- January 12th, 2015
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Uber and Managing the Surge: Using Data to Involve Customers
There is a saying about the ugly side of business that warns us against watching how sausage is made. These days, the ride-service company Uber is not only revealing its behind-the-scenes process, it also is inviting its riders into the grind – with attractive results.
The app-based service, recently criticized for surge pricing during high-demand times, is stepping in front of the issue and explaining not only why price hikes occur, but how Uber customers can help manage them. I received an email from Team Uber on New Year’s Eve explaining so much as it approached what would likely be its biggest night in Toronto, with more than 2 million rides.
“Busy nights require surge pricing to get enough cars on the road and ensure you always have a reliable ride,” Team Uber wrote.
The letter then detailed what would be the most expensive times to reserve a ride – 12: 30 to 2:30 a.m. – and suggested customers catch a ride right when the ball drops or a few hours later, when prices to “return to normal.”
“Don’t forget: you’ll always be notified in advance and asked to confirm any increased rates, and you can always estimate your fare before requesting,” the letters states, also suggesting customers share the ride and split the fare.
I appreciate many things about this letter, but what I love is how Uber uses its data to help customers understand its service offering and the significant demand curves that may take place. Uber is essentially doing something very simple – sharing key elements about its business with customers, but in a way that encourages them to help manage its own product limitations.
Other companies have exhibited similar transparencies when it comes to making major changes, or recognizing their limitations. In July, Spirit Airlines began giving away 1 billion Free Spirit frequent flyer miles to members who felt wronged by the carrier. The promotion, called the “Hate Thousand Miles Giveaway,” bestows 8,000 miles at a time to Free Spirit members who shared their terrible air travel stories at HateThousandMiles.com.
“We want to change the way people think about air travel and educate them about the Spirit way of traveling” Ben Baldanza, CEO of Spirit Airlines, said in a press release.
Similarly the fast food chain Arby’s, in its “We Have Pepsi” campaign, created commercials featuring Pepsi with a voice over stating that because Arby’s carries Pepsi, it is under contract to promote the beverage in ads twice a year.
But these efforts, while illuminating the practical challenges and requirements of their industries, stop short of inviting customers to help manage inventory or product limitations. By doing this, Uber invites its customers to be one with the business.
It may bring a new meaning to how the sausage is made.