Uber
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Uber uses dynamic pricing, also called surge pricing, where fares are adjusted upwards during periods of high demand to incentivize more drivers to meet rider demand. This strategy allows Uber to maximize supply and demand but has faced challenges from regulators limiting fare increases and from competitors. While Uber has yet to be profitable, its losses are decreasing as it grows and updates its pricing approach, such as showing quoted prices instead of multipliers, though customers still sometimes object to perceived price increases during surges.
Uber
- 1. 32qa TOPIC : PRICING STRATEGY
- 2. • Course Title: Marketing Management • Course Instructor: Mam Samra Malik • Presenter: Sajid Sharif 33-MB2.5-18-33
- 3. Agenda: • About • How Uber Works • Uber Offerings • Pricing Strategy • Type of pricing strategy
- 4. About • Uber is a transportation network company (TNC) headquartered in San Francisco, California. • Uber is not a casual transport company but a software. • Uber offers services including peer-to-peer ridesharing, ride service hailing, food delivery, and a bicycle-sharing system. • The company has operations in 785 metropolitan areas worldwide.
- 5. Background: • Founded in March, 2009 as UberCab. • Founders: Garrett Camp & Travis Kalanick. • Originally a private car service for executives. • Communication through emails and codes. • Started growth in 2010. • Use technology to bring together passengers and drivers.
- 6. How Uber Works. • Uber is a technology platform. Our smartphone apps connect driver-partners and riders. • Booking of ride through an Uber app using Internet. • Pickup Location and destined location can be set on the app. • Near by drivers can be seen on the app. • Estimated time and information about the driver can be seen on app. • In other countries fare can be paid by credit cards as well. • In Pakistan it is paid by cash.
- 8. The Uber App Interface:
- 9. Facts and Figures(Statistics): • 75 Million riders and 2 Million drivers • 10 Billion Trips completed world wide. • Operational in 65 countries and 600+ cities worldwide. • 15 Million trips completed each day. • 0ver 16000 employees at Uber as of 2017. • Uber launched in Pakistan in March,2016.
- 10. Uber Offerings: • Uber Eats • Uber for Business • Uber Freight • Uber Health
- 12. Pricing Strategy
- 13. Target Customers • Willing Drivers • Needy Consumers
- 14. Customer Classification. • UberX– Least expensive (economy customers) . • UberXL –For larger groups (moderate customers). • UberBlack–Black town cars only (roughly 35% higher fares); Targeted customers who could not afford a full-time driver, but who wanted more luxurious transportation than a taxi. • UberSUV–Worked well for large parties; priced higher than UberBlack. • UberTaxi–Connected users with a regular taxi.
- 16. Uber in Pakistan In Pakistan Uber has these types of vehicle rides which are available. • Moto- Affordable Motorcycle rides • Auto- Auto rikshaws • Mini- Affordable Compact rides without AC • UberGo- Rides with AC • Now a days in Pakistan Uber is running a campaign for empowering Pakistan’s Passion for Cricket starring “Sana Mir” “Har Ball hai Opportunity” #HarBallHaiOpportunity
- 17. Fare Structure for Uber in Multan Fare for uberMOTO • Base fare Rs. 25 • Per KM Rs. 6.85 • Per Minute Rs. 1.65 • Minimum Fare Rs 40 Fare for AUTO • Base fare Rs. 45 • Per KM Rs. 5.00 • Per Minute Rs. 1.15 • Minimum Fare Rs 50 Fare for UberMini • Base fare Rs. 60 • Per KM Rs. 5.00 • Per Minute Rs. 2.50 • Minimum Fare Rs 70
- 18. Pricing Strategy Type: Pricing strategy is a huge element of an overall marketing strategy. Uber use a dynamic pricing system often called "surge pricing. Dynamic pricing, also referred to as demand pricing, or time-based pricing is a pricing strategy in which businesses set flexible prices for products or service based on current market demands.
- 21. Surge Pricing • When prices are surging, you'll see a multiplier to the standard rates on the map. • Surge pricing is a tool that Uber uses to maximize the potential of their industry’s relative supply- and-demand. • For example, you might see surge at 1.8x or 2.5x. This is how much your base fare will be multiplied by, so a fare that is usually $10 would be $18 when it's at 1.8x Surge.
- 22. How Uber’s Surge Pricing Operated • Fares calculated according to algorithms, which helped match supply with demand • Higher prices during peak usage/demand • Fares continually adjusted (+/-seven or eight times the normal Uber rate) • Benefited passengers by incentivizing drivers to make more pickups
- 23. Why surge pricing is used? • Uber states that this policy exists in order to get more drivers on the road during times of peak activity, helping meet instances of higher demand. • Furthermore, the surge pricing is supposed to help moderate the demand for rides, as some riders will choose to wait (or move to a different area) if the pricing is higher than they want to pay.
- 24. Pricing Concepts to Support Uber’s Pricing Model • Perceived Value: Uber is reasonably priced compared to the “next best alternative”, creating a True Economic Value • Price Customization: To control supply/demand, pricing will fluctuate to during peak hours. • Price Sensitivity: Moving to quoted prices (without mention of “surges”) should reduce any price sensitivity
- 25. Factors Challenging Uber’s Pricing Strategy • Regulators & Legislators • Strict guidelines regarding passengers, fare structure, appearance of vehicles • Competition entering the market (Lyft, Careem) • Psychological effects (customers thinking they are getting “ripped off” during peak demand • Ridership demand decreases (7% -27%) during price surges • With close competition (from Lyft, Careem), and customer “friction”, surge pricing is becoming problematic.
- 26. Factors Challenging Uber’s Pricing Strategy • Adapting Pricing Strategy • Moving to pricing quotes (without a multiplier displayed) • Uber is changed surge pricing from a multiplier to a flat amount.
- 27. Uber’s Profitability 2018 Financials • $11.3 billion (gross bookings 1st Quarter 2018) • $12.0 billion (gross bookings 2nd Quarter 2018) • $11.3 billion (net revenue –Y,2018 Uber’s share) $2.6 Billion Revenue in 1st Quarter of 2018- Profit $2.5 Billion $2.8 Billion Revenue in 2nd Quarter of 2018 But lost 891 Million
- 28. Uber’s Profitability Is Uber’s Pricing Strategy Sustainable? • Although Uber has yet to make a profit, there losses are historically decreasing annually • As the company grows, overhead will become less expensive • Even now on updating the app they do not show the multipliers and just show quoted prices but still customers create problem.
- 29. THANK YOU!!