Over 100% capacity…The morality of the surge charge

Surge charging in taxi dispatch industry

By Torsten Brose | Business Development Director | Magenta Technology

I have had a couple of spats lately with my esteemed colleagues in the private hire industry who seem incensed about Uber surge changing on the inevitable train strike days that are currently plaguing London.

In fairness, they mostly work in the corporate market where they are stuck with fixed SLAs that agree everything in advance and a workforce more motivated by customer service and commitment.

As most of us who have worked in the taxi market know, on public transport strike days, when taxis will be stuck in murderous traffic from dawn till dusk, a not insignificant percentage of drivers who – let’s say diplomatically – draw their income from a number of sources, will stay home and watch Jeremy Kyle in preference to going out to work.

In these circumstances, paying surge charging completely changes the playing field for driver attendance, and even the laziest drivers will want to work.

At the core of this conundrum is how the taxi business chooses to manage being at or above capacity, as there are really only a limited number of options to tell potential passengers:

  • Tell the customer you are too busy to pick them up
  • Give them a massive delay which likely as not you will over-run
  • Tell them they can have a car in five minutes but pay a premium

Of course, if the passenger feels the premium is too high, they are perfectly at liberty to go back to any other company that will fulfil and put up with points one or two mentioned above. Surge charging is the perfect way to manage being over capacity.

Magenta Technology does, of course, give you other options because it is designed to work in real time and gives dynamic delays even when you are seriously over capacity. This means the customer knows the time they are given will be stuck to accurately as the system constantly considers all drivers for all jobs to optimise performance. For traditional taxi companies’ software, they have to rely on fixed delays and ever more increasingly exasperated controllers winging it on collection times … not great for passengers either, I would suggest.

What is interesting is that, despite Uber breaking the back of this charging model, almost no private hire company wants to move to a similar model of time and mileage for fear that their customers just won’t accept it. We have a time and mileage meter, and a couple of pioneer customers are going to trial this type of charging. I confess to being quite excited about how it will work out.

Ultimately, this is about choice, not morality. Nothing has really changed since the pre-Uber days. You can still wait a lot longer for a cab, but you now have the option to pay more and maintain service with a shorter wait It is a fact that, on tube strike days, the taxi is industry is chronically overbooked; it’s just a matter of how each company chooses to manage that over capacity.

So many other industries operate a supply and demand model which is accepted completely. If you book an airline or train journey at the last minute, you expect to pay more, and even more during holiday periods. It’s really only in the taxi industry that time and mileage surcharges based on demand are vilified.

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