SINGAPORE: Grab plans to introduce a 30 cents ‘platform fee’ on every ride in Singapore. For a company that is so embedded with people’s daily lives and transactions, such a move would obviously raise eyebrows, and even concerns whether Grab will abuse its power”.
Grab says that it is a common practice, because GoJek did something similar when it introduced a S$0.70 platform fee earlier this year. Uber has such an arrangement too.
AdvertisementAdvertisementWhile consumers might not even notice the difference, it is worth understanding the dynamics that impact such pricing, and how Grab has changed over the years.
WHICH WAY DO YOU WANT TO GO?
We all remember a time where booking a taxi would incur a fee, of S$2.30 with ComfortDelgro, which takes the vast majority of taxi bookings.
The taxi industry saw this as being fair to compensate for the time drivers take to drive to the pick-up location, as well as the cost to maintain a call centre and relevant technological infrastructure.
AdvertisementAdvertisementSingapore’s taxi pricing was more complicated than that, with multiple surcharges on time and pick-up locations added to the metered fare. Payment through electronic means, such as Nets and credit card, will incur charges ranging from S$0.30 fixed to 10 per cent of the fare.
This is to compensate for the costs of infrastructure and settlement.
[h=3]READ: Commentary: The next tech crash is around the corner thanks to COVID-19[/h]They all make sense economically, and logically. However, it often did not go well with consumers. It became difficult to estimate how much it will cost from point A to point B - the source of many disputes.
I had a glimpse of the customer complaints when I was running Easy Taxi a few years ago - and a significant percentage were due to disagreements about taxi fare.
And some customers who take taxis regularly become quite sensitive about how much they should pay for a particular itinerary. That’s the reason why drivers used to ask “which way do you want to go by” to minimise such misunderstandings.
UPFRONT PRICING
Ride hailing seems to have turned it upside down. They had not only - for a considerable period of time - made rides cheaper, but also eliminated the need for drivers to ask about the preferred way.
ComfortDelgro taxi booking app (File photo: ComfortDelgro)
Key to this was fixed, upfront pricing. You get to know how much you need to pay for the journey before you decide to take it. If it is too expensive, you can choose either to wait, or take other means.
When Grab first introduced fixed, upfront pricing, a voice in the industry was saying that it does not make sense. Because on the road multiple factors could impact the time and distance. Uber stuck with an in-app meter, with multiples to show the surge pricing.
[h=3]READ: Commentary: Is trouble brewing in Grab paradise?[/h]However, consumers seem to love the certainty. Knowing the ride will cost S$30 rather than “2X normal fare” would make them feel more comfortable. Uber eventually caved in; even ComfortDelGro introduced a fixed pricing option in their revamped app.
It might not be the most efficient method, but it is probably the best to build trust between commuters, drivers and the platform.
Remember, a key purpose of the meter was to introduce some trust and predictability in pricing.
IS IT FAIR PRACTICE?
There is also the question of whether the introduction of such platform fee is a fair price. Or whether the timing is right.
Ultimately, public transport pricing is always a sensitive topic because it impacts millions of ordinary people. Each fare review always invites a lot of discussions in the public. This is the case even when it is debatable whether private rides constitute public transport.
Among the reasons why consumers take up ride hailing apps, price and convenience are probably the most important. While in most cases price and convenience are a comprise, in this case consumers have been enjoying both for a while.
Among the reasons why consumers take up ride hailing apps, price and convenience are probably the most important. (Photo: Aaron Chong)
Everyone knows that eventually platforms need to be profitable, in a sustainable way. The matching efficiency compared to old taxi booking systems can only squeeze the cost to a certain extent.
The S$0.30 institutionalises the costs platforms can charge as part of their revenue, but because the pricing framework reflects supply and demand, it is quite likely that consumers will not even notice the price difference.
While Grab is definitely much ahead of GoJek in terms of ride hailing market share, it does not have the monopoly over the rides market. ComfortDelGro still runs more than 10,000 taxis, with its own booking system.
[h=3]READ: Commentary: If we can share or hitch rides, why not food delivery?[/h]This is even before considering the alternative of buses and trains.
With so much transactional data and so many in-house data scientists, it is reasonable to believe that Grab has done the full impact analysis before submitting the proposal to the competition commission.
As for the timing, it is in a period where commuting demand has somewhat recovered from the collapse during the circuit breaker. With demand stabilising and slowly rising, it is probably much easier to monitor the impact of such a move, without causing too much disruption.
GRAB CAN’T LOSE RIDE HAILING
Ultimately, while Grab is pursuing an ambition that is much broader, and potentially more profitable, vision of delivery, payment and financial services, it needs ride hailing as a key use case to acquire and retain customers, and boost transactions.
Grab did not follow GoJek in the pricing war last year in Singapore, and it did not engage in a promotion war against Foodpanda during the circuit breaker.
[h=3]READ: Commentary: Getting your food order delivered should be straightforward so why isn’t it?[/h]It has grown from a super-charged, disruptive company to a measured, disciplined one with strong focus on its path to profitability, despite the effects of the current hardship.
As a consumer, expect less promotions, but increased demand for service levels, as one would with any mature consumer company, whether in public transport or not.
Li Jianggan is founder and CEO of Momentum Works, a Singapore-based venture outfit. He was also previously MD Singapore of Foodpanda, co-founder and Regional MD of Easy Taxi.
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Grab says that it is a common practice, because GoJek did something similar when it introduced a S$0.70 platform fee earlier this year. Uber has such an arrangement too.
AdvertisementAdvertisementWhile consumers might not even notice the difference, it is worth understanding the dynamics that impact such pricing, and how Grab has changed over the years.
WHICH WAY DO YOU WANT TO GO?
We all remember a time where booking a taxi would incur a fee, of S$2.30 with ComfortDelgro, which takes the vast majority of taxi bookings.
The taxi industry saw this as being fair to compensate for the time drivers take to drive to the pick-up location, as well as the cost to maintain a call centre and relevant technological infrastructure.
AdvertisementAdvertisementSingapore’s taxi pricing was more complicated than that, with multiple surcharges on time and pick-up locations added to the metered fare. Payment through electronic means, such as Nets and credit card, will incur charges ranging from S$0.30 fixed to 10 per cent of the fare.
This is to compensate for the costs of infrastructure and settlement.
[h=3]READ: Commentary: The next tech crash is around the corner thanks to COVID-19[/h]They all make sense economically, and logically. However, it often did not go well with consumers. It became difficult to estimate how much it will cost from point A to point B - the source of many disputes.
I had a glimpse of the customer complaints when I was running Easy Taxi a few years ago - and a significant percentage were due to disagreements about taxi fare.
And some customers who take taxis regularly become quite sensitive about how much they should pay for a particular itinerary. That’s the reason why drivers used to ask “which way do you want to go by” to minimise such misunderstandings.
UPFRONT PRICING
Ride hailing seems to have turned it upside down. They had not only - for a considerable period of time - made rides cheaper, but also eliminated the need for drivers to ask about the preferred way.
Key to this was fixed, upfront pricing. You get to know how much you need to pay for the journey before you decide to take it. If it is too expensive, you can choose either to wait, or take other means.
When Grab first introduced fixed, upfront pricing, a voice in the industry was saying that it does not make sense. Because on the road multiple factors could impact the time and distance. Uber stuck with an in-app meter, with multiples to show the surge pricing.
[h=3]READ: Commentary: Is trouble brewing in Grab paradise?[/h]However, consumers seem to love the certainty. Knowing the ride will cost S$30 rather than “2X normal fare” would make them feel more comfortable. Uber eventually caved in; even ComfortDelGro introduced a fixed pricing option in their revamped app.
It might not be the most efficient method, but it is probably the best to build trust between commuters, drivers and the platform.
Remember, a key purpose of the meter was to introduce some trust and predictability in pricing.
IS IT FAIR PRACTICE?
There is also the question of whether the introduction of such platform fee is a fair price. Or whether the timing is right.
Ultimately, public transport pricing is always a sensitive topic because it impacts millions of ordinary people. Each fare review always invites a lot of discussions in the public. This is the case even when it is debatable whether private rides constitute public transport.
Among the reasons why consumers take up ride hailing apps, price and convenience are probably the most important. While in most cases price and convenience are a comprise, in this case consumers have been enjoying both for a while.
Everyone knows that eventually platforms need to be profitable, in a sustainable way. The matching efficiency compared to old taxi booking systems can only squeeze the cost to a certain extent.
The S$0.30 institutionalises the costs platforms can charge as part of their revenue, but because the pricing framework reflects supply and demand, it is quite likely that consumers will not even notice the price difference.
While Grab is definitely much ahead of GoJek in terms of ride hailing market share, it does not have the monopoly over the rides market. ComfortDelGro still runs more than 10,000 taxis, with its own booking system.
[h=3]READ: Commentary: If we can share or hitch rides, why not food delivery?[/h]This is even before considering the alternative of buses and trains.
With so much transactional data and so many in-house data scientists, it is reasonable to believe that Grab has done the full impact analysis before submitting the proposal to the competition commission.
As for the timing, it is in a period where commuting demand has somewhat recovered from the collapse during the circuit breaker. With demand stabilising and slowly rising, it is probably much easier to monitor the impact of such a move, without causing too much disruption.
GRAB CAN’T LOSE RIDE HAILING
Ultimately, while Grab is pursuing an ambition that is much broader, and potentially more profitable, vision of delivery, payment and financial services, it needs ride hailing as a key use case to acquire and retain customers, and boost transactions.
Grab did not follow GoJek in the pricing war last year in Singapore, and it did not engage in a promotion war against Foodpanda during the circuit breaker.
[h=3]READ: Commentary: Getting your food order delivered should be straightforward so why isn’t it?[/h]It has grown from a super-charged, disruptive company to a measured, disciplined one with strong focus on its path to profitability, despite the effects of the current hardship.
As a consumer, expect less promotions, but increased demand for service levels, as one would with any mature consumer company, whether in public transport or not.
Li Jianggan is founder and CEO of Momentum Works, a Singapore-based venture outfit. He was also previously MD Singapore of Foodpanda, co-founder and Regional MD of Easy Taxi.
Let's block ads! (Why?)
More...