For all the Uber and Ola cab service consumers, the term “surge pricing” is not alien. For those who don’t know, here’s how it works.
When is surged pricing applied?
When a product or service is high in demand and the company struggles to keep up with the pace, it increases the rates for its existing service.
Surge pricing in Uber
The popular cab service Uber, for instance, hikes the fare rates automatically when the taxi demand is high or when the supply of drivers arround a person is low. The strategy, according to Uber, attracts more people to offer their services to the company and earn more money.
Why is surge needed?
Without the surge pricing, the company would eventually run out of funds and would not be able to offer its services anymore.