What is Uber Upfront Pricing? How does Upfront Pricing work? 2019
The Truth about Upfront Pricing
In 2017, Uber implemented a change in how they charge riders, discarding the old surge pricing model that implemented multipliers to the cost of a ride during peak times. Uber’s introduction of Upfront Pricing is meant to clearly shows riders exactly what they will pay for their trip ahead of time (so that there’s no longer any unwelcome surprises once passengers receive their final bill).
Some observers believe Uber’s move towards ‘Upfront Pricing’ signals a notable improvement in pricing and transparency (especially for riders who were confused, or felt misled, by the ‘multiplier’ aspect of Uber’s old surge pricing model).
At the same time, many other analysts feel that, now – without a surge multiplier being clearly visible – it’s possible that Uber riders are being systemically overcharged.
Uber’s Upfront Pricing: How it Works
Uber’s upfront pricing system was introduced in 2016 to replace a former ‘surge’ pricing model that often left the final price of a ride unknown to a rider (at least, until the ride was over). With the new ‘upfront pricing’ model, riders began receiving a projected final cost before ever taking their ride – with prices being shown whenever a passenger inputs a new ride request.
The exact variables of Uber’s Upfront Pricing model aren’t public, but the Upfront system combines the following factors into an algorithm (initially developed for UberPOOL) which was designed to assign accurate pricing to a trip before it began.
With Upfront Pricing, an Uber trip’s price takes into account the following factors:
- Real-time traffic density
- Rider demand
- Driver availability
- Trip distance
- Trip duration (projected/estimated)
Knowing a trip’s final cost before stepping into an Uber vehicle
The new model gives passengers the ability to know how much an Uber trip is going to cost – and, if they think it’s too expensive, allows them to find an alternate method of transportation.
It’s worth noting: the new pricing system doesn’t mean that there won’t be higher prices during high-demand periods (prices still fluctuate, depending on local demand). ‘Upfront pricing’ simply means that riders will no longer see the ‘surge’ multipliers in their quote, or be left in the dark about how much a trip might end up costing before or during their trip.
Instead, Uber’s Upfront Pricing system gives passengers information about the final cost of their ride (down to the very last penny) before they ever step into an Uber vehicle.
How Upfront Pricing Replaced Surge Pricing
The surge pricing model worked in such a way that – during peak times, when more passengers were requesting rides – Uber would apply ‘multipliers’ to a quoted rate. This could range from a small multiplier to as high as 9.9x (in some cases). This system – to the detriment of certain passengers – meant an ordinary Uber trip could suddenly cost hundreds of dollars during busy (or ‘peak’) hours.
Peak times (such as New Year’s Eve) often made prices jump incredibly high – alienating riders, who began complaining to Uber’s management (and the media) about unfair costs.
Uber made sure that riders knew about the multipliers ahead of time – but, in many cases, people were simply not aware of how the multipliers worked. In response to the confusion, Uber introduced upfront pricing in Spring 2016 -eliminating the multiplier from the rider’s price-quote.
However, surge pricing didn’t disappear completely.
While riders see the entire cost of a trip before confirming their ride, Upfront Pricing’s ‘flat rate’ system does not completely clarify Uber’s pricing parameters – and in no way eliminates Uber’s demand-based pricing system – a system which still dictates overall trip cost.
Thus, riders will know the cost of their trip before a trip begins – but they won’t know exactly how a price is tallied (or, in turn, if they’re being charged fairly; or paying more for a ride than they should). Predictably, this has lead to speculation amongst industry observers about the possibility that Uber riders are being overcharged…
Is Upfront Pricing Overcharging Riders?
Despite its ‘Upfront’ pricing model, some observers are claiming that Uber is charging riders one fare, then paying the driver based on a lower fare, which creates a discrepancy in what is being charged to the customer and being claimed by the driver. This is (possibly) a result of Uber overestimating the actual cost of the ride..
Small discrepancies (and difficult-to-discern data) suggest that Uber may be overestimating the price of the ride, charging riders more, and paying drivers less. These small amounts of money (sometimes only a dollar or two), add up when multiplied by the potential number of ‘overestimated’ rides provided by Uber every day.
In addition, ‘calculation times’ at the end of a ride have increased (i.e., calculation time = the time it takes for Uber’s system to officially send a driver information on how much money they made from a given trip), which now results in the rider leaving the vehicle prior to a driver being given their own specific calculation of fees. This makes it much more difficult for drivers and riders to compare notes about a trip’s final cost.
Whether Uber is overestimating rides (and over-charging riders) remains unclear. All allegations of unfair pricing are unproven, and speculative. In a perfect world, a clearer system of cost tabulation would exist – but, for now, the details of Upfront Pricing remain reasonably hazy. The pricing system’s patina of simplicity (and the elimination of Surge Pricing) has successfully lowered customer complaints – and terminated media criticism – so expect Upfront Pricing to remain in place for the foreseeable future.