Uber Dynamic Pricing In London

Dynamic pricing is a strategy where businesses adjust the prices of their offering to account for changing demand. Uber utilizes dynamic pricing and machine learning to forecast market conditions. We will explore how Uber introduced their dynamic pricing strategy in London. Uber introduced an algorithm that allowed the company to set variable pay and pricing based on real-time data. However, they have seen some pushback “For drivers, the ADCU said the algorithm could push down working conditions by targeting drivers based on their willingness and ability to accept lower fares.” (Uber introduces). The pricing is meant to improve reliability for riders creating more trips. They said that these changes have not affected the average take rate, the only difference is that each trip is charged based on real-time information to provide the best possible price. 

The advantages of dynamic pricing are that it provides control over pricing strategies, cost efficiency in the long run, and high responsive repricing.  Dynamic pricing allows owners to get real-time data and pricing trends for their products, competitor price modification insight, and demand and supply understanding allowing Uber to adjust accordingly. This real-time data further helps cost efficiency in the long run. Dynamic pricing takes into account the different price variations within the market. By monitoring outside activity (competition, demand, and supply) businesses are able to use accurate information in order to make the most optimal product price and remain profitable, companies are able to avoid any price fluctuations. This leads to the last advantage of dynamic pricing, higher responsive repricing. As prices are lowered this causes an increase in demand achieving revenue goals. This strategy helps reduce prices according to market trends, stock levels, and most importantly competitor data. 

While many argue that Uber is taking advantage of higher profits with their dynamic pricing they argue otherwise and rather shift the blame to a lack of drivers “Once more drivers get on the road and ride requests are taken, the demand will become more manageable and fares should revert to normal” (uber). Problems arise from customers who have had enough of Uber price hikes and their continually changing based on variables, they argue that Taxicabs do not raise prices based on increased demand so why should Uber? 

Although some consumers might not like when companies participate with dynamic pricing it does have positive outcomes. For Uber, this translates to more availability and predictability when it comes to getting a ride. 

Sources:

https://www.uber.com/en-GB/blog/uber-dynamic-pricing/#:~:text=Dynamic%20 pricing%20 helps%20us%20 to,surge%20is%20up%20to%20you.

https://www.blog.datahut.co/post/dynamic-pricing

https://www.computerweekly.com/news/365531767/Uber-introduces-dynamic-pricing-algorithm-in-London