Harry here. Over the past few weeks, our staff here at RSG has been taking an in-depth look at Uber’s upfront pricing. Honestly, I’m surprised this hasn’t become a larger issue nationally, but I think part of the reason why is because the details of the program are so confusing.
But if you’ve been following our articles, you already know that Uber’s upfront pricing pays drivers correctly based off miles/time driven, but they are still over-estimating the upfront prices for passengers and thus overcharging riders. Since we wrote out first article on the topic, dozens of drivers have e-mailed us with similar experiences and, for now, we’ve found a way to ensure you get paid most of what the rider pays. This strategy might be controversial to some, but it’s not about trying to overcharge riders – it’s about ensuring that you are paid 75% (or 80% if you are on the old commission structure) of what the passenger pays on every single ride.
There’s a pretty easy way to “beat the system” when it comes to Uber’s new upfront pricing. But first let’s talk about what fixed price fares are and why some drivers think they are another example of how rideshare companies (especially Uber) are lining their own pockets at the expense of the drivers.
In the past, Uber would give passengers an estimate of their fare and then the final charge would be based off the exact mileage and time. But these days, Uber and now Lyft require passengers to enter a destination, and then they quote the passenger a fixed upfront price. The upfront price is based on Uber’s best estimate of traffic, time and mileage, but there’s a problem.
The Problem with Upfront Pricing
We discovered the problem a few months ago, and it’s caused by the fact that the customer is paying a fixed price and drivers are being paid a variable priced based on time and distance. We found several instances of Uber charging drivers a certain amount, paying drivers much less, and pocketing the difference.
Since we published that article, dozens of readers have sent in further examples of this – while it’s hard to confirm, it definitely seems like Uber is more often overcharging than undercharging the rider.
Uber explains the discrepancy by stating that upfront pricing is essentially a betting algorithm, and on certain rides they overestimate the mileage/time and make extra. And on certain rides, they underestimate the mileage/time and make less. So according to Uber, the numbers should all even out in the end.
Here’s an example where we’ll assume the driver keeps 75% of every fare:
- Suppose a customer is quoted an upfront price of $10.05 based on a six mile trip ($6.60 = 6 miles x $1.10/mile) that is expected to take 23 minutes ($3.45 = 23 mins. x $0.15/min).
- Now suppose that due to an accident, the driver had to make a 1 mile detour for a total of 7 miles ($7.70 = 7 x $1.10/mile), which added another five minutes for a total of 28 minutes ($4.20 = 28 minutes x $0.15/min).
- Without upfront pricing, that passenger would have paid $11.90, but since they’re on upfront pricing, their fare remains at $10.
- But the driver is ALWAYS paid out according to actual mileage and time. So the driver is paid 75% of his/her city’s normal UberX rate, which in this example is $1.10 per mile and $.15 per minute.
- So in this example, the driver would be paid 75% of $11.90. So instead of getting $7.50, they get $8.93. In this scenario, the customer underpaid and the driver made a little extra.
Now let’s look at the same example, but since the driver uses an external GPS app such as Waze or Google Maps, he finds a more efficient route than the one Uber based their price on. With efficient driving — especially one that understands current traffic conditions — it’s pretty easy to shave off some of the distance and time of a six mile trip.
The original trip was 6 miles and 23 minutes, but what if the trip is now 5.5 miles ($6.05) and 18 minutes ($2.70)? The driver would be paid 75% of $8.75, which is $6.56. That’s $.96 less than what the customer paid ($7.50). In this scenario, drivers are saying that the customer overpaid and/or the driver was underpaid.
(Note: This is a simplified example, and you also have to take into account the booking fee, but the results would be the same)
So while we’ve shown that it’s possible for Uber to actually lose money on upfront pricing rides, many drivers think the second scenario (Uber overcharging the passenger, and pocketing the difference) is more likely for multiple reasons.
- It’s human nature as a driver to try and take the fastest/most efficient route.
- Drivers work hard at being efficient because their passengers rate them on it, which is why many of us go to the extra trouble of using external navigation systems. If Uber is using their internal maps to calculate upfront pricing, it’s possible that they will often overestimate the time/mileage compared to a more efficient app like Google Maps or Waze.
- Some believe Uber purposefully uses an inefficient route when calculating upfront pricing, to ensure they make more money than they lose.
A good analogy for Uber’s upfront pricing would be a casino that doesn’t publish the odds of winning a certain game and gets to make their own rules. How long do you think it would be before this ‘casino’ realized they could charge a little more and no one would notice? The problem with upfront pricing is that it’s anything but upfront, and there’s a huge incentive for Uber to overcharge passengers.
Testing Upfront Pricing in the Wild
To test all this, we calculated dozens of routes from our current location to random locations nearby. We compared the route Uber displayed on the passenger app to the one Google Maps recommended for the same trip at the same time. And in most cases, they were actually the same route since it looks like Uber is now using Google Maps in the app (try it for yourself with the passenger app).
Below, you can see the Google Maps route and the one suggested by Uber are the same. You can also see that Google suggests two other, longer, routes to get to the same place. Spoiler Alert! That’s the secret to the strategy.
So it appears Uber is picking what Google Maps shows to be the most efficient route at the time — but that doesn’t mean it will be the most efficient route when you arrive a few minutes later. A lot can happen in 5-10 minutes.
How to Beat Upfront Pricing
It’s a little devious, but there is a way to ensure that you are always paid at least 75% of what the customer paid — and perhaps even a little bit more. This strategy will work on upfront pricing and shared rides like uberPOOL and Lyft Line. If you do it right, you can get paid more, but if you do it wrong, you could see your ratings plummet.
You should only consider this technique when you know for sure the customer is on a fixed price plan. Some might say that it’s dishonest no matter how you look at it, and others might say that you’re biting the hand that feeds you. The decision to use this strategy is left as an exercise for the reader.
This strategy only works on rides over the minimum distance in your city. So if your minimum fare trip distance is 3 miles — and the customer wants to go 1.5 miles, there is no reason to go farther than 1.5 miles. In fact, the best strategy there is to do the absolute minimum.
Take the Less Efficient Route
But if your trip is at least four to five miles, it’s pretty simple: don’t take the most efficient route. Use your navigation app to find a longer but still reasonable route to the destination and take that route. So take the route that is 6.5 miles, not the one that is 5.7 miles.
It’s all a matter of degrees though. Adding a mile to a six or seven mile trip is one thing. But taking a ridiculously long route will appear to your customer as inconveniencing them even if the longer route doesn’t change what they pay.
Look at the various routes Google suggests for getting from Encinitas, CA to San Marcos, CA. It’s one thing to take the 15 mile route instead of the 13 mile route, but if you go all way up to Oceanside and take the 78, anyone familiar with the area is going to know you’re up to something and your rating will reflect that.
One worry about this strategy is whether or not going a longer route would cause the passenger’s fare to be recalculated. We took several trips where we always chose the less efficient (although still recommended by Google) route and the fare never changed. But if you go way out of the way, it may re-calculate.
An Example of a Less Efficient Route
Here’s a great example. This passenger wanted to go from North Carlsbad to South Carlsbad. The route in blue is the one that Uber and Google Maps suggested as the best route, but you can see that Google Maps also suggested two other routes. We took the longest route, which was 2.2 miles longer than the shortest route.
This screenshot was taken en route and you can see that the Upfront Fare was $14.44.
Finally you can see the Trip Details summary that shows that we took the longer route, and yet the fare did not change.
We took several rides between multiple locations. As long as the source and destination were the same, and we took one of the suggested routes, everything was fine. If, however, we asked the driver to completely ignore the GPS and go way outside any of the recommended routes, the fare would automatically get recalculated. (It also happened accidentally one when a driver took a wrong turn and accidentally got on the freeway, adding 3 miles to 5 mile trip.)
So to be clear, this is not a strategy that allows you to gouge your customer or Uber, but it is a strategy to make sure you’re always getting paid at least 75% of what the customer is paying.
Using This Strategy
That’s the strategy: here’s how to implement it since you need to use Waze or Google Maps. Let’s start with Waze.
Right after you’ve hit the navigate button on the driver app and it opens up Waze, press the Routes button on the left and examine the available routes. Pick the one that is longer, but not one that’s ridiculously longer than the others. Once you do get used to this, you can do it in less than a second. Some might find pressing the Map View helpful at picking a route.
In this example, you would pick either the 4.4 mile or 5.1 mile route instead of the 3.8 mile route. The cost of these routes range from $5.23 to $6.96 based on the estimated time and distance, with a driver payment ranging from $3.92 to $5.22. If the driver’s Upfront Pricing was based on the first route, it would be $5.23. If you drove the second route you would net $5.22, almost 100% of what the customer paid.
It’s a bit harder to do this on Google Maps, but not impossible. Google Maps will show you multiple routes to your destination, but you’ll have to click on each route to see which one is longer. Be careful, as taking too long to do this might annoy your passenger. In the three photos you can see three very different routes to the same destination. They all take about the same time, but one is almost two miles longer than the other. You can try that one if you think you can pull it off, but you stand a good chance of your passenger asking you why you are going in the opposite direction of where they’re going. But you get the point. Look at the different routes, pick one that’s a little longer but not too much longer, and go with it. If your passenger asks where you’re going, you can always let them know that they’re on an upfront fare and that their fare is the same regardless of the distance/time traveled.
Risks of This Strategy
If you don’t do this right, you risk getting lower ratings due to navigation issues, and I’m sure that Uber will eventually start cracking down on drivers who take advantage of this. The big risk in the short term though is that if your passenger doesn’t like your route and protests — or gives you a lower rating. Remember, the customer is always right, but if they question the route you’re taking, it shouldn’t be too hard to explain that upfront pricing means they pay the same regardless of the route you take.
Should Drivers Use This Strategy?
I’m sure this strategy is a little devious for some, but I’m not a fan of what Uber and Lyft have done by decoupling the price that passengers pay and the payout that drivers receive. If Uber is an app that merely connects drivers and riders, they should charge one price to the passenger and pay drivers an exact percentage of it. And when you add in the fact that this new pricing system was never disclosed to drivers and is not explained anywhere on Uber’s website, you start to see why drivers are wary of upfront pricing.
The nice thing about this strategy though is that you are not taking advantage of your passengers but merely ensuring that you get at least 75% of what customers pay. Simply take the less efficient route recommended by Google Maps or Waze — but not a ridiculously inefficient route. This will increase what Uber pays you without increasing what the customer pays. You still need to be careful though and if the customer asks for a specific route — follow their lead. They’re still the real boss.
Drivers, what do you think about Uber’s upfront pricing? Are you okay with using this strategy to make sure you get 75% of what the passenger pays on every single ride?
-Harry @ RSG
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