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Uber Can Simulates “Surge Pricing” through Free Service Promotion

Amir Karimuddin - 10 October 2014

Cheer up, travelers, as Uber is currently offering a highly tempting deal for you to enjoy Jakarta. For this week only (up to October 11), the private car rental provider lets users to get the feel of their services at no cost at all. This is undoubtedly music to our ears, especially mine. Come on, when do you think can we enjoy such privilege if not during this promotion period?

This captivating promotion is held in response to Uber’s own question on which area has the most traffic of users. Interestingly, the company decided not to make its free services only available in certain areas of the city (that has the best traffic), but practically the whole Jakarta. Literally there is no price to pay and no requirements to be fulfilled.

Free services only valid for a purchase which is up to Rp 100 thousands. It means that customers must pay the rest of the fee should their fare reaches more than Rp 100 thousands. So far, the users have reacted quite positively toward this method of promotion. This is reflected from the observation special hashtag #JKTFREEWEEK on Twitter. It's full of tweets about joyful experience of using the services.

Actually what Uber does right now has been carried on by Rocket Internet’s Easy Taxi. The company even started earlier than the private car rental, and has planned to end the promotion period as per today. Even though both companies look similar at a glance, those two have actually different business model. While Uber provides private cars by partnering with a fleet of car rentals, Easy Taxi practically empowers current taxi providers. The latter tries to modernize the ordering method through a mobile app.

The fact that Uber provides private cars which, in average, are luxurious and extremely convenient has driven people wild. Thus, don’t get surprised if your ordered unit takes a bit longer of time than it should take, particularly in the rush hours, as it might just have too much to handle. Actually, this promotion might be used by Uber to scale its capability of serving the people of Jakarta.

Can it really meet the expectation? How can they handle over demand situation? Should they implement the surge pricing scheme in case such condition happens?

Yes, Uber has a surge pricing scheme to anticipate an overflow which is out of their reach. Even though the regular price of the services is not as expensive as premium taxi, i.e Silver Bird or Tiara Express, the price could go much higher should an overflow occurs. The scheme allows Uber to only serve those who are willing to pay higher than the others, just like in an auction.

This scheme is actually the problematic point that led the company to a friction with the local government of DKI Jakarta, as there is no single law in the region which administers about such scheme. In this regard, Uber should have explained about the scheme in detail from the beginning, including how it will be applied, when it will be, and how much the raise of the services price is.

On one hand, I really enjoy what Uber offers. On the other hand, I also support the decision of the government to ensure Uber’s legality and taxation. Thus, I sincerely wish that both sides can find a win-win solution as soon as possible. Well, for the time being, enjoy your own Uber’s free services while it lasts!

[Header illustration: Shutterstock]

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