Ever try and get an Uber at rush hour and find that prices have surged? Or see the price of an Uber change within minutes? Well, thanks to AI and data it’s because the app assumes you’ll pay the surged price. And you know what? We usually do.
As annoying as surge pricing may be to people, Uber knows that you are likely to pay the price at certain times. In fact, Uber even knows what your phone battery is currently and can determine if you are likely to pay or not.
“One of the strongest predictors of whether or not you are going to be sensitive to surge—in other words, whether or not you are going to kind of say, oh, I’ll give it a 10 to 15 minutes to see if surge goes away—is how much battery you have left on your cell phone,” Keith Chen, Uber’s head of economic research said.
In other words, you’re more likely to accept a surge-priced fare, regardless of the price, if your phone’s about to die because you need a ride home immediately, and if your battery’s death is imminent, you can’t afford to wait 15 minutes to see if the price drops down again. Uber knows when its users’ phone batteries are running low because the app switches into power-saving mode. “And we absolutely don’t use that to kind of like push you a higher surge price, but it’s an interesting kind of a psychological fact of human behavior,” Chen said.
What they do act upon to determine price is called Dynamic Pricing. It works through Algorithmic Pricing, which determines what price to deliver based on different variables like your location, time of day, traffic patterns and even your user history with Uber. This data is collected, and the algorithm predicts the top price that you are most likely willing to pay. This “willingness to pay” algorithm can determine how likely you are to agree to the price of the ride at the current time. The results of the determining get incorporated into demand predictions by micro-segments and ultimately determines what price to set the ride at each time.
Using large quantities of data, AI can also pull from different sources to add to the algorithm such as events, time of day, amount of people requesting rides and more. With pulling in these real-time pricing dynamics, this means that pricing can vary from minute to minute. It can also pull in personal customer data and historical activity to determine how to price the ride. If your online behavior shows a pattern of going certain places and times, it may charge more to your account at those times.
“Uber relies extensively on machine learning (ML) to establish a robust and reliable dynamic pricing system,” said Ivan Didur, CTO & Co-Founder at DataRoot Labs. “With the help of ML, Uber generates a future-aware forecast of multiple conditions of the market and uses a system that is very sensitive to external factors: these factors ultimately include the global news events, weather, historical data, holidays, time, traffic, etc.”
Dynamic pricing allows Uber the ability to change prices efficiently. They can also stay ahead of the competition between taxis and Lyft by collecting data on their current pricing and have the ability to set prices that may lean customers to choose them over another service. This all ties back into your likeliness to pay and this can actually benefit the rider.
Continue reading: https://www.forbes.com/sites/nicolemartin1/2019/03/30/uber-charges-more-if-they-think-youre-willing-to-pay-more/?fbclid=IwAR2q_kr9W7wUeLaHKJo0X9XIl2wJL92FbNHLxYKiY6LqTCW147qNEzz6gKo#46f9c8027365
Nicole Martin is the owner of NR Digital Consulting and host of Talk Digital To Me Podcast. She is a journalist and has worked in several industries digital marketing and strategy.
- “Dynamic pricing allows Uber the ability to change prices efficiently. They can also stay ahead of the competition between taxis and Lyft by collecting data on their current pricing.”