BluSmart's Evolution: From No Surge Pricing to Rush Hour Strategy

Salutations, Olio aficionados! 👋

Happy Hump Day and welcome to the 72nd edition of Weekly Olio - your trusty source for giggles, wisdom, and a dash of intrigue courtesy of our tantalizing thought piece (yes, buckle up for Publisher's Parmesan). 🧀

The Quote󠀢 💭

The Tweet 🐦

2021 was a heady time for startups - with millions of dollars being raised on 30 minutes zoom calls and unicorns being birthed every few days. In the last 18 months, as markets have cooled, investors are realizing the mistakes that have been made. This thread is a compendium of mistakes investors hope to not repeat in the future. How that pans out, only time will tell.

The Infographic 💹

LA Lakers Le Bron James is the first player in NBA history to score more than 40K points in his career. What is remarkable is the consistency - each bucket of 10K points came in roughly the same number of matches.

• 0 to 10K in 368 games

• 10K to 20K in 358 games

• 20K to 30K in 381 games

• 30K to 40K in 368 games

There is something magical about the power of consistency!

The Short Read 📝

The Dangerous Seduction of the Lifetime Value Formula - by Bill Gurley

Lifetime Value of customers is one of the most commonly used metric to estimate the total potential revenue that could be generated from a single customer. Since SaaS businesses spend a lot of capital upfront to acquire customers, it sort of made sense to look at the total revenue that could be generated - it helped provide a rough view into the efficiency of investments in sales and marketing.

In this article from 2012, famed investor Bill Gurley lays down the pitfalls of relying too much on this formula. Any estimate or model is only as good as its assumptions. While LTV is a good directional metric, things become messy when executives fixate on optimising this number and losing sight of the overall strategy in the process. Written more than 12 years ago, this article continues to remain relevant.

The Long Read 📜

Prospect Theory: An Analysis of Decision Under Risk - by Daniel Kahneman and Amos Tversky

Last week, Daniel Kahneman, one of the pioneers of the field of behavioural economics passed away at the ripe age of 90 years. He won the Nobel Prize for Economics in 2002 and is the author of the best selling book ‘Thinking Fast and Slow’. One of his most seminal works, published in 1979, provided a critique of the expected utility theory as a framework for decision making under risk.

This week’s long read is the original paper published in Econometrics in March 1979 by Daniel Kahneman and Amos Tversky. Here they showed that decision making under risk involved choices that were inconsistent with traditional utility theory. Instead of analyzing each decision based on its expected utility, decision makers tend to ascribe value to change in state versus the final state and the expected utility is weighted not by event probabilities but by decision weights that could be unique to each individual. They also showed that the utility curve is concave for gains, usually convex for losses and is generally steeper for losses than for gains. This paper is a fascinating read and forms the basis for a lot of modern finance and economics.

Publisher’s Parmesan 🧀

BluSmart's Evolution: From No Surge Pricing to Rush Hour Strategy

BluSmart, an electric vehicle (EV) ride-hailing company, has recently shifted its pricing strategy, sparking discussions among consumers and industry experts alike. Let's delve into the company's journey, examining its transition from a no surge pricing policy to the introduction of Rush Hour pricing.

In June 2019, BluSmart's co-founder Punit K Goyal emphasized their commitment to avoiding surge pricing, promising customers an experience free from unpredictable fare hikes. He said,

Fast forward to January 2024, BluSmart's co-founder Anmol Singh Jaggi tweeted about the company's new perspective on pricing. Instead of labeling it as surge pricing, BluSmart now refers to it as Rush Hour pricing. Jaggi emphasized transparency, stating that their pricing structure reflects the effort exerted by drivers during peak hours, unlike surge pricing, which is perceived as opaque and arbitrary.

However, many customers argue that Rush Hour pricing merely mirrors surge pricing under a different guise, raising concerns about fairness and transparency.

Understanding Rush Hour Pricing

BluSmart has designated specific times of the day, labeled Rush Hour, during which higher pricing applies for both airport and intracity rides. The rationale behind this decision mirrors that of industry giants like Ola and Uber, who implement surge pricing during periods of peak demand.

According to co-founder Anmol Singh Jaggi, this new pricing model aims to offer transparent and fixed rates to customers, ensuring fairness and consistency in pricing. For instance, fares for distances up to 3 km now stand at INR 199 during rush hours and INR 149 during relaxed hours.

Implications and Criticisms

BluSmart's introduction of Rush Hour pricing marks a departure from its previous stance on surge pricing. The move has raised concerns among customers, particularly its most active users, who now face increased costs during peak hours.

Questions also arise regarding the distribution of this premium to BluSmart's driver-partners. While the company claims to offer transparent and competitive compensation, some driver partners have raised concerns about the opacity of the incentive structure.

Industry Trends and Consumer Impact

BluSmart's pricing strategy reflects broader trends in the consumer services sector, where platforms increasingly rely on additional fees and charges to bolster revenue. From food delivery services to transportation, various platforms have introduced extraneous charges, raising questions about fairness and consumer protection.

BluSmart faces challenges in expanding its EV fleet and competing with industry giants like Ola and Uber, who are rapidly scaling their EV operations. Limited market presence and intense competition make it difficult for BluSmart to maintain competitive pricing while retaining users.

Financial Landscape and Future Prospects

Despite facing funding challenges and stiff competition, BluSmart remains optimistic about its prospects. The company's recent funding rounds, primarily driven by its founders and existing investors, indicate confidence in its business model.

As BluSmart navigates the complexities of Rush Hour pricing and intensifying competition, its ability to sustain growth and profitability will be closely scrutinized in the coming months.

In conclusion, BluSmart's transition to Rush Hour pricing underscores the evolving dynamics of the ride-hailing industry, highlighting the delicate balance between revenue generation, customer satisfaction, and market competitiveness.

Olio Jobs 💼

• Customer Success Manager- PointClickCare | Remote

• Client Success Manager - CareRev | Remote

• Scaled/Digital Customer Success Manager  Jellyfish | Remote

• Product Marketing Manager - ReMatter | LA or Remote

• Marketing Manager, B2B - Colibri Group | US

• Content Marketing Manager - Nova Laboratories | Remote

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We’ll be back in your inbox 2 PM IST next Wednesday. Till then, have a productive week!

Peeyush and Mohit

Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual.