technology, ride-hailing businesses are becoming more centered towards offering their taxi services to the passengers on their smartphones and use the dedicated mobile application to receive ride requests from the passengers.
As the demands of passengers are changing, so is the services provided by the taxi businesses. Receiving support from today's technology, ride-hailing businesses are becoming more centered towards offering their taxi services to the passengers on their smartphones and use the dedicated mobile application to receive ride requests from the passengers. This has benefitted not only passengers but for drivers and business personnel it is proved as advantageous as they get the ride requests from customers directly on their smart devices and using the various elemental features of the application, they can serve the passengers better.
As the invention of ride-hailing applications has brought the businesses to the global market, it has also resulted in a fierce competition where technological updates are necessary and so is strategical updates. The competition has become cut-throat where the businesses have to provide the best services to passengers in order to attract more passengers and create their loyal customer base to survive in the market. Hence, the requirement for excellent strategy planning is more as it can assure the businesses that they are still doing well in the market with leaving their competitors and other future threats behind.
How Surge Pricing Entered the Picture?
Surge pricing, also called Dynamic pricing, is the change/surge in the prices of the ride fare according to the demands and supply availability. In essence, the ride-hailing businesses charge more during the increased demands or shortened supplies to earn that extra money that can add up to their profits.
This strategy has been introduced by the ride-hailing giant, Uber, who is successfully operating in many countries across the world and earning good profits. Therefore, the importance of surge pricing increases as it has been put into effect by this ride-hailing Goliath and other ride-hailing applications that have been serving the customers for years and now sit at the top positions in the industry.
However, many businesses consider surge pricing a threat to their business. As the surge pricing influences the ride fare charges taken from customers, which usually ends up as an increase in the charges, it leads them to many questions if their customers are going to be happy with it.
Therefore, here are some major areas where surge pricing puts up its influence and can help the businesses a lot.
When to Implement Surge Pricing?
Surge pricing is based on the concept of increased demands and a shortage of supply. Therefore, the time duration to be chosen for implementing surge pricing must be the hours when maximum ride requests are placed from the passengers.
Maximum Ride Requests from Passengers
This includes the peak hours of office, traffic conditions and the hours during maximum people are out there and want a ride on their location. For example, during any concert, or any functions during which audiences are out on the streets.
Therefore, during the time when there are multiple passengers requesting rides, it is but natural that all the rides are not going to be available for all. An excellent application like uber clone can ensure that surge pricing is applied within a few controls. And implementing surge pricing during this time is advisable as the passengers are ready to pay the little extra charge for getting a ride as they are in a hurry to reach home.
Less Availability of Rides
As the drivers working under the online ride-hailing system are free to switch their status to offline, there may be times when not much of service providers (drivers) are online and ready to accept the ride requests. Therefore, during these times, you can increase the charges or ride fare as there are not many options available to passengers and they are also willing to pay the extra prices as they want a ride right away.
How much is Too Much?
It is true that your passengers are in need of a ride and they may pay the extra charges that you have implied through surge pricing, but there must be a limit on the dynamic charges you apply. As there are your competitors also who are ready to snatch away your possible passengers, they may lower their ride fares which may result in fewer ride requests for you. Therefore, knowing when to stop is the key to the success of any surge pricing strategy. Hence, it becomes important for you to consider the passengers' point of view also to implement a successful strategy for the upbringing of your business.