Surge pricing is a concept introduced by top taxi startups. Soon after it, many small and medium startups started to use this feature. Even, yet to launch taxi hailing firms are willing to add this feature to their taxi app solution. SpotnRides, which develops taxi apps to many startups explains how surge pricing is implemented and the methodology it follows to calculate it. Read this till the end to know how.
How is Payment Done in a Taxi App Startup?
When you take a taxi-hailing startup like Uber or anything else, the rider first gets an estimate of the fare before the ride and if the rider is okay with it, the ride starts and the fare is paid after the completion of the ride. The type of payment can be cash or paperless transaction like debit card, UPI, and e-wallet.
The fare estimate for a ride is based on the standards set by the taxi hailing firm. The standard can be anything like rate per kilometer or per unit time or a fixed rate for a ride.
For example, Uber calculates its fare as mentioned below.
- Base fare – A flat fee charged at the beginning of every ride. Uber charges $1 for each booking.
- Cost/minute – How much you are charged for each minute you are inside the ride.
- Cost/mile – How much you are charged for each mile of the ride.
- Booking fee – A flat fee is collected and mostly it is to cover Uber’s operating costs.
Here’s how Uber uses the 4 main criteria above to calculate your fare:
Base Fare + (Cost per minute * time in ride) + (Cost per mile * ride distance) + Booking Fee = Your Fare
In our SpotnRides taxi app solution, the taxi fare estimation is in-built. Also, the taxi fare is calculated based on the standard provided by the clients. We also have ready made provision to calculate fare similar to Uber.
Now coming to surge pricing
What exactly is it?
In layman terms, surge pricing is the practice of charging more for a product or service during periods when it is in high demand. This feature was first introduced by Uber in many metro cities and slowly it is spread to other on-demand services.
The surge pricing concept is also known for facing severe backlash from the riders because the taxi fare will increase by 1x or 2x or 3x than the fare on normal days. Fortunately, this surge fare will be displayed on the customer booking app.
To escape from the surge pricing, riders have to wait and book another ride. SpotnRides also has an optional surge pricing feature. In our solution, surge pricing can be changed by the admin from the admin web panel.
The surge pricing turns on based on the location of the rider’s pickup location. When the driver gets a request from a rider and it is not a surging area, the surge pricing will not turn on even the driver’s location is surging.
If the rider’s pickup location is from a surge area, the trip screen displays surge multiplier to the driver. Surge pricing is applied to the base fare, rate per unit time, and rate per unit distance.
It will be more clear with an example:-
If the fare is surged by .5x, the net fare is calculated as,
Base – $2
Rate/time – $5
Rate/distance – $5
Gross fare – $12.
Net fare after surge – $18.
Other charges – $1.
Gross fare – $19.
How SpotnRides implements surge pricing?
As already said, we already have the surge pricing feature with us and it is very much similar to that of Uber. We have a default method of surge pricing in our solution and it can be easily altered on client request.
The surge pricing in SpotnRides works as follows as an example. When more than three cabs are present in the rider’s location, surge pricing will not go on. If less than three cabs are present in the rider location, automatically the rider fare is calculated using surge multiplier.
This feature in SpotnRides app can be made completely transparent. For example, the surge amount will be displayed along with the fare estimate. Also, the time up to which this surge pricing is in place can also be mentioned in the customer app. This is to inform the waiting time to book a cab at a normal rate.
A multiplier symbol along with the rate to which it increases will be displayed on the screen. For example, the fare is $10 and after surge pricing, if it is $15. “1.5x” will be displayed.
Factors other than the no. of cabs we take into account for surge pricing are weather, traffic, peak hours, weekends, natural events, etc.
See, although the method we follow for surge pricing is almost similar to Uber, we do have some differences in the factors that set the surge. The no. of cab in the rider’s booking area is taken into account which is not the case of Uber.
We have applied this feature to many of our clients and so we know about the different factors that can influence surge pricing. So, at SpotnRides, we are open to apply different factors to set the surge pricing and it is completely doable because of our app development expertise. The client who approaches us should articulate regarding the factor to determine the surge pricing.
Still not satisfied with the details shared above? Quickly tap a message to [email protected] and get in touch with our business team to know more about SpotnRides taxi app solution and other optional features like surge pricing.
We will be happy to partner with enthusiastic entrepreneurs who are keen to enter the on-demand taxi market and provide technical help through our solution.