Free Critical Thinking On Critical Analysis Of Uber Surge Pricing Model

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Introduction

Uber entered and revolutionized the taxi industry in few years. The contemporary concepts of ride share, private and luxury cars, convenience of smartphones to request a ride all were enough to shook up the taxi industry that has been monotones forever. However most of its “first times” standards were appreciated and adapted by some competitors too, but the pricing model of Uber has been under constant criticism from authorities and customers.
This paper discusses the concept of Uber’s pricing model as it relates to the core business of the company and critically analyses the article “Pricing the surge; Free exchange” published in The Economist in May 2014.
Uber has positioned itself differently from the simple taxis from the beginning of its campaign. The paper will argue and analyses that surge pricing is a requirement of Uber’s business model and to ensure its position in the market against its competitors.

Surge Pricing to Drive Uber’s Business Model

This point discussed by the author aligns with focus of this paper, that surge pricing may be new to taxi industry however it is a known standard practice in most of the travel, hospitality and other high end brands. Coming back to the placement and positioning strategy of Uber as discussed by the author the application of surge pricing directly relates it with its positioning as high end taxi/ride industry. The target market of Uber are the people who understand this niche market and are willing to pay some extra to get privileged services rather than just riding a cab. Based on these facts it is worth understanding that this small but definite audience are the people who do not like the idea of one price for all concept. The pricing model of Uber relies on the fact, as mentioned by the author too, that people who understand the value offered by the company will always be willing to pay more to get the service as they would receive a safe and reliable ride at the most odd hour in any city (covered by Uber).
Additionally the company guarantees to its customers that they will receive a driver to pick them up from anywhere however the rate for the ride might be double or triple the normal rate. How unfair it might sound but in order to encourage Uber’s drivers to drive at late nights or during festive events like Christmas and Halloween it is important to give them a pompous return of their time as driving at such hours might mean jeopardizing personal security and safety. Higher prices at odd hours mean better compensation for the driver thus increased motivation.

Conclusion

The article points and discusses the need of surge pricing in alignment with the business model of Uber very effectively. The author states that the company positioned itself as high end and value added and had to prove that through its service offerings that guarantee a safe ride anywhere with a smartphone tap. To facilitate all that the company needs to maintain its driver’s supply and ensure a perfect match every time a passenger requests a cab. To create this balance the company encourages the divers to earn more by picking up a passenger. Thus high prices are meant to guarantee a sure and safe ride. Uber targets a market that understand the value of services offered and are willing to pay extra to utilize the offerings.

References

Pricing the surge. (2014). the Economist.