Lyft is moving towards eliminating surge pricing, a decision aimed at increasing the number of riders. During the second-quarter earnings call, CEO David Risher described the pricing strategy, also known as “Prime Time,” as an unfavorable way to raise prices that deeply displeases customers.
The surge pricing mechanism usually takes effect when there is a shortage of drivers to meet the demand. It’s designed to lure off-duty drivers back on the road by offering them a chance to earn more. But it’s a feature that has not been well-received by riders in general.
Risher expressed the company’s intention to abandon this approach, stating, “We’re really striving to eradicate it. Our substantial driver supply, which we’ve earnestly worked on, has seen a significant reduction.”
According to a Lyft representative who spoke to TechCrunch, the driver pool for the company is at its highest in three years, since the beginning of the COVID-19 pandemic. The driver base expanded by 20 percent compared to the previous year, and the average hours worked by each driver have surpassed the levels seen in 2019. Risher indicated that these factors contributed to a 35 percent reduction in rides affected by surge pricing, relative to the last quarter.
While this change has resulted in decreased profits for Lyft, Risher emphasized that it benefits the riders and enhances the overall market standing of the company.
In order to remain competitive with rivals like Uber and attract more riders, Lyft has been cutting prices. Even though the company’s revenue per rider has declined by five percent compared to the last quarter, the active rider count has experienced growth, with an increase of nine percent.
Frequently Asked Questions (FAQs) about surge pricing
Why is Lyft planning to eliminate surge pricing?
Lyft is planning to kill off surge pricing in an attempt to boost rider numbers and increase competitiveness. CEO David Risher admitted that surge pricing is an unpopular practice among riders, and with the highest driver supply in three years, the company has managed to reduce rides impacted by surge pricing.
What is surge pricing, and why do riders dislike it?
Surge pricing, known as Prime Time at Lyft, kicks in when there aren’t enough drivers to meet demand, leading to higher prices. The idea is to attract off-duty drivers to work for a while, but riders largely dislike it as it raises the cost of rides unexpectedly.
How has Lyft’s driver supply changed recently?
Lyft’s supply of drivers is at its highest in three years since the onset of the COVID-19 pandemic. The driver base has grown by 20 percent year-over-year, and the number of average hours each driver works is at a new high, surpassing 2019 levels.
What effect has the reduction of surge pricing had on Lyft’s revenue?
The reduction of surge pricing has resulted in Lyft making less money. The company’s revenue per rider dipped by five percent from the previous quarter. However, it is seen as a positive move for riders and the company’s overall market position.
How is Lyft staying competitive with other ride-sharing companies like Uber?
Lyft has been lowering prices to stay competitive with rivals like Uber and attract more riders. Despite a decrease in revenue per rider, the number of active riders grew by nine percent, indicating a positive response to the company’s pricing strategy.
5 comments
Interesting move by Lyft. Mayb this will help them in the long run, but they’re losing money now? Not sure how thats gonna work out.
Finally! Someone is thinking about the customers, just hope it doesnt effect the drivers negatively. We need balance in the market.
never understood why they had surge pricing in the first place, it’s just a bad business model. Hope more drivers get onboard though…
I can’t believe they’re finally ditching surge pricing! this has been a pain in my side for so long, glad its going away.
Lyft is doing the right thing! Uber should follow suit, dont you think so? its high time they think abt the riders too…