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Surge pricing has been very controversial, but Uber says it is necessary in order to compete
Of all the controversies over Uber, the one that most annoys the people who use it are the so-called "surge pricing," in which it raises rates during peak periods, including holidays and inclement weather,
Travis Kalanick, Uber's co-founder, has repeatedly defended the practice, and made it clear that it will continue to be the company's policy in the future.
So, instead, the company is doing the next best thing: notifying its users when the rates come back down.
In it latest update for iOS users, Uber is switching from SMS -based notifications to push notifications, which will notify users when the surge price period is over, the company announced on Monday. The feature is called Surge Drop.
Kalanick first promised the feature would be coming at the 2014 LAUNCH Festival last week, saying, "one of our goals for 2014 is bringing humanity to our communications."
There is no word on if, and when, Android users will be getting the same feature.
"We know the whole reason you use Uber is that you’ve got places to go and people to see. We’ll stay true to our pledge to get you the fastest ride available, and sometimes that will require surge pricing to get more drivers on the road," the company wrote on Monday. "But at those times when your schedule is flexible, you can hold out for a ride that’s as affordable as it is reliable."
Surge pricing explained
As I said earlier, price surging has caused a lot of ire among Uber customers, as they feel as though the company is gouging them when it knows they will need a ride the most.
"We raise price when supply of available cars gets tight," he said. "We raise the price in increments over time based on supply health. When supply opens up, we then lower the price."
The reason it is necessary is because raising the price gets more drivers out, which is more important during high demand periods like New Year's Ever.
"Higher prices encourages more supply to come online. It gets some drivers out to work on NYE. It keeps other drivers from going to alternatives like renting their car out for the night, or trying their luck at hustling rides on the street," he said. "Higher prices means more cars, means more rides, means more people getting around the city efficiently, safely AND in style."
Essentially, the way Kalanick sees it, it is necessary to charge more to get more drivers to be willing to go out. From my perspective, this seems a little specious when talking about a time like New Year's Eve, a night when every driver knows that there will be a lot of money to be made, no matter what the fare.
Kalanick, though, counters that by saying that drivers have plenty of options, so Uber needs to give them a reason to stick them.
"Drivers have alternatives to make a lot of money on this night, and if we do nothing, they’ll go elsewhere," he said. "Our driver ops guys worked their butts off the week before NYE trying to get as many drivers as humanly possible to take the Uber bet on NYE—it's a tough bet as one of their alternatives is selling their services for $1500 or more for the night."
The times when it would seem to more likely increase the number of drivers on the road would be during bad weather, especially heavy snowfall, when many drivers would, obviously, think twice about whether it would be worth driving in. During those times it is understandable to give drivers an extra incentive to do business.
Either way, price surging is definitely here to stay.
"Surge Pricing will definitely become a mainstay for major holidays and big events in the cities we operate in," said Kalanick. "The big questions are around surging downward, and doing surges during other more moderate spikes in requests."
(Image source: nytimes.com)
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