Surge Pricing - Good or Exploitation

Surge Pricing – Good or Exploitation

Consumer is at the center of everything. Everything is for the people, for the consumers. Even the law! Every product, every service is modeled and catered to needs of people. Cabs and share taxis are one such area where a huge market is available. With a not-so-good and not-so-efficient public transportation, cabs, taxis, rickshaws, etc. have established themselves firmly to ‘serve’ the people. The word ‘serve’ could be a point of disagreement after seeing the ‘surge pricing’ concept introduced by private cab and taxi companies. Surge Pricing means increasing the fares during high demand. However there are supporters for this concept too!

It is exploitation –

1. No limit - There is absolutely no limit to what the multiplier would be that would decide the fares. Multiplier is a number that is multiplied to the normal fare during the peak hours. The multiplier ranges from 1.5 to 6 or even 7 times the normal fares. This is exorbitant.

2. Fake shortage - All this rests on the fact that there is more demand of cabs in an area than the number of available cabs in the area. There is also the possibility of creating a fake shortage of taxis to raise the prices.

3. Not the definition of service - This strikes at the heart of service industry which mostly should be based on ‘first come first serve’ basis. There should be a balance in increase in pricing and first come first serve. By raising the prices it only caters to the rich and those who can afford rather than the needy.

4. Doubtful customers - The prices fluctuate aggressively from one moment to the next one. This causes problems as sometimes prices go down immediately after booking a cab. This also creates doubt in minds of customers that they might be getting cheated.

5. Not clear - There is no clear formula for deciding the multiplier.

6. Banned in other states - With such exploitative features, Delhi and Karnataka have brought a ban on surge pricing. Delhi has a ban whereas Karnataka is putting in a regulator to manage the pricing.

It has its benefits –

1. Thoughtful - Had the concept been so exploitative and problematic, the private companies would not have introduced it in the first place. Especially in a country like India where the consumers can bring a brand, product or service on verge of bankruptcy very easily, no one would risk exploiting people.

2. Encouraging service providers - Surge pricing will help bring more cab drivers and taxis on the market. The higher prices will act as encouragement. Sometimes for normal fare, drivers are not too keen to work. This is again problematic for consumers as they need to reach their destination especially at night time and early mornings. This encouragement will bring in taxi drivers to serve the high demand.

3. Boost to economy - This in turn helps the nation’s economy as the driver earns more. Also the surge pricing is for certain periods of time only. Once there are enough taxis in an area, the price in the area drops down to normal fare or a lesser multiplier.

4. Just an extension of already existing - The name ‘Surge Pricing’ too brings a negative connotation and negative image to the concept. This concept was already in existence informally as the rickshaw drivers and taxis used to charge more during night time. Surge Pricing is just an extension of that in peak hours.

5. Better Service - It has also been found out through studies and observations that waiting times of taxis has reduced due to surge pricing. This again falls in category of better serving the consumer.

6. Increase in base fare - There is also another argument that if there is ban on surge pricing, then the taxis would not be finding it economical in the long run to have low fares as their normal fares. This would increase the base fare / normal fare. This will lead to more expenditure for all the consumers.

Conclusion

Looking at its benefits, Surge Pricing can be beneficial in long term but in the short term and with no regulation it is only creating dissatisfaction and driving consumers away from the services. The needy feel that they are being exploited. Surge pricing needs proper marketing and regulation. Marketing will help improve its image among the consumers and make them understand its importance to the transportation industry. Regulation will put a stop to arbitrary and exploitative prices and price mechanisms. Private cabs and taxis are becoming very important and have the potential to bear the burden of transport along with public transportation. They must not waste this opportunity.