Photo by James Yarema on Unsplash
At a sandwich shop, you will probably pay around €1.50 for a can of cola or other soft drink. In a supermarket, the same drink could be less than €0.50. In a fancy restaurant the same drink, poured into a glass, could be well over €5!
Most people think this totally normal.
Now let’s consider something a little closer to the shared micromobility market. The price of a seat on a flight can vary by more than x10 in price. The same seat on the same flight! So that’s not even considering the time of the flight or whether the ticket is flexible or in business class. Airlines have powerful algorithms to maximise the total revenue they generate with each flight, constantly balancing seat availability and predicted demand. Months before take-off, there are plenty of unsold seats and tickets are generally good value, but the nearer to the departure date you get (and with fewer seats on the flight still available), the price starts to climb. Then, within a couple of days of take-off, one of two things can happen, either the ticket can get really expensive for a full flight, or really cheap, for a flight with many empty seats.
Again, most people think this is totally normal.
So how much is a ride on one of your shared e-bikes or e-scooters worth? Is it the same at 17:00 on a Sunday as it is at 17:00 on a Friday? Is it the same for a vehicle parked outside a busy train station as it is for one parked in the suburbs? Is it the same if the vehicle is parked close to 10 others to when it is on its own? Does the weather affect the value of a ride?
Many shared micromobility operators charge the same price for rides at all times, in all locations, under all conditions. Rain or shine, busy or quiet, in a popular location or miles from anywhere, it’s €X to unlock and €Y per minute.
Why would any operator stick to a fixed tariff when it’s obvious that the worth of a trip varies widely, and consumers have demonstrated in many other areas of life that they accept a more dynamic pricing model? This means you’re missing revenue when demand exceeds supply by not increasing your price, and also missing out on extra revenue during low demand conditions by not lowering your price to a level people might be attracted to take an extra ride that they otherwise wouldn’t.
Possible objections are:
1) Our platform doesn’t support dynamic pricing. If your platform has APIs, it may be possible to implement dynamic pricing with a lot less effort than you think. We work with several platforms already and can work directly with the provider of your platform to implement a solution if it isn’t already supported.
2) It will upset customers. In our experience, this isn’t the case. Customers love a discount, and accept a reasonable premium under certain conditions. It’s usually best to start with mild discounts and premiums, and then turn up the volume once the concept is established.
3) It’s difficult to develop the advanced algorithms required to get it right. Yes, it is very complex, which is why Anadue has done this for you.
An additional benefit of dynamic pricing is that it can automatically reduce the costs of rebalancing your fleet. By discounting vehicles parked in low demand locations, your customers are motivated to ride vehicles away from areas of low demand. So instead of paying someone to travel to a low demand location to pick up a scooter and drop it off in a high demand location, customers pay you to move the vehicle!
Not every ride is worth the same. To join the rest of the world’s economy by not always charging the same price for every ride, contact Anadue now. We can show you the benefits of varying your price based on supply and demand to maximise the revenue you generate in more detail.
