Monday, November 02, 2015

Hourly Guarantees Motivate Drivers

Do hourly guarantees really matter? Ridesharing companies introduce hourly guarantees to reward their drivers during peak demand (externally). Thus, increased demand translates into surge pricing to increase revenue (internally).

As a result of this, surge pricing activates price multiples and higher fare prices jolt different regions. Drivers go online in areas where hourly guarantees are in effect to make guaranteed money.

Are guaranteed earnings good? Do they really help drivers to make money? We believe that guaranteed hourly promotions motivate drivers to drive in cities they usually avoid.

Why avoid certain cities? Is this because of safety? Distractions? Troubled riders? Higher vomit incidences? Rush riders? Poor road conditions? Traffic? No restrooms at night?

The main intent of surge pricing is to fill demand. Whenever supply is low (vehicles), surge pricing activates to feed this high demand. Drivers are more inclined to populate surged areas, increasing their earning potential.

What matters most? Is making money the primary objective? Are drivers willing to take risks to make this guarantee?

What we determined is that guaranteed earnings motivate drivers to drive in specific areas. When these drivers go online in these areas, they actually make more than guarantee earnings. Surge pricing goes into effect, so most trips taken on busy event nights pay well.

UberPool trips are much longer. 2-3 clients request trips. Drivers may travel further outside of their service area.

Hourly guarantees entice drivers to engage. These ridesharing drivers service busy areas, taking a safe risk that will pay them hourly guarantees if fares don't meet expectations. When earnings fall below this minimum level, ridesharing companies pay out miscellaneous earnings before commission is deducted. During these hours, $30, $35, $40, $45, and $60 are guaranteed. All requirements must be followed to honor these hourly earnings.

But in the end, drivers end up making higher than these guaranteed earnings. Therefore, ridesharing drivers won't receive matched earnings. Without releasing hourly promotions, drivers may service less than spectacular areas that limit their earning potential.

In more ways than one, drivers are motivated to drive in high risk areas to make higher fares. Essentially, their per trip average increases and this benefits all clients requesting rides. In promotion areas, clients wait less time to get a ride. Higher supply of vehicles decrease the cost of rides.

On extremely busy nights, surge pricing and Demand Pricing remain in effect. Sharing the cost of a trip can alleviate total fare cost. We come to the conclusion that hourly guarantees lead drivers to areas they need to service. In result, these drivers accepting guaranteed hourly earnings make more money than expected. It is a good idea to drive in promotional areas to increase overall earnings.