That's one thing I have noticed in general. I used to think that as a long time customer you are valued and get better deals. But this seems to have changed to the opposite. Long time customers are viewed as something a company doesn't have to compete for anymore and instead more money can be extracted from them. See cell phones, TV cable, car insurance and others. Almost like employment where now the only way to get a raise is often to change jobs and not to stay.
It's a weird development and I wonder what the long term effects of this attitude will be.
Financialization of everything and everything strikes again; we're now routinely applying quality of income measurements to determine book of business value - this means that increasing the current revenue take from recurring customers gives you a huge expected customer LTV bump prior to the increased churn. During this period, your numbers look great, so analysts pop up your ratings, which affords you access to cheaper capital - or alternately you can cash in and sell with a higher valuation multiple on your book.
In larger firms, you'd think the incentive would be to account for the drop-off caused by eroded goodwill, but functionally there's a middle level manager who is using this spike in numbers to jump to another role before the piper has to be paid by his replacement. Even if the company blows up, he can lateral safely with his new title.
Well put. I think I saw this very dynamic in action with my car insurance this year. AAA tried to bump it 40% over the previous year with no claims in previous 5 years and no changes in major underlying parameters.
I think mileage may have gone up slightly but I'm still well below the norm.
Well, I guess AAA finally hit that "gap between your changes and the long term change in churn" for me. I dropped them for GEICO. But even before I left, I called them back and gave them a chance to match the GEICO quote. Their phone agent seemed to have no path in her script to consider or escalate this offer.
It sounds like we may need a catchy term for that gap you mentioned, the one where as a consumer I'm ready to jump but the alternatives (if any still exist) don't feel like they're worth the trouble. (I'm at that point with my cable internet provider.) Something like the "Recurry" or "Gamey Valley".
I call it "Loyalty Tax", Australia is terrible for it.
Shop around every year as most of these brands are just identical white labeled policy underwritten by the same insurer.
One trick I stumbled across last year was comparing prices on an aggregator (eg I used iSelect), and not buying. Then the agent called the next day and offer a 15% discount on my already cheaper price.
Same with electricity retailers. And if your existing company sees you are churning they will call in the cool off period to (a) entice you to change with a slightly better offer, and (b) find out the competitor's price. (I always give them a lower price to match than what I've been offered, because price matching enables the incumbent vendor to rip everyone off with bad list prices and private deals).
Be careful with iselect though, I think all their resellers use the same underwriter. I.E not real competitors.
I worked in insurance that kind of increases do work (for the insurer), but we did it in the "boiling the frog slowly" way so there was no 40% trigger to wake you up.
We had little churn, if you stayed a customer after a slight rise, 90% stayed for the next slow rise.
> It sounds like we may need a catchy term for that gap you mentioned, the one where as a consumer I'm ready to jump but the alternatives (if any still exist) don't feel like they're worth the trouble.
I was with Admiral here in UK last year, then literally got a quote that was 100% higher for renewal, with no claims and no changes to the car or my coverage - Aviva gave me a lower price than the original one with Admiral was, and when I called them to ask if they will price match there was literally nothing they could do to match it. Insane.
There are more cars on the road, cheaper gas prices means more miles driven per car, and we have fewer total accidents but the accidents we have are more expensive due to more expensive parts (i.e. bumpers these days are thousands of dollars due to sensors and cameras vs a few years ago). All combine to create ~10% rate increase year over year.
I know this sounds like conspiracy theory and I can't tell you if this is a trend or not but I've heard about it from several people. To add to your point, the inspector has more incentive and justifiable reason to scrap the car altogether (salvage title).
Then, the inspector can buy the salvage car for pennies on the dollar, fix it, and sell it with a salvage title.
All these companies are putting in a good amount of effort in "gaming" their clientele (for lack of a better word) - I wonder if they spent this brain cycles and time and other resources in actually improving their product, their support and generally treating their customers as human beings instead of Profit/Loss items, how much would it pay off in the long term.
All these gimmicks work short term, until someone figures it out (like this article). But if everyone is doing it then it wouldn't make a difference I guess.
We need a startup that uses the same market forces to slowly chip away from the capitalists.
i.e. a collective labour and legal assistance group that has economy of scale and/or ML that's cheap enough for everyone and uses its userbase to collectively punish companies that uses belligerent gamifications against its customers by automating bill payments and underpaying every single bill by a small amount that makes it financially penalizing to resort to collection agencies etc.
A consumer protection equivalent of unions + zombie botnets.
Nothing will change until people shop responsibly and not give their money to shitty companies. But for that to happen, we need reliable info on what places to avoid (how do I know if a particular place is owned by walmart, koch or whoever I want to avoid?).
Sure but in the gap between your changes and the long term change in churn, a third party isn't going to be able to quantitatively monitor future churn rates before they happen.
The solution doesn't fix the problem, because the problem is that quality of business models just plain don't sample for customer goodwill - they measure sales metrics rather than feelings. So the sales metrics are gamed at the expense of the consumer feelings that create the metrics in the first place.
NPS doesn't measure future goodwill (or present goodwill for that matter). Rationally it may have some correlation, but it isn't a silver bullet even when understood and used properly (which it often isn't).
Instead you often get people trying to game their local NPS scores; not quite the same problem, but similar.
The term you're looking for is "brand". Measuring a brand's value is much more difficult than measuring sales, but it's not something new that no company do.
I believe any brand loyalty metric would be helpful if tracked consistently over time. If sales are climbing and loyalty is cratering it's time for the board to step in and ask questions.
More like the dark side of stupid B-school ideas that should be discarded in the dustbin of history. The data is there if one cares to measure them and incentivize properly.
But why would they favor that? They are intelligently blind.
That's a dynamic that emerges frequently. The examples you gave are in good company.
Its a side effect of an optimization function, basically. New customers are price sensitive. Loyal customers are.. loyal. They will buy anyway. Advertising is expensive, and discounts can be a cheaper way of getting them. If your decision framework is "do what brings the most growth by lunchtime" you will often end up with new customer perks.
If you have freebies and discounts to spread around, spending them on newbies will produce more sales.
Politcal campaigns often consider voters in reverse order to loyalty. Party members are guaranteed votes, so don't spend effort courting them. Party supporters need some attention, to bring them out. Fence sitters or potential conversions are courted vigorously.
Lots of tech "platforms" will be free for new users, cheap for small users and expensive for big clients. The big clients are more locked in, so it's hard to affect sales one way or another. New/small users are fickle, and more likely to respond to prices.
Banks have better rates for new customers, sometimes actual free money.
Its like when you don't put effort into dating your wife. It's not the right thing to do, but there are some difficult to avoid consequences to knowing she will go home with you regardless.
I've imagined a company (cable phone or some other long term service) that signs everyone up at their full rate, and for every month you stay with them, they add 1% discount till after 50 months you are at 50% of full rate and stay that way. No coupons, no special just for you! offers, just an honest straightforward "we need to collect money to keep things running, but we value our loyal customers most".
Fantasy indeed... most consumers will prefer the offering of 40% off for the first year instead.
Which can even be rational since there will frequently be another company offering a similar discount for switching to them the next year (ignoring intangible switching costs, of course).
The trouble is when some eager MBA comes along and sees a bunch of customers paying below market rates, so decides to shutter the program and bump payments up for the loyal customers.
In the case of car rentals that seems like less of a loyalty program and more of an attempt at reflecting the fact that the thing you're paying for is getting less valuable over time.
Car insurance is required by law and home insurance by many mortgages, so for those types of insurance, initial rates for a given coverage level should be uniform since demand and supply are understood quantities. Instead, they market policies on ancillary benefits, like roadside assistance, home warranties, etc.
Discounts for long term and importantly, lowrisk customers, are a way of securing future revenue by disincentivizing customers from shopping for lower rates elsewhere.
I've actually had AAA for my car insurance for a dozen years. Only had very small price increases during that time. No accidents, no tickets and yet they just increased my rate 25%. Been happy with them but if they think that I don't pay attention to the price I'm paying they'll learn.
Why would you leave money on the table? The longer a customer has been with you the more inertia there is to switching. If you incremented by a small amount every month, most of them wouldn't care.
For that to happen the full rate at signup would be higher to accommodate the later discounts. That would drive customers away, so this probably wouldn't happen.
Yep. This whole thing is very closely related to that game. But embedded in that game is almost always a rule where the "return" in terms of customer value relative on "investment" in terms of effort/discounts/perks is better for new customers relative to old ones.
Generally, it comes down to a choice between losing/spending money on churners or losing/spending it on advertising. I'd wager some are and others aren't doing their long term math right, but regardless that dynamic emerges, and it recurs.
Typically it emerges where "customer acquisition" is hugely expensive or important and this typically emerges when either (1) it is a winner-take-most-game or (2) the product is an ironic "commodity:" A product that is 90% standardized under the hood but has a sales oriented differentiation layer. EG, the underlying product is electricity, cable TV or money market stuff like insurance or loans. The company you deal with as a customer is a customer services, sales & marketing layer. Guess how they compete.
I have no interest in repeatedly shopping around for new providers for things like energy, telecoms, savings accounts and so on. I just want to give a company money in exchange for services and have them continue to provide that service with reasonable increases in price as inflation happens. I feel like I'm constantly being bullshitted – "Good news, we're reducing your savings interest rate!".
Yes, but it's a deadweight loss, waste that provides no value to anyone. It's a breakdown of trust leading to market failure. It would be better if the waste was converted to economic profit and the difference split between vendor and client.
but… this will be the primary usecase of blockchain projects.
Players on markets agreeing to use one common protocol and compete for prices in real time.
It won't be the incumbent who wants to do this or change. (it never is) It will be the powerlaw distributed Number 3 to 99 who together are alone barely competitive but together as interesting as the main incumbent.
The fundamental shift is that more and more businesses are exploiting consumer trust. The shift to online makes it easier. In face to face transactions, the emotional and psychological makeup of a business's sales staff bound what is practical at scale...it's hard to hire a lot of psychopaths into low wage high turnover jobs. The low wages make it hard for people to rationalize continuously taking advantage of trusting individuals, a business really needs high ticket goods and commissions to make it work (e.g. car sales). With automated online transactions there are no ordinary staff who might loose sleep at night over abusing trust.
This is a major gripe I have with the modern service/subscription-based economy.
I give major props to companies that reward loyalty. IntelliJ, for example, offers discounted rates the longer you've been subscribed. It works for them because it's an incentive to never let your subscription lapse, and it rewards the dedicated end-users as well with cheaper prices.
It’s because companies have financial incentive to spend resources where they have the biggest impact. Why spend on someone who won’t leave anyway? It took me a while to realize how misplaced my loyalty was. In reality, the loyalty becomes to the individual seller (that specific restaurant owner) or leader rather than corporate entities.
For small businesses this type of service still pays. I know bars who hold tables for hours on a Saturday to save them for the regulars who come the rest of the week. But even there, loyalty is to the staff more than the owners.
You should never have loyalty to a company, only to an individual (even then you have to be a bit careful; CEOs of public companies for instance, have responsibilities to share-holders which take precedence to their personal opinions and desires).
Yes, similar to voting for political positions, being a marginal (or "swing") consumer draws the most benefits.
Over time, today's swing consumer becomes tomorrow's safe user, so it is really complacency that is penalized. That makes some sense, but is hardly the utopia where we get to spend less mindshare on fundamental services.
I just called up my ISP and got them to renew the $20/month discount for the 4th year since getting the service. I have to go to the retention department each time, but this time I didn't even have to threaten to switch.
Doing this will all of your bills can easily save you hundreds of dollars a year, but it's socially awkward and kind of a pain in the butt (especially if you actually have to switch providers), so most people don't bother. Companies know this and capitalize on it.
You probably have an ISP with competition. I tried the cute “Give me the introductory rate for another year or I’ll cancel!” bluff, and the response from Comcast was: “Just a moment... OK sir your service has been canceled. Have a great day!” Oops
I recently did this with Charter as AT&T is also in our neighborhood. The person at Charter first tried to do an up-sell (which would have cost more money) and eventually came around to saying that they wouldn't offer the lower rate again. At which point I said, "I'm going to AT&T who will give me a better rate, cancel my service." Which resulted in a slightly rude interaction before they canceled my service. A week later AT&T internet was up and running.
It's was a very odd interaction given that Charter's fine print says that to qualify for the discount you have to not have subscribed to Charter's services for a mere 30 days[0]. Even with limited competition, now with MiFi hotspots a person could cancel their plan, do a pay-as-you-go MiFi hot spot for 30 days, and then resubscribe with the new rate. (Not sure if Comcast is the same.)
[0] "Offers are valid for a limited time only, to qualifying residential customers who have not subscribed to applicable services within the previous 30 days and have no outstanding obligation to Charter."
With our FIOS account I simply cancel service every year and and my wife sign up for new service in her name. Usualy we set this up to occur on the same day so practically no downtime in service. This has worked for 6 years now and while it feels ridiculous the savings are significant.
It certainly helps to have competition but is not required. I have Comcast also, and there are no alternatives where I live (5 miles from Palo Alto, BTW). Sometimes when I call in they immediately give me the discounted rate, and sometimes I have to call in a few times to get a rep who can get it done. Kind of a pain, but worth it to save hundreds of dollars every year.
In my case, windstream is the only wired option.. but they don't seem to realize it.
The service used to be completely unreliable too, but as I've complained over the last few years, they seem to have improved things a bit. It's now approaching the reliability of Comcast (i.e. still not great), but at ~1/3 the speed and slightly higher cost.
~15 years ago I sold cellphones for Rogers in Canada and there was the exact same system in place. Long time customers get no deals and deal with effectively rising prices for stale outdated monthly plans, while new customers get discounts and deals out the wazoo. Made a lot of long term customers really angry at me, the sales rep. Thanks Rogers.
Its funny that people say this. For me, I've almost always been with Telus. Their Retention department has been great to me over the years. Until recent, I never paid for than $50 for my plan (previously 6gb, lots of minutes, etc), but recently went to that 10gb plan that they were all hustling.
I do the same process for internet (both Shaw and Telus). Each company has their own process for getting better rates, but it rarely takes more than fifteen or so minutes a few times per year to get them.
I was with Rogers back in 2003 and had their retention give me a killer rate after a few months.
For mobile, I always dig through the loyalty threads on Howard Forums first so I know what to expect.
You can go in and demand the "new customer" deals. I've done it several times with Comcast. It's a pain, but they will do it. Best to do it in person not on the phone. It's not possible online AFAIK.
This constant struggle against not being abused is a real pain. Very unpleasant. Although it probably works for people who are aggressive by nature and live to fight.
I haven't used them since I only have one bill I realistically have negotiation power on, but BillShark seems like a pretty good deal if they actually are skilled negotiators.
Recently had an issue with Verizon where they flat out refused to give us the new customer discount, regardless of how hard we pushed. Ended up leaving Verizon. Someone will give us the discount, I don’t care if it’s their competitor.
My parents have the 12 month "deal" expiration from Comcast on their calendar. Every time it expires, they call and say they want to cancel, causing another "deal" to happen. They fully expect it.
The opposite thing happens to me though - with regards to communicating with the telecom company. I usually do it over the phone, ensuring that I get escalated to their Customer Care manager, who in essence, have more power to give you better deals. I find most of the staff at kiosks for Telecom companies are only focused on selling, and does not have any power to provide you a deal that you cannot resist.
A lot of the "kiosk people" have more power than you'd expect. Sometimes it's just a matter of finding the one who has bothered to explore the system, or goading them into it.
I looked a little over the shoulder of one of the guys in the AT&T store. They can override pretty much all prices. For example this guy gave me a $39 plan for $19 because they had messed up a previous order. He just typed in different price numbers for each item on the bill. I assume they have a certain amount of discounts they can give away each month.
> You can go in and demand the "new customer" deals. I've done it several times with Comcast. It's a pain, but they will do it. Best to do it in person not on the phone. It's not possible online AFAIK.
Sadly, everyone's favorite darling Sonic.net doesn't do this. They will gladly charge long-time customers more than the advertised rate though.
Yeah, I mean it only makes sense. It's about price discrimination - they don't want to give you a discount if you're willing to pay full price, same reason companies send out coupons or mobile app offers. They want to offer discounts only to bargain hunters and those who otherwise wouldn't be able to afford the service because that's where it's worth spending the money for them.
If you're not already, find yourself a local deals site - it can really help you avoid getting screwed over by stuff like this. You can also wind up staying if you're willing to call your current provider back and say "here's what they're offering, beat it or I'm leaving".
Not so sure, I saved over $1200 this year in about 1 hour of research and 1 hour of phone calls and live chats... my time is definitely not worth $600/hr.
Your savings are also tax-free (for personal bills), so for those of us paying just over 50% in taxes on the last dollar, we make would need to make over $200 in income to put the same $100 in our pocket as cutting a bill by $100.
It's just business. If you really feel like pushing back, then focus your efforts on changing legislation or spreading your money around so that we don't only have 2 mobile providers, and 1 internet provider, and 2 taxi options, etc.
Lots of examples here, but the one I can't stop thinking about is rent. The longer you stay, the more you pay. To get a decent rate, you have to move. But there's a lot of friction there, and landlords know it.
That's the other way around most of the time where I lived (Continental Europe and London)
Only in London, people I know have had both experiences. Letting agencies are really the one pushing. For the landlord, a paying tenant is a good tenant, there is friction in changing tenant: you can lose 1 month rent or need to do some refurbishments. Even missing a few weeks can mean losing any benefit of keeping the same tenant at the same rate for 1 or more years.
Letting agencies offer a service to both the landlord and the tenant. As a tenant you get a certain level of service, like repairs or maintenance. As a landlord, the agency offer vetted tenant, management and various guarantees. They are the one pushing for rate increase as that's what they take their share from.
The real problem with renting is the underlying skyrocketing price of housing. You can't escape it.
I have the exact opposite experience, my rent is $50 more than it was when I moved here in 2011 and a lot less than I'd have to pay if I decided to move. Pretty sure I'm paying less for my 2 bedroom than they're charging for a 1 bedroom now.
Since I've been here the neighborhood has improved to the point that people actually want to live here and not, like when I originally moved in, a semi-OK neighborhood with cheapish rent where you probably won't have any hassles walking to the corner store at 3am.
Then again, I was talking to my landlord a while back and the city was complaining he wasn't charging enough (ie. wasn't paying enough taxes) but he would rather have good long-term tenants than charge "market rates" and deal with all the problems that come with that.
Landlords also no that empty units are worthless and good tenants are hard to find, so usually they offer good rates to long-time tenants, unless they are sold out of inventory in a tight market.
This depends on whether a human or a computer is setting the prices. I once lived in an apartment complex that had management software setting the prices, and one time when I got my lease renewal offer I checked the apartment's website and found another apartment that was basically the same for $150/month less. I asked if I could get that rate on my current apartment, but was told by the manager that there was nothing they could do. So I moved from one apartment to another in the same building.
Both sides lost - I had to spend the time and effort to move and they now needed to spend time and money to prep another apartment for rent - but I suppose the pricing algorithm takes this into account and figures that in aggregate the apartment complex still comes out ahead by continuing to squeeze people that don't want to move.
As opposed to living expenses artificially inflated, despite the landlord not putting one iota of work into their property? (Because the neighbourhood gentrified, a new school was built with taxpayer money, Amazon opened an office..?)
Property markets are perverse in many different ways, most of which don't benefit renters.
If exogenous factors make an area more desirable to live in, increasing demand and the market-clearing rent, that’s not “artificially inflated” IMO. The landlord is (or at least should be) exposed to the vagaries of supply and demand in the downward direction as well as the upward.
The anecdote that comes to mind for this phenomenon is the more frequent flyer miles you have the more like you are to get a negative experience such as being bumped from a flight. This is because they know you're invested in their airline and are more likely to come back. A new customer might decide to take a different airline next time.
Edit: Apparently this was an old wive's tail or something. Oh well...
With a lot of frequent flier miles you are very likely a status customer and airlines will bump those last and, depending on the status, will bump other low revenue passengers to make space for a high status customer.
I know a bit about aviation and if an airline really needs to involuntarily bump a passenger (which is quite rare) they will chose an infrequent flier with a cheap ticket.
Unless you can provide a source for your assessment I call bullshit.
This is accurate per everyone I know at airlines. The reason is it’s trivial to shift one’s loyalty. If an airline goes to shit, I’ll switch from spending cash with them to burning down miles while I book work trips with someone else.
There are two classes of frequent flier miles: status-qualifying miles and award miles.
Status-qualifying miles are miles that you can only earn by flying with that particular airline. Those miles are used in calculating your "status" with the airline. Achieving a higher status generally comes with perks that make frequent travel easier and more enjoyable (such as being able to sit anywhere in the plane for free, extra checked bags, access to lounges and better chances at upgrades).
Award qualifying miles are the miles that people most commonly associate with frequent flier miles. These are the miles that can be redeemed for discounted flights in the future. There are several ways to earn this aside from flying with the airline (though flying with the airline gives you more award miles than not): credit card spend, promotions through airline partners, giveaways, etc.
There is also another metric that airlines collect to determine loyalty: the amount of money you spend on your tickets, or status-qualifying spend (or dollars). In the past, this information was only used to protect more frequent or high-paying customers from being inconvenienced during travel. Now, airlines use it as an extra requirement for achieving status levels.
Now, since award miles for airlines can be collected without flying with them, flyers with very little status-qualifying spend will usually be the first in line for involuntary removal (involuntary denied boarding, or IDB). However, IDBs have become less frequent ever since the United Express incident last year; airlines are trying to favor giving people vouchers first (voluntary denied boarding, or VDB) before bumping folks.
That doesn't match my experience. When I have a large reserve of frequent flyer miles I am generally treated quite well, actually. Frequently I have been bumped to first class gratis, or "economy plus" if that is what is available, given discounts/rebates on luggage and other fees, offered complementary access to the airline's lounge/club at the airport, etc. This is all above and in addition to the usual perks, like priority/VIP boarding order or whatever.
"Frequent flier miles" don't mean a thing on any major US airlines. The only factor in how they treat you is your overall profitability, which is calculated in elite qualifying miles (EQMs). This is what determines your status and your status determines your perks. These miles come from buying high cost-per-mile tickets, i.e. a $300 SFO-LAX fare, a $20K international first class R/T from IAH to LHR, etc.
Not to summon my inner Bernie, though if you think about the nature of it, it's actually hard to think of a different outcome than the candycrushification of the producer-consumer relationship in an unregulated monopolizing market (thank god Candy Crush wasn't a monopoly of anything).
Definitely the result of larger companies with fewer competitions. Around my area there is usually one or two specific providers for any service, for example internet. If they hike the price, there's nowhere else to go.
We have four Internet providers in my area, yet they still pull this crap (better prices only for new customers). We've actually switched in the past just for this reason.
I'm not seeing the problem of offering a discount to new customers. The new customer is taking a risk by accepting a new vendor, and hence to entice them the vendor offers a discount.
Now, if the vendor continuously offers the discount to the customer just because they keep asking for it, then that is unfortunate. But I usually only see this with monopolies, like Comcast. I'm sure their strategy is to do that on purpose just to satiate the vocal minority.
The problem is that it removes any incentive for loyalty and encourages churn, while being a pain in the ass for the customer. What benefit can possibly come from getting people to constantly switch providers?
In this case, "new customer" is anyone not currently subscribed. So if you go from provider A to B and then back to A a few months later, you're a new subscriber.
It's also the result of many small and medium sized competitors, who won't survive another 12 months if they don't grow faster than all their competitors.
> It's a weird development and I wonder what the long term effects of this attitude will be.
Optimistically, middlemen or automated tools that ease the pain of changing in hard-to-enter markets. In easier-to-enter markets, the emergence of companies respecting simple pricing (we've already seen some of this). Simplicity will win in the long run, again, unless it's a market that can keep competitors out.
> Optimistically, middlemen or automated tools that ease the pain of changing in hard-to-enter markets.
Not sure what it's like outside of the EU, but what made it easy and attractive to swich mobile operators here were neither "middlemen or automated tools". It was regulation. Namely, the EU directive that forced mobile operators to allow you to take your phone number with you when switching to another operator. Before this you had to get a new phone number when you switched operators, which was a huge disincentive.
A couple decades ago I used to get legit offers from banks or financal institutions on other services or products they offered. They were legit, and sometimes even includes some minor bonus for being a customer (or at least they said so or something was there).
In the meantime I'd get really bad offers (I want to say scam, but they were IMO deceptive) from other places (they were still legit financial institutions) for whom spamming me via mail wouldn't cost them much and they'd make plenty if I was dumb enough to take their offer.
Then I found I got the same, not a scam... but really bad offers from the places that I had done business with for years.
It really irked me when I'd get those fake check (actually a loan) things from a bank I'd been with for ages...
Eventually just said screw them and to a credit union who just keeps mailing me about local discounted baseball tickets. I can handle that.
While it is weird, the long term effects of this attitude depends entirely on the market. Until there are competitors out there, Uber will keep using this tactic.
But, once they get some sort of monopoly everyone is going to be worse off. Something which is happening right now with Grab's acquisition of Uber.
Isn't Lyft a competitor in almost every market? Personally, I always check both Lyft and Uber to see which is cheapest (and wait for a little while, to see if they price fluctuates)
Online supermarkets in the UK as well. Your first order, you get £10 off, and a free gift. They encourage you to buy the same products again for 'usability' but hugely increase the prices on everything.
I felt that last week with Amazon: https://twitter.com/garfieldnate/status/977994478911975426. For non-customers they show a nice price to get you into the web site, and for customers they might block an item altogether to get you to sign up for Prime. These days I always check the prices of large things in an incognito window.
Set a reminder to call cancellation every year or so. It’s annoying we have to do this, but it easily saves hundreds if not thousands of dollars a year.
> I used to think that as a long time customer you are valued and get better deals
I bet that would lead to complaints that companies are exploiting the less wealthy. The argument would be that less wealthy people might not be able to afford to switch to a new company where they would not have the long term discount.
Same with employers: if you don’t move around every 2-3 years, they get used to you and divert a part of raises and bonuses to the more uncertain targets. So I always urge people (including my own reports) to look around every now and then, and move to where the grass might be greener.
The current VC model inevitably leads to this, a similar flaw/holistically inefficient long-term to that of like how the political system/most politicians only sell to the short-term perception to rally shallow needs instead of discussing the depth of what matters.
Isn’t it basically the model of places selling addictive things? Cigarettes, alcohol, other drugs - once you’re hooked, the provider can keep upping the price.
This behavior is as old as civilization. When you went to a market and wanted to buy something from the owner/operator of the business stand, none of the prices were marked. You asked the owner the price of something and he would respond. Or maybe he would try to hawk you something by giving you the price of something first. Then you start haggling. If you have a lot of time and like the game, you might get a very low price. If you are his cousin, you get a good price, no haggle. If you are in a hurry (your time is valuable too you at the moment) the price is likely to be higher. All sorts of bullshit/fun-time-shopping.
At some point in the 1600? the Quakers decided that a person morally should only get some fair markup on something they were selling and that to charge more was wrong. On thing they were selling they put fix prices on and no haggling. Lots of people liked this way of shopping. You save time and don't feel ripped off. This idea really spread, department stores took off, and fixed pricing was around for quite awhile. It is a much better way of selling things for society in many ways.
This fixed price for everyone has been eroding for awhile. Coupons have been around for all of my life. Not sure when they started or if they always existed since the first newspapers. In any case, with computers, businesses are able to change the price at will and everyone is carrying smartphones leaking their identity. I wouldn't be surprised to see digital prices in supermarkets that change depending on who is next to the tag. Sets the price when you pick it up. Amazons automatic stores could easily do this. I really like Trader Joe's because it does not do all of this coupon, sales, huge bulk discounts, etc stuff.
This is basic market segmentation—charging more to people who pay more. Although I think rate regulation is a stupid idea, taxi rate regulation was designed to prevent exactly this sort of thing. (It’s also why taxis can’t compete “fairly” with Uber. They have to charge everyone the same all the time; surge pricing and price discrimination allows Uber to offset the cost of cheaper service for some people against increased revenues from other people.)
> It’s also why taxis can’t compete “fairly” with Uber. They have to charge everyone the same all the time
This is just not true. In many jurisdictions, it's the maximum price and the number of hack licenses that are regulated. In those jurisdictions, taxis could charge less than the "regulatory" rate, it's just that none of them do...because the taxi biz is about artificial restriction of supply.
The reason Uber can go lower for some customers is because it's going higher for other customers through surge pricing and higher up-front pricing for regular users.
Anyway, every major city (New York, DC, Chicago) I am aware of fixes rates and makes it illegal to charge some people less. (This is a very common feature of rate regulation generally: rates must non-discriminatory and non-preferential.)
I wasn’t referring to Uber. I am well aware of how and why their pricing structure works. There are jurisdictions outside the US however. For example, here in London black cabbies can charge less than the maximum, they simply never do.
Uber started as a pirate taxi company and has used enormous amounts of money, shady tactics, and market pressure to turn itself into a legitimate taxi company.
First time commenting...I found this article highly reaffirming. I'm a frequent uber rider with almost 800 trips on my personal account alone. I take uber M-Th to and from work. The same exact end points. And I've noticed changes with pricing but ALSO with route times:
Pricing - yes it's going up - both from a "this seems higher" perspective but more concretely in the 30 day "pass" I buy that locks in a flat fare for 30 days between 2 specific endpoints. My flat pass fare when up 50 cents a ride between last month and this month. I believe it's gone up in the past as well but don't have my receipts readily available.
Route Time - I believe the uberpool route is no longer (if it ever was) calculated purely on efficiency. Instead, I suspect the individual riders are assigned a priority and then the route is calculated. And I'm guessing the flat fare pass riders are assigned a low priority. My ride times have increased dramatically over the last two months, with 8 rides marked as "late arrival" meaning they took longer than the longest time estimated by the uber app. These rides are approaching 1 hour to go 7 miles (that's right, that's an efficiency of 7mph if you will). The most egregious was a route that literally passed by my block (my home was 3 houses away from the intersection) and took me 10 minutes further out to drop off a co-rider and then 10 minutes to return to the intersection. (I realized too late to jump out.)
So I am guessing they are testing people's tolerances both for 1) pricing and 2) duration. I have some wiggle room with pricing and am willing to stomach some increases. However, I can't stomach the ridiculous routing and excessive ride times. I may be unique in that Uber is the only rideshare app I've used to date but I'm now planning to try out Lyft, read about Waze Carpool, and investigate any other rideshare solutions out there... :)
Seems crazy that they would allow routes that are this obviously inefficient. It's as if they're just catering to new folks and not checking to see if the route can be even slightly adjusted to increase total rider efficiency by large amounts (i.e., dropping off another passenger with a 30 second detour, saving 10 minutes).
This is fairly similar to the way airlines can charge lower prices for a SFO-NYC-BTV route than they do for SFO-NYC. They know certain routes (SFO-NYC) are used by business travelers.
Some people try to game the airlines in the same way that the article describes, getting a price based on one route (SFO-BTV via NYC) and then actually taking a different one (SFO-NYC). I expect Uber will eventually prevent this the same way the airlines do: penalizing you for taking a trip that doesn't match what you told them you were doing by refusing to allow you to continue once you deviate.
Another part of airline pricing that makes zero rational sense is when a one way flight costs $x, but a round trip flight (which includes the original one way flight) costs <$x.
For instance, (at the time of writing) this Lufthansa one-way flight from Prague to Budapest at 1pm on May 20 costs $425 [0]. But this round trip flight from Prague to Budapest (which includes the 1pm May 20 flight) costs $343 [1].
Butterfly was often far cheaper due to the almost 2-week stay on the outer ticket and a Sat night stay on both tickets. We got the spend the difference on better hotels/food, or that middle ticket could be PHX-SFO for the weekend.
This is a nested ticket and is technically against the contract of carriage with the airline, as you're trying to avoid paying their fees. Very hard to get caught, but if so they would try to come after you.
I don't see how it would be hard to catch. They have uniquely identifying information on each passenger, so just arrange the flights sequentially, and if one matches up, then compare which is 1st leg or 2nd leg and flag it. They can probably even ban you from the airline, and then what? There are quite a few monopolized airports and routes in the US, s you can be majorly inconvenienced by not being able to fly one an airline.
The question is, how badly do they want to catch it?
If it's something only a small fraction of the customers actually bother to do, it doesn't dig into their profits too much.
It effectively acts as another form of market segementation. There is a mostly fixed cost for flying an airplane; the marginal cost per passenger is relatively low. So ideally, you would have a paying passenger in every seat. Some passengers are more price sensitive than others, so you want to have the less price-sensitive passengers pay as much as possible, while still providing ways for the more price sensitive passengers to get fill up seats that are still available after that.
People who are willing to go to the trouble of doing this will happen, but you're still making money off of filling seats with paying customers, they're just acting as slightly more price sensitive passengers.
The airlines fluctuate rates for just this reason; they want people to be able to buy tickets at different prices, so price sensitive passengers can go to a little more trouble to book earlier or take bigger risks by flying standby or waiting for the price to go down if it's not appropriate, while less price sensitive passengers will just buy the ticket whenever convenient.
If this were being seriously abused a lot of the time, or there were automated systems which booked trips like this for you, I could see the airlines doing something about it, but if it's just a few people going out of their way to get a slightly better price, it's probably just considered to be part of the whole ticket pricing game.
> If this were being seriously abused a lot of the time, or there were automated systems which booked trips like this for you, I could see the airlines doing something about it, but if it's just a few people going out of their way to get a slightly better price, it's probably just considered to be part of the whole ticket pricing game.
This is pretty much how it's gone so far - sites that have offered anything even resembling an automated service to do bookings like this (and similar other tricks) have been aggressively fought by the airlines legally.[0]
There are also a very small handful of stories per year about some frequent flier getting caught abusing these sorts of fares habitually and getting a trip canceled and/or banned from the airline.
As far as I know my airline flags all sorts of trips like this - but doesn't do anything about it unless it becomes obviously gamed. For example I fly between two cities frequently for week long+ periods, but may need to go home for a weekend during a 2 week stay now and then. I know my airline flags that, but haven't had a problem since it only happens a few times a year out of dozens of total trips.
Pardon my ignorance, but how does this avoid fees? I can see this being an issue with international flights with visas and whatnot but don't you pay the same fixed rate per flight in the US?
> don't you pay the same fixed rate per flight in the US?
In a word, no.
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Flights in the US are dynamically priced. Each airline decides how much they want to charge per particular flight for a particular person at a particular time (meaning, when you purchase the ticket). Prices fluctuate constantly. If you look up a flight from City A to City B today (and said flight departs within a reasonable amount of time; say, a month), it's fairly likely to have a different price tomorrow. Prices can also vary based upon how you book the ticket (i.e. travel agent, different travel websites, by phone, etc.).
It's very much possible, and generally expected, that you and the person you're sitting next to paid different amounts for what amounts to the same ticket.
This again is market segmentation. When I was flying a lot as a management consultant, even when flying somewhere and back, the times mattered more to me than the airline so I'd often do 1-ways on different airlines and didn't care that it cost ~$1k 1-way for a domestic airline. Also often, I was hopping from place to place using 1-ways.
I understand the economic rationale behind this, but I would think that there's automated tools to exploit this segmentation. It'd just be a simple function call to determine if there is any round trip flight (with a certain one-way segment) that's cheaper than the one-way segment alone.
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I stumbled upon this strangeness while planning out a vacation. I'm basically hopping through Europe so I was buying several one way flights. I accidentally clicked the roundtrip button once and noticed that the prices, in general, seemed lower than the one way. So I checked and lo and behold: they were lower. I ultimately just went with Ryanair because their prices were literally a third of what the next lowest carrier wanted (~$35 vs. ~$120).
You have to be careful of this - airlines look for people using the so-called "throwaway ticketing" strategy, and reserve the right to close your frequent flier account. I'm not sure it happens often, but it's certainly within the realm of possibility. Flyertalk[1] is a good place to research this more.
It's definitely possible. But things happen and people miss flights. Unless I do this several times a year on the same airline, how would they ever be able to tell the difference between intentionally and unintentionally missing the return flight?
The people that would really benefit the most from this are people who would use it a lot on the same airline (read: business travelers milking those FF miles), i.e., the people to be most noticeable for the airline and the people with the most to lose from being discovered.
They're not that worried about regular folks doing it once or twice a year.
I use this all the time. It is recommended though when flying this way to not use rewards/ff accounts because they can be closed and to not check baggage because it won't end up in the right place.
I just use Google Flights by first searching for one-ways: I enter in the origin, destination, and departure date. (as an aside: generally only the large legacy carriers do this type of price discrimination.) Find one flight that's not "this is so cheap I don't care" (basically at least a few hundred dollars). Then, change the search mode to round trip and find the same departing flight. The lowest round trip price will be shown.
No the rationale behind it is very different from the Uber case.
The reason behind hidden city fares is, the price of SFO-NYC-BTV is for the SFO-BTV market, to compete with other airlines' SFO-ATL-BTV, SFO-ORD-BTV, SFO-Whatever-BTV or SFO-BTV direct flight. It has nothing to do with SFO-NYC market, just for this particular airline it happens to route through NYC. It discounted more than SFO-NYC market because competitions on that market. That's why competition is good for customers (history has shown us that when an airline has monopoly on a market, you can only expect the fares on that market to go up). That's also why it's against the contract of carriage you have with the airline and the airlines are working very hard to avoid customers doing that (if you associate your frequent flyer number with hidden city bookings, they might cancel your account. they might also put you on a blacklist if you are caught doing this frequently).
The airline practice similar to the Uber one is charging more for frequent flyers. United was caught doing that a few years ago (maybe they are still doing that).
> The reason behind hidden city fares is, the price of SFO-NYC-BTV is for the SFO-BTV market, to compete with other airlines' SFO-ATL-BTV, SFO-ORD-BTV, SFO-Whatever-BTV or SFO-BTV direct flight. It has nothing to do with SFO-NYC market, just for this particular airline it happens to route through NYC. It discounted more than SFO-NYC market because competitions on that market.
In price disparity situations as an outsider, its impossible to determine whether the lower price is because based on competitive pressure (as you claim) or whether the higher price is based on customer's willingness to pay (as I claim), because both imply that the other is the "normal" price absent those features. Its likely a little bit of both.
What is the same is the economics: costs in both industries are primarily based on miles that they took you. Prices are based on what they think they can get away with charging you. The more they know about you (or infer based on the data they have and what you are trying to do) the more chances they have to charge you higher prices because they think you can afford it.
It's always based on customers' willingness to pay, that's how capitalism works. It's just that the competition will make customers less willing to pay more.
They might cancel the rest of your roundtrip ticket and refuse give you a refund, or they might ignore it for a while and then ban you, or they might do random things like refusing to honor ff miles. There are no rules to protect you and no one to complain to except the airline's customer service.
People do this a lot. This is a well-known and old issue known as "Hidden City Ticketing" and goes by other names, as well. It is against the typical Contract of Carriage agreement passengers have their airlines, though it's hard to actually enforce: https://travel.stackexchange.com/questions/17984/is-leaving-...
Note that while this tactic can be money-saving and useful in practice, it does have certain downsides, like if you need to check luggage, or if you expect to collect your airline miles and segments (typically requires completing the full itinerary, though not always).
The big one that nobody's mentioned is that the airline will cancel any remaining flight segments on that ticket, without recourse unless you are very good at begging favors from customer service.
So don't book a round trip SFO-NYC-BTV-NYC-SFO on one ticket and skip the NYC-BTV segment, because you won't be able to rejoin either for BTV-NYC or NYC-SFO.
There's a whole website (https://skiplagged.com/) dedicated to it. The airlines do NOT like it. I believe they sued the creator of the website at one point.
In short, you can't check your baggage, they'll probably notice you didn't take the second leg, and if you do it too many times, you might find yourself with a ban.
There was a whole controversy a few years ago around this. See https://skiplagged.com/about . This website automated that approach so that you got a ticket with a few stops for cheaper but you just left at the stop you wanted originally.
Uber is profiling passengers, it's been known, which is why I stopped using them. As convenient as they are, I hate being profiled.
I'm from Romania and our alternative over here is https://taxify.eu; the app is as polished, the cars and drivers are actually a little better due to being less popular and thus less noisy. And they do charge higher prices in rush hour, but their pricing is far more predictable.
I don't care if this is legal or not btw. It's my money, so fuck Uber.
This makes me wonder aloud ... why shouldn't we charge people who are more affluent more than those who are poor? We apply this idea already in our income tax systems.
I'm not sure I subscribe to this idea, but I notice I don't feel morally aghast at this story.
Charging able-to-pay people more is called "price segmentation" and is quite common... but it usually happens by adding some sort of features at a (much) higher margin rather than by price discrimination on exact same product.
The difference between letting folks opt-in to a more overpriced service versus selecting it for them is huge, because it centralizes all the economic choices in Uber HQ. Uber knows you will pay more, but does it know that you have 5 kids to support with what's left over? Or that your costs come out of a non-profit budget? Or that your need for rides is associated with disastrous new medical expenses? These concerns are built into our tax code, but Uber doesn't have the interest or ability to align with any kind of moral consensus about what "able to pay" should really mean... they just have a lot of insight into what you're willing to pay for rides.
Early on, Uber was championed in some circles as a good example of technology enabling a two sided market to compete with highly centralized industries. Over time, they've stopped being a market, and insisted on becoming a broker that keeps both sides at an information disadvantage. This is a good way to collect rents, not to drive competitive service.
The funny thing is that Uber already has segmentation with their Black cars. Presumably if someone's on an expense account and doesn't give a fuck about price, they'd be using that service.
I think this isn't so much segmentation as it is simply extracting more money from people who probably aren't going to bother looking for alternatives like Lyft or a vanilla cab.
The black cars cost much more, but when there's chaos at an airport, the black cars are much easier to get from what I've seen. You're definitely right, the people who don't care or value their time more will choose black.
Price segmentation often happens not by adding features to the high end pricing, but removing them from low end prices, even at extra cost. Think CPUs shipping with disabled cores, etc.
You've got the cause and effect backwards. CPUs ship with disabled cores because that's the only way to recover from manufacturing errors that would otherwise make that segment of the wafer completely useless. Instead of scratches and misplaced dopants costing Intel the full price of a $500 i7, they disable the damaged silicon and sell it as a cheaper i3 or i5. It's literally the only way to make modern CPUs economical and the price discrimination is more of a consequence of physical phenomena. Likewise with RAM clockspeeds: each chip is "burned in" during fab and the most stable ones (with the fewest imperfections) are sold as overclocked RAM while the worst are sold as underclocked low power mobile chips.
If you don't care at all about cost (aka yield), like with RAD hardened CPUs or high throughput serial processors like those from IBM, there is no real room for discrimination and you just pay for the NRE/fabrication plus a profit for the vendor.
It's easy to see why people would be irritated, but at the same time, if a company is losing vast amounts of money providing a service, then it's inevitable they're going to start getting creative about charging more.
Because you'd typically have to collude to do it. If just one company did this, anyone being charged more would switch to the other company. You'd have to have some kind of agreement among all the competitors to do it, or build it into law.
Some mobile games with in-app purchases do various flavors of this, but it's more based on willingness / capability to pay than affluence. And of course they're structured such that switching to a competitor would make everything you've previously paid in moot.
> Because you'd typically have to collude to do it
There's all sorts of ways that companies charge the wealthy more for the same product without collusion.
1. Coupons
2. Generic brands that are repackaged name brands
> anyone being charged more would switch to the other company
And this is a common way to charge the wealthy more for the same product. Someone making $500K+ is less likely switch ISPs every year, or even spend the time to threaten their ISP they are going to switch.
That's doing it by proxy, though, and isn't what I took OP's question to mean. S/he specifically mentioned a comparison to income tax, which is much more direct.
Because price discrimination is the producer's attempt to poach part of the consumer benefit of trade for themselves, to take more than their fair share of the economic specialization. (To be explicit, "fair" is when the whole area below demand and above equilibrium price goes to the consumer, and the whole area above supply and below equilibrium price goes to the supplier.)
And it requires that suppliers be able to know or discern things about their customers. If it becomes too severe, then the consumers that were overcharged have an incentive to either deceive their suppliers (as in the article) or to discriminate in the same way for the good or service that they supply (such as by adding a 50% surcharge to whatever it is you sell, just for known Uber owners).
It is economically more efficient for suppliers to always sell at the same price for everyone, and to not know anything about the customer other than the color of their money, but that is not a Nash equilibrium. A supplier can always get ahead by discriminating, if everyone else is not. It is therefore beneficial to discourage the practice by statute or by social approbation.
Income tax is often progressive, but doesn't affect any one good or service in particular, beyond financial instruments. We basically charge richer people more to have a higher savings and investment rate.
And mostly, people don't want to have to haggle, use coupons, and read sale flyers every time they buy anything.
This isn't a moral objection, exactly, but if every company did that for every product or service, being "rich" could potentially be meaningless. Like, getting a raise at work would just meaning paying more, so the net impact is zero.
Result of that would be disincentive to do anything that raised one's wages, I suppose.
Doesn't this already happen online? Websites can figure out you're on a Mac or in certain zip codes, etc, and some of them alter pricing depending on that metadata.
I don't know how you could bring that into the physical world successfully. But I always thought it would be cool if gas prices changed depending on the type of car you drove up in. Or if ATM fees changed based on how much money you have in your account.
It's basically the reverse of gouging people with low credit scores.
Because the freedom to switch is often a luxury. At the minimum, it requires foresight, which many lack. At the maximum, it requires buying the same thing twice.
Uber has no idea if you are poor or not. Even if you want more price segmentation (maybe okay) you certainly can't ask each passenger their income. And Uber isn't indicating if a price is cheap or not, creating a very large disadvantage to the poor as they are unable to accurately judge the expected value of the service before planning their method of transportation somewhere.
They also know the model of device you have, its retail price, and possibly what cellular carrier you have.
They've also got your e-mail address, which has some predictive value for income. And access to your contacts, which likely includes the names / e-mail addresses / mailing addresses / phone numbers of people with which you interact. If you have an entry for yourself with your address, they can probably know your home's value and whether or not you're listed as an owner.
With enough cross-referencing between users, I imagine they could get a reasonably good guess.
I'm on iOS and signed up for Uber long before the privacy scandals went mainstream. iOS would have required that I be prompted for access to contacts, but I don't remember what the justification was.
I do know it knows where "Home" and "Work" are without me explicitly telling it. I assumed I'd be able to type in the name of a contact and it'd resolve that to the contact's address I have listed (an actual valid use case), but I just tried that and it didn't work. So I don't know OTOH what valid justification they have for using it.
I do see if you go to invite friends (for "free rides"), it allows you to connect contacts to send codes to. I don't think that's how I got prompted, though.
Then I don't understand the question, but you can probably make pretty decent guesses about a person's income just by looking at the type of credit card and the issuing bank. And definitely if you include credit card billing address. There's tons of databases that translate a zip+4 to a median household income.
I don't know about temporary card numbers, which afaik don't exist where I live but : the data-industrial complex indexes people by credit card numbers so given the number you can get a full profile. Income, etc.
No, they don't. They have indicators and clues about your income based on your rides and credit spending at uber, but they do not know if you are poor. All those indicators could and often are very wrong if that is what they draw assumptions from.
Their indicators can be wildly off because they do not know the person themselves and they can only make guesses.
Also,
> Seriously?
Yes, seriously. Of course seriously. Stop being insulting and rude.
I would have thought that they know enough to make a decently accurate guess.
Not that I know what they do of course, but without much thought I can think of a model that would allow me to predict income.
- They're using Uber, that cuts out a decent chunk of poor people.
- What areas do you visit and at what times?
- Property prices in those areas, are they workplaces or urban commuter areas? Can likely predict value of someone's house if they use it from home.
- Type of Uber taken
- Size of tip
- Frequency of travel
- etc. etc.
I reckon that given some time and some people's ride data I could estimate their income, house value, and even perhaps job. I would guess Uber have done this and then some.
Of course it's not going to be 100%, but Uber don't need that.
Hopefully the various comments on this thread have shed some light on why I expressed incredulity at your assertion. Incredulity isn't intended as rudeness but I unreservedly apologize since you took it as such.
Reading your response I suspect you failed to account for the fact that what "Uber knows" is not limited to the set of facts that you choose to disclose to Uber. They can and likely do use those facts to lookup your information in third party databases. They also know facts that you may not have chosen to disclose but unwittingly did so.
It's not important if a specific person is poor, it's just important to be right often enough to offset the expense of being wrong. Since they have your billing address, it's pretty trivial to look up the median income for the zip code or even neighborhood you live in, or the average sale price of the home in your neighborhoods, etc, to figure out which wealth/income bracket you are in.
I would think that there is no way they don't know that. They know where you live and which bars/restaurants/whatever else you frequent via uber. They might even know where you work if you've ever taken an uber to work. I'm sure they've either purchased from a third party or taken off your phone all sorts of other data they use to build a customer profile on you.
New customers are likely enticed with the low end of the rates, and as you use Uber they learn a lot about you. If you're using Uber to get from a low income area to the rail station or to Walmart, you are poor. If you use Uber to travel from and to various international airports, you can probably afford to pay a lot more (or somebody is paying a lot of travel costs for you).
> low income area to the rail station or to Walmart, you are poor.
That is a wickedly evil definition of poor and extremely distopian if you truly believe that. Your scenario does not make someone poor or define them as poor or anything like that. It is a data point that Uber can use to guess your income but it does not mean you are poor. To define poverty like that is so extremely mean and also possibly straight false.
Of course that's not a good way of defining poverty. For all I know, somebody living in a low income area and shopping at Walmart could be a billionaire that lives frugal. But to Uber that doesn't actually matter: somebody who seems to spend little money on living expenses or travel won't spend a lot on Uber either, and likely wouldn't stay a customer if Uber inceased prices for him. In the end, spending is much more important in this context than actual wealth.
Wow. This is just wrong. Uber knows where you live and its trivial to link that to general income level, either indirectly based on zipcode/neighborhood or directly via public property records.
We apply this idea in a lot of places. It's basically the entire idea of market segmentation: get everyone to pay exactly as much as they are able/willing to pay. What Uber does is notable, but I don't see anything evil here.
The mechanics are different, but the goal is always the same: Store brands that are just repackaged brand products sold cheaper, slightly more comfortable travel experiences that cost disproportionatly more, support contracts and "enterprise features" for absurd prices, lootboxes in games, etc.
Costco is the epitome of a rich guy discount. If you can afford a small membership fee and have some reasonable financial planning skills and live in the suburbs you get a discount on everything. Just one example of many.
Not an Uber fan but this just seems like price discrimination with better data, which in principle could subsidize rides for poorer drivers. Student rush tickets to the opera could be framed as price gouging of non-students (by probing into their personal lives, no less). But in reality more students get to go to the opera this way. Hard to judge without knowing the tradeoffs.
>which in principle could subsidize rides for poorer drivers.
I don't think you can specify this. In principle this could subsidize rides for some people or it could increase profit and even if the money were put towards subsidizing rides there is no guarantee it's going to subsidize rides for the poor, there is no law that says the poor are going to receive these subsidies - frequently they don't because they don't because they're a lower priority for the company due to their decreased spending power, have less information about the marketplace and are less able to substitute between alternatives.
I tweeted a couple of weeks ago about Uber Eats charging me way more than my wife for delivery. I use the app way more than her. Related? My tweet with photo comparison https://twitter.com/kaimallea/status/974819433322557440
This hasn't been my experience at all. I have been using express pool basically every day to commute for months, and the price has always been between $5 and $8 for a 30-45 min ride (depending on traffic and how many people pool in the same car). Fare increases are pretty obviously correlated with how close to the peak rush hour window I request and things like rain (i.e. more demand)
What I did notice though is that prices can fluctuate plus or minus a dollar in a matter of minutes, so sometimes I can get a cheaper fare by simply waiting a couple of minutes (though that tends to only work if I'm not approaching peak rush hour).
We didn't test this with Express Pool but Pool in general is a different animal since the prices are so cheap to begin with, there's not a lot of variability that can come into play and affect the pricing.
Plus, Uber takes a huge loss on Pool and Express Pool especially when they first launch since they want to offer low prices to riders but they don't know the match % rates yet.
Can you qualify what you mean by a frequent rider? How frequently are we talking about?
I did experience lower prices when I first started using express pool (though not to commute to/from work), and at one time I got a $2.50 ride to go from downtown SF to Ocean beach (a 40-ish minute ride), which anyone with half a brain would suspect to be VC subsidies at play.
Could it be that this is a similar case, where the original "cheap" price is just subsidies for new rider/some desirable target audience and the "ripoff" price is just the regular price if VC money/competitive race to the bottom weren't in the equation?
Another theory I had was that congestion in pick up/drop-off areas would play a role in pricing (given that cheaper-than-expected rides happened to be nearer the freeway as opposed to, say, Market st)
Express Pool is almost another form of price discrimination, IMO. It's around the same price as I remember Pool being before, but they make you walk a couple of blocks to the pickup point. But in my experience, the pickup point is almost never better or easier or faster for pickup than the place you're calling from; in fact, sometimes it's much worse! (E.g. they try to pick up from a busy road where cars can't stop.)
I think the point is not to shorten or speed up the driver's route, but instead to deliberately add inconvenience for the rider. So if you can afford it, you'll do traditional Pool (which now costs more) or UberX, while if you're truly price sensitive you'll deal with the indignity of Express Pool.
Here's what I do: I ride Uber for a while, then I ride Lyft. After a day or two of riding Lyft, Uber sends me a discount on my next 10 rides. When those run out, I go back to Lyft until Uber gives me some more. I never really end up riding Lyft for more than a day or two before I get the next discount email.
Im not sure if it's cause they're spying on Lyft like they've done in the past, or just noticing that I've stopped riding Uber. Either way, thanks go out to all the idiot VCs for making this happen.
Competition among ride services should keep this kind of thing in check. If you're in an area where Uber is the only option (don't know how likely that is) you may be stuck.
I thought London had banned Uber? Did that end up getting repealed?
There are competitors to Uber in London [2], myTaxi seems to be the one that lets you hail London Cabs via an app. And apparently they're offering 33% discount over Easter [1]. (Never used them and I'm usually an Uber fan, but it seems myTaxi could be an alternative to try.)
No, it's still pending appeal but I would be very surprised if it actually goes ahead; Uber has 2-3M users in London and I think it's more a scare tactic to get them to play more ball with regulation here.
'Standard' taxis are really expensive, I would say 2-4x the price of Uber, so a 33% discount doesn't really get you anywhere.
I've foundyself using cabs a lot more recently. My daily commute to the office is ~£12 each way in a cab, £8 at normal Uber prices but they seem to be perpetually surging the last month to an estimate of £10-£13 so I may as well jump in a cab.
Now that I switch between Uber and Lyft I notice the prices are lower for the same rides than when I used Iber exclusively. I noticed it by accident when I would use Uber out of habit instead of Lyft.
Similar for reserving hotels on travel sites. I started always checking the price on the hotel’s own site and it’s often cheaper. At first the gaps were huge, but they came down after I became a frequent-abandoner on Kayak
I’ve traveled a lot recently and was surprised by Lyft always being cheaper than Uber until I had my colleague check Uber rates for the same destination when together.
Uber has decided I’m a schmuck who must pay more for the same service. Not a fan.
For accommodation, the rates are usually a bit cheaper direct (often a few dollars), but unless you have/want hotel status, the rewards program at Hotels.com gives a lower effective rate.
This is the opposite of false advertising - upfront pricing means you agreed to the price by definition. Uber is under no obligation to detail the pricing mechanism to the user.
You’re right of course, but it is in the public interest to know that it is happening. Profiling individuals for price discrimination is not popular, violating most people’s notion of fairness.
Amazon experimented with it years ago before pulling the plug after consumer outrage.
While I see what you're saying, without the details of how the pricing structure works this is basically gambling from the consumers point of view and theres a lot of harm in that.
Flight pricing works in similarly opaque fashion (I generally compare pricing between different browsers and private sessions and sometimes even devices before buying).
Flight pricing is opaque, but there is no comparison possible with Uber since that price is based on your individual profile. United doesn’t use my recent travel history and detailed personal information gleaned from data brokers before quoting me a fare class ticket.
The difference is that when I buy a plane ticket, I see the price that the company wants and then I can decide to purchase it or not. With Uber, I have to agree to pay first and then they tell me what the price is. That difference, in my mind, is the key difference to what makes riding an Uber gambling, while buying a plane ticket not.
As a rider, I use Uber and Lyft interchangeably to get a roughly stable price whenever I come to work. This price is about 40% more than what I would like to pay based on my budget, but I don't have a choice but to pay it sometimes because neither app is willing to give me a lower price (which I have paid in the past). I know I'm being overcharged, but I still need to get home or to work so I have to pay the higher price. Also, because I'm using a transportation program through work, I can only use the carpool services, which means I can't take advantage of the tactic in this article since you are not allowed to change your destination after booking for pools. I was really hoping Waze's carpool would help, but I can't get connected to someone else at the times I need to leave and they are not recognized as a valid candidate for our work program. Uber once had a monthly pass available, which was a huge help for me financially, but it hasn't been available in over a year. Would really love to get some more affordable options as I use these services almost daily.
> For a brief period last year, Uber was profitable in the United States and Canada, the company said
Recent troubles have been due to negative press and Lyft's popularity, but again in the same article (from November) they said they could be profitable again in 6 months. So overall their business is pretty stable and not really on the brink of death as people here usually make it out to be.
It says the algorithm is based on time and distance. Was there more traffic? Is it possible that the up front pricing algorithm knew that the time portion of the trip would be more than usual and charged more because of that?
We tested all different times and traffic levels but in general, Uber's algorithm is terrible at predicting traffic since they use their own internal maps system (as opposed to gmaps or waze).
> Uber's algorithm is terrible at predicting traffic
So how does that rule out that their algorithm is looking at estimated traffic? I usually get an estimated arrival time right after booking and that's generally correct on the few Uber trips I've taken. How different was your estimated arrival time and your actual arrival time?
It seems like its time for consumer-driven AI to combat these shenanigans. Like if there is an app I could open that would automatically do the Uber/Lyft rate arbitrage for me, create false positives/negatives to thwart the business traveller flags and then to automatically reset the destination mid-way to ensure I get the honest price.
Is there some reason this wouldn't be viable? I would think such apps would have applications beyond just fighting the latest discriminatory or dynamic pricing exploitation by Uber.
Additionally as the article hints at, imagine they detect that you use Uber to commute to work (destination is a business and Monday - Friday at near the same time each morning and evening). Of course they can charge you more because often times the companies are reimbursing, or it's a tax write-off.
Yes, Uber's opacity is shady, but raising their rates is a business necessity.
If rides are still being subsidized by Uber (via losses) and its drivers (via low wages), would it be more accurate to say that new riders are given a promotional discount and frequent riders are charged a more sustainable rate?
>would it be more accurate to say that new riders are given a promotional discount and frequent riders are charged a more sustainable rate?
The government had already regulated cab fares to where they couldn't just gouge the customer and (hopefully) the prices were fair to both the cab driver and the rider. Uber re-introduced risk into the equation, along with the opportunity to capture the consumer surplus.
This doesn't seem any different than the known behavior of online merchants (particularly airlines in my experience) of listing different prices based on what they can infer about the user, or than a mechanic quoting an artificially high price to someone who seems less knowledgable about what's actually required (Seinfeld has an episode touching on this, blanking on which one).
That said, I have noticed that, the rare times I Uber to work (I work in a pretty big corporate office space), if I enter a nearby Target as my location, my price is often notably lower. This happens with Lyft as well. It's hard to tell if this is just timing based (sometimes just re-requesting fares to the same destination has a similar effect).
This is very true, I used to get offers but right after I took some insane surge of 3x no new offers were coming. Other than that, none of the usual coupon codes were working for me.
I've definitely noticed that if use Uber infrequently, I consistently get marketing promotions for "40% off" of your rides.
This might be specific to my market, but it happens really consistently.
Honestly, I just think about it like a marketing analyst. Who would you try to entice back onto your platform? High value users, who show interest (i.e. opening the app but not taking rides). It really becomes easy to game most marketing promos this way, but Uber's is particularly gullible.
Digging into ride data I have access too, I see this is definitely the case for UberXL / UberBlack rides. Seems they are fairly consistently "overcharging" for those types of rides by 20-25% with upfront pricing. Unfortunately most of the data I have access to for other types of rides has RidePass's associated with it, so the difference isn't as pronounced, but that could potentially be the advantage of the Ride Pass.
Lyft has switched to an upfront pricing model too so it wouldn't surprise me if they are doing something similar. But I haven't seen any examples that are as bad as with Uber, where I'm constantly seeing big discrepancies like this.
It takes just a few moments to bring up Lyft and Uber and compare prices to your destination. The one you don't choose will likely see an abandoned cart type of metric as feedback as you did not complete the transaction. This is the only method I can think of for keeping prices competitive.
Couldn't a higher upfront price also partly be because Uber tries to predict the travel time and need to add some error margin due to uncertainty? That would probably explain only a small part of it and certainly not why different people seem to get different deals.
I basically used uber to commute (exclusively for a few weeks and as a second option for the rest) during an internship. I noticed my pricing going up from $16 to $22 at the same times during the same season. By the end I ended up using Lyft.
I've noticed that Uber gives discounts when you don't use them for a while. Uber will give 10 rides at 50% off. I'll do 10 rides with them and then go back to Lyft...until Uber notifies me of the next round of discounts.
This is how Comcast works too: introductory offer and then the price goes up. So about every two years I call them acting like an over sharing man-child and say my parents cut me off and I can’t afford Comcast anymore.
I’ve notified this a lot in San Francisco/Oakland coming and going from the airport. I always comparison shop with lyft and sometimes their is a $10-$20 difference in price.
While it always weird to see just how much Uber plays both the local laws as well as its customers, it’s also quite an interesting insight into what I would call peak capitalism.
I only use Lyft for personal reasons but FWIW Lyft almost certainly uses this type of predatory regularly trip pricing. As I mentioned in another comment, I take the same trip at roughly the same time 1-2x per week. After doing that for awhile, I noticed the price went up 10-20%. When I adjust the locations just a few hundred meters from my usual endpoints, the real time price drops 10-20%.
Lyft is definitely doing it too. I take the same trip at roughly the same time 1-2x per week. After doing that for awhile, i noticed the price went up like 10-20%. When I adjust the locations just a few hundred meters from my usual endpoints, the real time price drops 10-20%.
TL;DR: Uber charges more if it thinks you might be expensing the trip. When going home from the airport try setting as destination a place close to your house. That will fool the system and will give you a non inflated upfront price. Then wait to be in the middle of the ride and ask driver to change destination and take you home.
"Uber involved in $shady_business_practice, news at 10!"
Seriously, they're scum, this isn't surprising at all.
I deleted my account a while back and although sometimes it's less convenient, I've managed. I don't regret it. I hate the idea of supporting such a bunch of thieves and liars.
In summary, you're upset that a business is, largely correctly, assessing the value of their service to you and adjusting the price based on your willingness to pay?
You do know that this happens constantly right, just usually by overpricing it and giving out discounts based on your willingness to pay.
The problem arises when the business overestimates willingness to pay. Ancestor post said "screw this; taxi".
That damages customer goodwill. Every time.
If you double the prices on umbrellas every time it rains, some people will stop buying umbrellas from you entirely, even when it's sunny and they're still normal price. But if you offer a 50% discount whenever weather is fair, there will be no adverse reaction from consumers. Weird. The prices are the same either way, but the reaction is totally different.
People like to know "this is the maximum I can be expected to pay" a whole lot more than "this is the lowest price I can get". When planning out a budget, it is always better to have an unexpected surplus at the end of the month than an unexpected additional expense. That's why businesses overstate the price by X% and then continually give out Y% discounts. People who can pay the higher price might not bother with requesting the discount. If they advertise a low price, then add on a bunch of hidden fees and surprise upcharges, people get pissed.
This is something telecoms and airlines should consider.
I'm in complete agreement. This may very well hurt their business by making their customers angry but I don't feel right telling them that they shouldn't be allowed to do this.
It's no less morally defensible than an employee asking for a salary that's more than they need because they know their worth to the company.
I don't think that anyone thinks Uber's upcharges are hidden given how often they're talked about -- hell, Uber seems proud of the system. It might be bad for their business in the long run to price this way but who am I to tell them how to run their show.
Cabs can be next to impossible outside downtown core. Calling in advance had minimum half hour wait in Hamilton, even an hour wait when when you're only 10 minutes outside the downtown. And street pickups have massive discrimination. Everyone except cab drivers was happy for Uber.
My first and only uber ride was a 80$ one. Enjoying the special 3x tarif, according to them to help me having the fastest service. Felt like a very hypocritical scam.
Was let down in the middle of the night, angry and impatient, I thought I'd try uber because f. it. Actually I think I installed the app because I thought it would be cheaper than a traditional taxi, but a quick calculation the next day showed that they would have asked for 50$ end to end.
Also they are struggling to make money and they just killed an innocent woman. I wonder if the lawsuit or lawsuits from their murder prompted by following the startup adage move fast, break things and learn will cause them irreparable harm?
Isn't this largely their own choosing? They're deliberately undercutting the competition to at best gain a foothold, or worst eliminate the competition entirely so they can put prices up.
Yet they are doing everything including 3rd degree murder to be the winner. Can anyone name a previous modern company who succeeded via this type of playbook?
Wonder why people downvote my loathe for Uber who stole 1k from me and then laughed in my face and 1000s of other users who fell the same fate.
The media is purposefully generating outrage for ad clicks.
People need to think when they see a headline, "Is this title clickbait?", "Is it purposefully angled in a way to increase likelihood of me sharing the article?"
EDIT: This article should be flagged, since it's spreading misinformation.
> I started regularly taking a Monday morning trip to the airport, then another ride home from the airport Tuesday evening.
My first thought from the headline: Walk, bike, or take public transit. But the pollution I expected wasn't in the same league as his actual behavior. He's a global warming machine.
Yes, walk or bike >30 miles between cities before getting on an airplane for work. Your fellow passengers in coach will appreciate your odiferous devotion to the environment.
Sometimes the comments in here are truly insane. How could you even suggest walking or biking between two California cities?
I wonder if the poster has considered the cost in carbon of their use of a computer and the internet to visit Hacker News to criticise other people's commute?
One would think that a more green practice would be to offset carbon use instead of using carbon to complain.
Yes, the parent commenters did skip public transport and focus on the other modes.
But focussing on public transport, I use it. I go to Manchester on the train. It's about the same time as driving (once you've got to the station), and when you take into account parking about the same cost.
It works for me because I live not too far from a station, and Manchester is a /relatively/ nice city to walk around in. I like it at least. I do it in part because it's easy, and in part because it means I can have a few sociable beers at one of the user groups I attend.
But it doesn't take much to make it a far worse option than driving. I live on the edge of the area that's reasonably walkable to a station. Many others live further away.
If I want to go somewhere else (the closest town, Stockport, for example) I'd have to get the train into Manchester, then back out to Stockport. It'd take potentially an hour to do, and cost way more than the 15-20 minute car journey + parking. The bus to Stockport is an alternative, but also weirdly more expensive, far less convenient, less reliable (1+ hour wait for a bus? Done that when I was younger), slower and less clean than my car.
If I want to go to Chorlton, a little further over (there's a nice supermarket apparently) I can take a 35 minute car journey, or I can take a 3 walk + 2 bus journey at 1 hour 20 minutes. A trip that has all the downsides of bus travel I previously mentioned, but doubled, + it will still cost more.
Public transport is great, and cars are toxic, but it only works where it's not crap. I used to live in London and didn't need or want a car, it was great. Here, I'd be isolated. In the US public transport as far as I can tell is even worse.
I don't hold out much hope for public transport here, or in the US unfortunately. It's a nice idea, but then so is universal healthcare and not leaving Europe.
"Here is a tip: comments are a lot less insane if you actually read them."
Oh, so when he said "walk, bike or take public transit" he actually meant "walking and biking aren't options for you, only public transit is"
Wow, I'm so glad we have folks like you to literally rewrite posts.
And of course it's completely beyond the pale that I dared quote someone and judge their words as they wrote them!
The reality here is that this person obviously did not read the post and wrote a boilerplate "green shame" post, assuming that walking was valid, assuming because they obviously did not read.
The "insanity" is people not reading and just running to the comments to parrot their script even when the script is absurdism when applied to the situation.
Even then, it turns a 1-h car ride to a 3-h trip with three connections. And that's the route given by GMaps, the eternal optimist (it thinks 4 mins to make a bus connection is reasonable).
That sounds suspiciously close to "he should move closer to the southern California airport he's headed to or should quit the job that requires travel." I don't think we know nearly enough about the writer or his situation (or his wife's job that might then require the reverse of that drive but 5-6x/week?) to entertain any such sentiment.
I feel pretty safe though in saying that if you're driving Uber for extra income then you're probably not financially solid enough to uproot to save 3-4 gallons of gas per week.
Edit: Yes, public transit could indeed be an option to/from Oceanside. Probably wouldn't add much more than an hour each direction, assuming that there are appropriately timed trains for presumably early and late travel.
"It’s important to understand that traffic is rarely an issue when I’m going to and from the airport, as I’m usually doing it in non-peak hours. So the part of the cost having to do with time shouldn’t fluctuate by more than a few dollars."
The time has a very large impact on the price, because morning is when demand is commonly the least elastic (people need to get to work)
Uber is not "ripping off frequent riders", it's charging more for trips where riders will accept higher prices. And now, the Ride Share Guy has ripped off Uber (and it's drivers) by publicizing a flaw in pricing.
It's a weird development and I wonder what the long term effects of this attitude will be.