When you have an essential task on a special or rainy day, you book a taxi using your favorite app. However, you’re surprised that the cost is much higher than usual. How did you feel in that situation? This situation occurs due to surge pricing or dynamic pricing, and it’s the reason behind your unexpected reaction.
This blog will help you grasp the idea of dynamic pricing more easily.
Okay, we can begin now.
What Is Surge Pricing?
Surge pricing is when a company raises its prices on a festival day, rainy day, or during busy times (when many people want their service). They do this to control the number of people using their service and to use their resources more efficiently.
Many well-known brands also use the idea of dynamic pricing.
Top Brands Using Surge Pricing
- For ride-sharing: Uber and Lyft.
- In food delivery: DoorDash, UberEats, and Grubhub.
- In travel: Airbnb, Kayak, and Expedia.
- For ticketing: StubHub, Vivid Seats, and Ticketmaster.
- In retail: Amazon, Walmart, and Target.
- In the Airline Industry: American Airlines, and United Airlines
- Event venues such as Madison Square Garden, Ticketmaster, and StubHub.
Let’s See How Uber’s Surge Pricing Works
Uber wanted more drivers to work on busy or rainy days, so they introduced surge pricing. Without this pricing system, drivers didn’t want to work on those days.
Uber’s dynamic pricing helped to solve transportation issues in real-time.
It was a successful way for Uber to get drivers to work on special days.
How Does Surge or Dynamic Pricing Work?
Dynamic pricing becomes essential when many people want something (like booking a taxi or renting a house), but there needs to be more of that thing available.
Many people want to book a taxi during rush hours or special occasions. However, at that time, there weren’t many taxis or drivers around in that area. So, the company increased the price to make fewer people book taxis.
Advantages and Disadvantages of Surge Pricing
- You can reach your destination quickly, even during busy times or special occasions.
- Drivers can make more money because of dynamic pricing.
- Business owners can earn extra money and use resources better.
- It can help reduce traffic jams.
- Only some people are willing to pay a lot of money.
- It’s hard to predict when surge pricing will happen.
- It can make customers less loyal.
- It can harm the company’s reputation.
- Some customers might switch to a different service or app.
Types of Surge Pricing
- Time-based pricing: This happens during busy times like rush hour or midnight.
- Weather-based pricing: Occurs when the weather is terrible, leading to higher costs.
- Geographical-based pricing: Prices increase in areas where many people want the service.
How to Avoid Surge Pricing?
- Don’t book during busy times, special occasions, or crowded areas.
- Plan your rides or stays.
- Try different apps or services.
- Share rides with others using carpool or ride-sharing options.
The suggestions above can only partially stop dynamic pricing but can help you deal with high prices better.
Some companies use “surge algorithms” to raise prices automatically when there’s high demand, like during lousy weather, festivals, or busy times every day. It helps suppliers and business owners, but you might have to pay more if you need their service as a consumer.
I hope this blog explains “surge or dynamic pricing” well. Thanks for reading. Goodbye!
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