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Uber Launches New Pricing Model to Address Wider Target Group

Posted by PriceBeam on May 22, 2017

uber pricing

Uber recently launched a new pricing model called "route-based pricing", where the driver pay is no longer based solely on how much passengers pay. This new pricing model allows Uber to charge a higher price to passengers based on time of day and destination. What is interesting about the new pricing model is that it is much more focused on aligning prices with the willingness to pay of passengers. Prices will to a greater extent be based on historical willingness to pay data which factors in a much broader range of factors than the previous one.
In particular, this will result in higher prices for passengers ordering Ubers in high-income neighborhoods, and moreover, this new model should result in slightly lower fares for UberPool, where passengers share Ubers with other groups, while the premium service UberX, will become slightly more expensive.
Clearly, Uber is addressing the increasingly broader target group for its services. While traditionally, the key competitive priority of Uber has been its lower prices, especially the premium segment is getting bigger. And thus, this new pricing model allows Uber to reach a very price-sensitive segment with its UberPool service that now has become cheaper, while capturing more profits from the premium segment that are traditionally used taxis or private chauffeurs.
Ultimately, as drivers are no longer paid a fixed percentage of the fare, Uber will be able to put more profit in its pocket -- and since the pricing is based on sophisticated willingness to pay research, the decrease in market share will be insignificant.

Written by PriceBeam

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