Rapido's Customer-Controlled Pricing: A Product Manager's Deep Dive

Salutations, Olio aficionados! 👋

Happy Hump Day and welcome to the 86th edition of Weekly Olio - your trusted 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 🐦

Solar energy is on track to become the primary source of human energy by 2040. The dropping cost of solar energy, advances in battery technology and massive investments in buying solar power continue to make it an attractive source of energy. Will be interesting to see how this shapes up!

The Infographic 💹

There are a lot of myths surrounding how flight tickets are priced. Some people say that booking on certain days of the week is beneficial while others might suggest booking at specific times. This graphic is a basic primer how different classes are priced relative to each other in a flight.

The Short Read 📝

The Right Kind of Stubborn - by Paul Graham

Another gem of an article from Paul Graham - this time he talks about the difference between being persistence and being stubborn. While almost all successful people are persistent, obstinacy is a sure shot recipe for failure. Is there a real difference between these two or are these just labels assigned to actions based on the final outcome? PG tries to answer this question in this wonderful article.

When you examine the internal structure of persistence, it is nothing like obstinacy. Five distinct qualities - energy, imagination, resilience, good judgment and focus on goal - combine to produce a phenomenon that might look like obstinacy but pushes you to deliver so much more. A must read!

The Long Read 📜

The Mike Speiser Incubation Playbook - by Kwokchain

Mike Speiser, a partner at Sutter Hill Ventures, has pioneered a unique incubation model - his approach focuses on starting companies and remaining as the interim CEO for the first year or two. His model is designed to attract top technical co-founders who may not view themselves as natural founders.

Speiser’s success ratio is far beyond the normal distribution of venture outcomes, with hit rate of around 20% of his companies achieving multi-billion dollar valuations. His portfolio includes companies like Pure Storage and Snowflake Computing. While this model has benefits, it comes with tradeoffs. Founders may end up with less equity and have lesser autonomy due to Speiser’s hands on involvement.

🎉 Drum roll, please! 🥁 Let's give a hearty round of applause to our guest post collaborator, Chetan Metkar! 📜🎩

Chetan is a Group Product Manager at Tata Neu, overseeing Consumer and Supply Products for the OTA platform. Previously, he has worked with SuprDaily by Swiggy, Helpshift Technologies, and Ola.

Publisher’s Parmesan 🧀

Rapido's Customer-Controlled Pricing: A Product Manager's Deep Dive

As a seasoned product manager in the ride-hailing space, I've witnessed numerous attempts to solve the pricing puzzle. Rapido's new customer-controlled pricing model is a fascinating development that warrants a closer look. Let's break it down.

Pricing in the ride-hailing industry has long been a contentious issue, marked by the complexities of balancing supply and demand while keeping both drivers and customers satisfied. Traditional dynamic surge pricing has been the go-to model for most platforms. This system, while effective in balancing supply and demand and encouraging drivers to work during peak hours, comes with significant drawbacks.

For customers, surge pricing often lacks transparency, leading to unpredictable fares and occasional price shocks. This unpredictability not only frustrates users but also makes it difficult for them to budget for rides. On the driver's side, the lack of visibility into potential earnings and the perception of being shortchanged by the platform’s cut of surge pricing add to their dissatisfaction. The resulting inconsistent income further exacerbates their frustration.

Rapido's Innovative Approach

Enter Rapido's customer-controlled pricing model, a bold reimagining of how fares are determined in the ride-hailing market. At its core, this model allows customers to set their own fares, a radical shift from the traditional top-down pricing mechanisms.

Key Features of Rapido's Model:

1. Upfront Pricing Control: Users can set their own fares before booking a ride.

2. Full Fare Transparency: The full fare, minus a standard platform fee, goes directly to the driver.

3. Driver Autonomy: Drivers have the option to accept or reject rides based on the offered fare.

This approach offers several potential benefits. For customers, it provides greater control over ride costs and the ability to prioritize urgency through pricing. The transparency of this model can build increased trust in the platform. Drivers, on the other hand, may experience higher earnings during peak times and more autonomy in ride selection, leading to clearer expectations for each ride. For Rapido, this model differentiates them in a crowded market and has the potential to foster increased loyalty among both users and drivers. Moreover, it simplifies backend pricing algorithms, potentially reducing operational complexities.

Cultural and Market Fit

Rapido's model aligns well with certain cultural and market dynamics, particularly in regions like India, where tipping culture is not as prevalent. By bypassing tipping issues and providing a straightforward, culturally appropriate solution, Rapido can appeal to a broader audience.

Market dynamics also play a crucial role. This model could attract price-sensitive customers during off-peak hours while appealing to users willing to pay more for guaranteed service during peak times. Such flexibility could help Rapido capture market share from competitors.

Potential Challenges and Considerations

While Rapido's customer-controlled pricing model is innovative, it is not without its challenges. Educating users on this new model will be crucial to its adoption. Ensuring sufficient driver coverage at all times and balancing user expectations with driver earnings are other significant hurdles.

For drivers, adapting to a new decision-making process for each ride could be daunting. There's also the risk of drivers cherry-picking high-fare rides, which could lead to service inconsistencies. From a market perspective, there’s a potential risk of a race to the bottom in pricing during off-peak hours and price gouging during extreme peak times or emergencies.

Impact on Competitors

Competitors in the ride-hailing space are likely to respond in both the short and long term. In the short term, we might see enhanced loyalty programs, improved driver incentives, and more transparent surge pricing explanations. Long-term strategies could include the development of hybrid pricing models, increased focus on value-added services, and potential partnerships or acquisitions to remain competitive.

However, adopting such models won't be easy. Competitors will face challenges such as legacy system constraints, resistance to change from established user bases, and potential revenue instability during the transition period.

Broader Industry Implications

Rapido's model could set a precedent for similar pricing models in other sectors. In e-commerce, we might see name-your-price options for certain products or reverse auctions for excess inventory. In hospitality, guest-set pricing for hotel rooms and dynamic pricing for vacation rentals based on user bids could become more common. The freelance and gig economy could also see client-set budgets for projects and negotiable rates based on urgency and complexity.

Such shifts could lead to broader changes in consumer behavior, with increased expectations for pricing transparency across industries. As consumers grow more comfortable with dynamic and personalized pricing models, price-conscious decision-making could become the norm.

From a technological perspective, the need for more sophisticated real-time pricing algorithms will rise. Machine learning will play a crucial role in optimizing pricing suggestions, and enhanced data analytics will be essential to understanding pricing patterns and user behavior.

Product Management Takeaways

There are several key takeaways for product managers from Rapido's innovative approach:

1. User-Centric Innovation: Always consider how to give users more control and transparency. Look for opportunities to solve pain points in unexpected ways.

2. Market Differentiation: Sometimes the boldest moves can create the biggest impact. Don’t be afraid to challenge industry norms.

3. Cultural Sensitivity: Remember that global solutions may need local adaptations. Consider cultural context when designing pricing models.

4. Balancing Stakeholder Needs: Strive for solutions that benefit users, service providers, and the platform. Be prepared to iterate based on real-world feedback.

5. Data-Driven Decision Making: Implement robust analytics to track the impact of pricing changes. Use A/B testing to refine and optimize new models.

Future Outlook

Looking ahead, Rapido's model could evolve in several ways. AI integration could suggest optimal pricing to users, expanding the model to other verticals such as food delivery and package delivery. A bidding system for rides during ultra-peak times might also be developed.

Industry-wide, we can expect increased regulatory scrutiny on pricing models, the emergence of new platforms built around user-controlled pricing, and a shift towards more transparent and flexible pricing across all services.

Conclusion

Rapido's customer-controlled pricing model is more than just a novel approach to ride-hailing; it's a bold reimagining of the relationship between platforms, service providers, and users. As product managers, it's crucial that we pay attention to such innovations and consider how similar principles could apply to our own products and markets.

This model challenges us to think beyond traditional notions of pricing and user experience. It reminds us that sometimes the most impactful innovations come from questioning our most basic assumptions about how our products should work.

As we move forward, the success or failure of this model will provide valuable insights into user behavior, market dynamics, and the future of the sharing economy. Regardless of the outcome, Rapido's experiment serves as a catalyst for innovation and a reminder that in the world of product management, there's always room for game-changing ideas.

Olio Jobs 💼

• Business Generalist, Spellbound (Consumer), Remote; Backed by Soma Capital

• Strategic Finance and Operations Associate, Focus AI (Enterprise), NY; Backed by YC

• Chief of Staff, Destiny (Fintech), NY; Backed by Soma Capital, Streamlined Ventures, Luca Ventures

• Founder’s Associate / Chief of Staff, Anterior (HealthTech), NY; Backed by NEA, Sequoia, Neo

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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.