Kapil joined Uber as the Global Head of Pricing & Strategic Initiatives in 2015 when the business was rapidly growing across developed but also emerging markets. He was responsible for formalising pricing structures across both UberX, UberPOOL and UberEats globally. Kapil left Uber after two years and joined Poshmark, the fast growing social commerce marketplace, as VP of Finance and Corporate Development where he has helped quadruple revenue at the business. Kapil has led $90m of capital raising for growth equity companies and has deep experience scaling marketplace businesses. Read moreView Profile Page
Yes. We had a lot of data, from launching in many cities, so we knew what the potential efficiency would look like, in a particular city. We had the characteristics of different cities. For example, San Francisco, LA, New York, they can combine into a particular group of cities and we can assume that, yes, those cities could reach 60% to 70% efficiency, whilst the other set of cities, like Dallas, Houston, etc., they could, potentially, be 50% to 60% efficiency. When we are launching in a new market, we could say that, okay, this market could resemble this city and what the long-term efficiency for that particular market would be.
If we achieve that efficiency, in the six to nine months, what should the driver pricing be so at that efficiency level, the driver can still make sufficient money, in that market.
Yes, that’s correct. The cheaper the product, more people will use it. As you have more and more people using it, that specifically means that the driver opportunity will go up. Let’s say there are more and more people using it, there will be one ride after another, so there won’t be any wait time for the drivers. As their efficiency increases, they will be able to make a similar amount of money, even at the lower prices for the riders.
For example, let’s say we started at a $10 ride, for the rider. At that time, the efficiency, because of the level of demand, was 40%. If you cut the pricing to $5, in that particular market, the demand will go up, exponentially. What would that mean? The driver’s efficiency could increase from 40% to 60% or 70% and they can still make the same amount of money, as they were doing when the prices were $10 for the rider.
Although, in some of the markets, if you don’t see that a certain level of efficiency kicks in, or a certain amount of ride volume go up, as we cut the prices, we are open to roll-back those price cuts that we used to do.
For example, we did do this price cut, at the time, in hundreds of cities in the US and other parts of the world. Out of all those cities, we’ll track the specific metrics and the driver earning and efficiency levels were two of the metrics. We tracked those metrics, to enable us to understand the health of those markets, whether there was enough of a balance between the supply and demand, after the price cut in that market.
Two things could happen after the price cut. Either your demand goes up, significantly and that means that the driver’s efficiency goes up and drivers are making enough money, even at the lower prices for the rider. The second situation could be, you cut the prices but demand does not go up, significantly. Because of that, drivers are not making enough money and drivers churn on the platform and then you will see higher surge and smaller number of drivers to receive, and higher ETAs. If you see those types of metrics, then you must be open to consider rolling back the price cut, so that the drivers can make the same amount of money that they were making earlier.