A NY Times article about Uber & surge pricing made an interesting point about the reason for Uber’s success: they’ve brought technology to a very inefficient market.
“Say goodbye to the clunky old taxi model, with wildly varying and often invisible demand met by wildly varying and often inaccessible supply. Say hello to a more transparent market, where Uber has real-time data on demand, nudges supply to meet it and makes it vastly easier for drivers and riders to connect.”
Another point made in the article is that while we like to think that more transparency and more information is better for the consumer, Uber shows that this is not the case. There are times when there is higher demand and you are more desperate to get a car. This desperation can now be translated into Uber and its drivers demanding a higher price for the service. In the traditional taxi model you would pay a regular, non-peak price but you’d have to have luck on your side to hail a cab on a busy night.
My marketing professor used to say that imagine how much more a gas station could charge you for gas if it knew that you pulled up with an empty tank and didn’t have enough gas to take you to another station? Well, now Uber knows how desperate you are: you’re willing to pay surge pricing to get the service. Transparency is not as cute any more, is it?
So, from a product perspective, the question we need to ask is what other markets are as highly inefficient as the taxi market used to be? In what other markets or transactions can we use more information to improve the product/service?