We didn’t expect to do a second post on the theme from the last one, but customer fees continue to grab negative headlines. That means in the age of 1% vs. 99 %, companies must be painfully clear about how fees might distort typical transactions.
For Uber, the new startup app that lets you score rides on otherwise-unbooked sedan car services, this lesson in fees is all too real. Uber dispatches sedans in a way similar to taxi service, and for a slight premium over standard taxi fares, you get a chauffer-driven ride in style. Uber’s innovation (particularly in our city where the taxi industry is notoriously hostile to riders) has earned it a great amount of popularity, and in that sense, an excellent reservoir of brand equity and positive PR.
That is… until some riders from this past New Year’s Eve got stuck with paying hundreds of dollars for rides of less than a few miles. Uber employs what it calls “surge pricing” – a system that ratchets up fares when the app experiences high demand.
The economic explanation on surge pricing might be correct, but here’s the problem: in justifying the, ahem, uber-premium, Uber makes the classic PR mistake of defending process instead of defending outcome. As every smart politician knows, any time you’re explaining a bill or political proposal, you’re losing. Uber’s multiple attempts at explaining surge pricing unfortunately come across a bit tone-deaf; telling your customers that “70 years of [taxi fare] conditioning” is the culprit doesn’t resolve the pain from paying exorbitant to Uber. And, judging by some of the extreme negative reactions and customer experiences, Uber has definitely taken a sharp reputation hit.
Uber’s CEO explains that surge pricing will remain in place, and warns users to expect higher fares during holidays and other high-volume events. An ok warning, but taken to its logical extreme, that means surge pricing might be a frequent negative footnote to an otherwise awesome service. If Uber continues having unusual billing incidents occur at a regular pace, we might witness slow-motion crisis PR by a thousand (negative customer experience) cuts.