Everyone hates Uber’s expensive surge pricing model, which charges a multiple to every ride hailed during busy times on the mobile app.
One of the highest surge prices ever documented by Uber, for example, was 50X the fare.
Uber says it needs surge pricing to keep supply and demand in check. If it doesn’t entice more drivers to take to the roads during busy times, then a bunch of people will be stranded. Uber prides itself on being reliable above being affordable.
What if Uber gave its users the option to never deal with surge pricing again?
Currently, Uber generates all of its revenue from taking a 20% cut of all fares. Drivers keep 80%. If Uber was interested in an additional revenue stream, it could offer a premium monthly or annual account for users that’s a guaranteed ride, surge free.
Premium accounts could offer all sorts of things, such as a set number of rides/minutes per month, priority hailing over other customers, access to swanky vehicles or special promotions, and no surge pricing.
The average Uber ride seems to be about $US20 depending on the city. The service is sticky; about 70,000 San Franciscans took more than 150,00 Uber rides during a one-week period late last year, for example. Some users already pay thousands of dollars per month on Uber; in 2011, one New Yorker was paying $US6,000 per month on Uber rides. On New Years Eve 2013, Uber generated $US10.7 million in a single day.
How much would you pay for a premium Uber service? $US50-100 per month? More? If just 100,000 users paid $US100 for the service, that would generate an extra $US10 million for Uber per month. If you take a few Ubers per month, that pricing model could be worth it — especially if Uber has its way and convinces people they no longer need to buy their own vehicles.
And like the cars you can hail, Uber could have multiple tiers of paid accounts that escalate in “baller-ness” with price. Uber already generates billions of dollars per year. If it wants to generate a few billion more, subscriptions may be the way to go.
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