Uber has announced that it is implementing a new upfront pricing policy to mitigate the effects of surge pricing on the business. Uber’s product team has been testing the idea in select cities throughout the U.S. and India since April. The new upfront pricing has now been made available in Miami, San Diego and Philadelphia, as well as some other cities in the US. Uber plans to roll out the changes to pricing in the app globally in the next few months.
Pricing for Uber rides is based on expected time, distance, traffic, the number of drivers available nearby and the number of riders requesting rides at that time. Surge pricing is when prices rise due to high demand. During periods of excessive demand, Uber increases its normal prices to encourage more drivers to hit the streets. Surge pricing may be a permanent part of the experience of hailing a car via smartphone, but the technique is unpopular with many customers that use the services.
Uber started to notice something when it introduced UberPool riders to exact fares two years ago. People seemed to use the service more often when they were told up front how much the ride would cost. A post on Uber’s website says, “Knowing how much a ride will cost in advance is clearly something riders appreciate.”
This doesn’t mean that customers will be paying any less. Uber pricing will still fluctuate with demand and customers might still end up paying a ridiculous amount of money for a ride in certain places or times of day. However, now they won’t get the warning pop-ups telling them how many more times the usual rate they’ll be paying and the lightning bolt warning you that a surge multiplier is in effect will disappear. Customers will just see a statement that says “fares are higher due to increased demand.”
The move to upfront pricing comes as a surprise to many. In May, Uber executives said in an interview that the company would not be doing away with surge pricing. That same month, the company denied an NPR report mentioning it would be ending surge pricing. While surge pricing is not being eliminated completely, it will now be less obvious to the average customer.