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Lyft is trying to kill off surge pricing

A recent earnings call revealed more on Lyft's strategy to lower prices.
Lyft is trying to kill off surge pricing
Posted at 9:44 PM, Aug 09, 2023

When it's time to call a car, the decision between Uber or Lyft for many rideshare customers often comes down to whichever is cheaper, and with a new pricing strategy, Lyft hopes to always been the winning choice.

The company is slowly trying to get rid of surge pricing, or "primetime" as the company calls it, which is when the app raises ride prices during peak times. 

"[Primetime pricing] is a bad form of price raising," CEO David Risher said during the company's earnings call Tuesday, per TechCrunch. "It's particularly bad because riders hate it with a fiery passion, and so we're really trying to get rid of it."

Though the company wants to be rid of it in full, its surge pricing has so far fallen 35% from this year's first quarter to second, and it appears to be helping riders choose the app, with earnings showing an increase in the number of riders by almost 2,000.

This decision hasn't seemed to hurt driver supply, either. Lyft's driver supply in its second quarter was its highest in three years, according to TechCrunch, and the average hours per driver reached a new high, too. These heights, Risher said, are the reason Lyft has been able to bring down surge pricing and, in turn, bring in more riders.

But as of now, these positive effects seem to be reaching everyone but the company itself.

SEE MORE: Uber's new Carshare feature lets you rent or loan a car

Lyft's decision to "price in line with the market," Risher said, fueled a decrease in revenue per rider by almost 5% quarter-over-quarter. Reuters pointed to the company's shares falling more than 7% Wednesday after the call, but Risher still points to this as good for the riders and, therefore, good for the company overall.

The rideshare company's lower price campaign comes as its main competitor, Uber, has recently been called out for its high prices, with its own CEO even shocked by the cost of a 2.9-mile ride when confronted by Wired.

Uber's website says its surge pricing is an incentive for its drivers and a premium for its riders, claiming to keep it "effective and accurate" and tied to "marketplace imbalance."

It's winning this imbalance, plus that of revenue versus riders that will really decide who the superior app will be.

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