To make transportation quick, apps like Tootle & Pathao have been very much handy. They provide two-wheeler as well as four-wheeler ride sharing options. Easy usage of apps and payment after a ride has made these apps accessible and popular.
But the applicable charges for these two apps have always been a topic of discussion. If the services provided by these apps are the same then how come the prices are not?
Alright! Let’s discuss that now.
Tootle charges Rs 60 for the first 3km and then Rs 18 for another 3km and finally Rs 25 for each more kilometer. This means that it will charge the user Rs 214 for riding 10 km on a 2 wheeler.
Tootle has also released its tootle balance. Users can top up their tootle balance online via eSewa or Khalti. New Tootle users are getting a Rs 200 free Tootle balance!
Pathao charges a base fare of Rs 30 on all rides with the addition of Rs 15 per kilometer. They have the least charge of Rs 45. But Pathao provides heavy discount codes constantly.
Pathao Car, which is its four-wheeler service, charges Rs100 as a service charge. They charge Rs 39 per kilometer and Rs 1 per minute. This does sound expensive. But it is very much less than the rates set by the Department of Transport Management which is Rs 3 per minute!
Why are the prices different?
Comparing the rates for two-wheelers of Pathao and Tootle we can see a difference. With the rates of Tootle riding for 10 km would charge Rs 214 whereas, in Pathao, 10 km would charge Rs 180. The difference of Rs 34 could cost tootle its users. If both the rides are from the same route and in two-wheeler then why the difference?
Pathao uses discount codes and cheaper rates to attract more consumers. However, a greater reason for the different pricing is surge pricing.
Surge pricing is a strategy in which businesses set up flexible pricing rates based on current demands. It is also known as dynamic pricing. This means they can change their rates according to current algorithms, competitor pricing, and supply and demand.
This strategy is applied when the supply is less than the demand. Hence, increasing the prices to earn more and cut out demand is the way surge pricing works.
In ride-sharing apps like Tootle and Pathao, high demand can be seen during office hours. Or evenings where more people are going to and fro from their offices.
Evenings are also when most people hang around hence the demand is high during these hours. And during these, raising prices helps in cutting demand and earning a great profit.
Surge pricing strategy is applicable in other fields too. Such as in hotels where festival seasons have costly booking prices.
For a simple example of surge pricing, we can also take taxis on the streets. The price during the daytime and the price during the evening are different for the same destination.
UBER’S SURGE PRICING STRATEGY
Uber, the American ride sharing platform, uses surge pricing for its rates. They have admitted and posted about how they use surge pricing on their service. The simple 3 step process of Uber’s surge pricing is as follows:
- The demand for rides increases. This is when the demand is outgrowing the supply. There is more demand for rides than there are cars. Hence there must be a solution.
- Price increases. When the demand starts to increase, expectantly so does the price. This is a very good opportunity for the company to earn.
- Pay or Wait. If the user is really in a rush there is no way but to pay the expensive prices. But if the user does not want to then they would have to wait or explore other choices.
Uber has special features in its app to address the surge issue. When the user’s area has a higher surge pricing the app color on the map becomes red.
Unlike Uber, our Nepali ride sharing apps do not have features to address the surge issue. Yet there is surge pricing that differentiates the price.
Our apps like Pathao and Tootle do not have a significant increase like the taxi services on the streets. But they do apply surge pricing depending on the demand and supply of that area.
Well, this can come off confusing as many people are not aware of the surge pricing algorithms nor do the apps address them. But this is a pricing strategy applied all over.