![]() Myle unfortunately looks to be a cautionary tale, illustrating the importance of understanding how pricing and business strategy must work together, especially in a two-sided market, to create value for both sides.ĭynamic pricing and the occasional cancellation fee actually make Lyft and Uber better platforms and therefore more useful to both riders and drivers. Unless the dynamic pricing mechanism behind Lyft and Uber is seriously broken, it appears that Myle is not only bringing a knife to a gunfight but is also holding its knife by the blade. Its promises of transparency and lower prices are either undifferentiated or actively harming the platform it seeks to create. We can see that all three of these have the effect of discouraging drivers, increasing rider wait time, therefore discouraging riders and creating a vicious negative feedback cycle. It promises to have no surge pricing, no cancellation fees, and lower rider fees. Who can afford to stay unprofitable longer? ConclusionĪt this point, we can see that Myle is attempting quite the feat. Uber is on the precipice of profitability already, and unless Myle can also count on SoftBank as an investor, it’s hard to see how they could hope to win a price war against better-funded marketplace leaders. They are also not afraid to forgo profits to keep prices low. Uber and Lyft are already competitively priced to taxis, if not cheaper. But it is hard to see how Myle can undercut these competitors enough to make up for a worse experience. ![]() Price WarriorsĪccording to Engadget, Myle also “hopes to differentiate itself by giving people a more affordable alternative to Uber and Lyft”. ![]() Having a cancellation fee makes Lyft and Uber’s platforms better at matching.īy rejecting cancellation fees, Myle risks the stability of its matching. Having a small cancellation fee is a way to shape customer behavior: if their activities are costly, they should assume some of that cost. And it’s harmful to the app ecosystem by tying up resources. Cancelling a ride is harmful to the driver who has wasted time and mileage going toward a rider. However, there is a reason these fees exist. Perhaps Myle is referring to cancellation fees, which are still applied sometimes when a rider cancels a ride that is on its way. However, as of 2016, Uber had already shifted its model to one of price transparency, clearly showing the final fare before the ride is booked. I call this pricing transparency, and this level of transparency was no different than a taxi’s. True, Uber used not to provide the final price of a ride, instead showing how the fare would be calculated. Fees and More FeesĪs for hidden fees, it’s not clear which fees Myle is referring to. They plan on doing what Lyft and Uber never could: being able to match supply, demand, and wait times without the help of the pricing mechanism. In this story, dynamic pricing helps to grow the pie and adds value to both drivers and riders.īy rejecting dynamic pricing, Myle is essentially rejecting the latter story. Too small a supply causes long rider wait times and eventually fewer people using the service. The result is a better functioning marketplace that balances supply and demand, limiting shortages in driver supply. The purpose of those prices is both to encourage more drivers to become active and to encourage riders to consider alternatives. From this perspective, higher prices reflect an increase in demand. However, understanding the principles of dynamic pricing reveals a different story. The pie is fixed, and riders deserve a bigger share. ![]() Higher prices are simply captured as more revenue by the driver and/or ride hailing company, and riders would be better off without such surges. In Myle’s telling, dynamic pricing (surge pricing) serves only to fleece the rider. Which is the right scenario? A foundational understanding of pricing and business strategy suggests the answer.
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