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Uber Is Ripping Off Frequent Riders and Here’s How to Avoid It

668 points| imartin2k | 8 years ago |therideshareguy.com | reply

348 comments

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[+] maxxxxx|8 years ago|reply
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.

[+] ABCLAW|8 years ago|reply
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.

[+] dalbasal|8 years ago|reply
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.

[+] matthewmacleod|8 years ago|reply
It's also just a total pain in the arse.

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!".

[+] brudgers|8 years ago|reply
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.
[+] dcchambers|8 years ago|reply
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.

Source: https://www.jetbrains.com/store/#edition=commercial

[+] mathattack|8 years ago|reply
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.

[+] evrydayhustling|8 years ago|reply
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.

[+] nfriedly|8 years ago|reply
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.

[+] cryptoz|8 years ago|reply
~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.
[+] piracykills|8 years ago|reply
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".

[+] rdiddly|8 years ago|reply
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.
[+] Consultant32452|8 years ago|reply
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...

[+] xster|8 years ago|reply
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).
[+] rellui|8 years ago|reply
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.
[+] kodablah|8 years ago|reply
> 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.

[+] duxup|8 years ago|reply
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.

[+] thisisit|8 years ago|reply
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.

[+] blowski|8 years ago|reply
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.
[+] JumpCrisscross|8 years ago|reply
> cell phones, TV cable, car insurance and others

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.

[+] sudomake|8 years ago|reply
My health insurance provider try to pull this on me this year. So I went got a better(relatively) plan on the exchange...from them.
[+] tzs|8 years ago|reply
> 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.

[+] throwaway84742|8 years ago|reply
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.
[+] GFischer|8 years ago|reply
Unfortunately it does work. I worked in insurance, and you definitely got the short end of the stick if you were a loyal customer.

New customers got all sorts of incentives.

So, perversely, the system encouraged to switch providers every year or every 2 years.

Many people (myself included) don't do it because of the hassle.

[+] loceng|8 years ago|reply
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.
[+] karmelapple|8 years ago|reply
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.
[+] pklausler|8 years ago|reply
> Almost like employment where now the only way to get a raise is often to change jobs and not to stay.

This has always been so, it's nothing new.

[+] amelius|8 years ago|reply
Yes, this should be simply illegal.
[+] njarboe|8 years ago|reply
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.

[+] rayiner|8 years ago|reply
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.)
[+] qeternity|8 years ago|reply
> 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.

[+] awakeasleep|8 years ago|reply
Wow. I didn't think about it like that but Uber is transforming itself into a pirate taxi (G*psy cab) company.

Thats pretty crazy.

[+] amr137|8 years ago|reply
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... :)

[+] philipodonnell|8 years ago|reply
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.

[+] bad_user|8 years ago|reply
I hate companies doing this.

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.

[+] paublyrne|8 years ago|reply
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.

[+] pithymaxim|8 years ago|reply
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.
[+] lhorie|8 years ago|reply
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).

[+] saosebastiao|8 years ago|reply
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.

[+] paulsutter|8 years ago|reply
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

[+] the_watcher|8 years ago|reply
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.
[+] tomcooks|8 years ago|reply
Am I the only one seeing an "Earn up to 1500$/week" Lyft banner right above the header of this article?
[+] memco|8 years ago|reply
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.
[+] swiley|8 years ago|reply
Man I thought the point of all this shiny app crap is that you don't have to know what's going on with it and everything "just works."

I'll stick with my non-mobile command line tools and keeping all my cash under my bed.

[+] specialist|8 years ago|reply
Increasing the price? Or reducing the discount?

I ask, because Uber is operating at a loss, hemorrhaging money.

[+] Spoom|8 years ago|reply
Seems like an easy thing for Uber to fix; it's not running its price gouging calculation on mid-trip changes.
[+] viscanti|8 years ago|reply
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?
[+] bogomipz|8 years ago|reply
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.