Distance-based pricing is here

Limo Anywhere is happy to announce that distance-based pricing has arrived in our software.

Powered by our integration with Bing Maps, distance-based pricing allows operators to forgo the traditional zones and fixed rates structure by mapping customer routes and applying predetermined rates per-mile or per-kilometer, making for a simpler, easier pricing experience.

Distance-based pricing will be a feature in the fourth generation of our online reservation system, due out in March 2015.

To read more about how to implement distance-based pricing for your business, see the following explanation from our Knowledge Base: http://limoanywhere.uservoice.com/knowledgebase/articles/475189.


 

The evolving nature of pricing styles in the limo industry

Here at Limo Anywhere, we consider ourselves lucky to serve a variety of different types of operators. Small and large, sedan and specialty focus, retail and corporate focus – our 3,500 operator customer base has a little bit of everything. So while we’ve helped customers build and implement rate structures of all types, we can certainly attest that for many years, “zone-based” pricing was the the bread and butter of the limo industry.

In the age of TNCs, enhanced focus on ground transportation spend from travel managers, and blurring lines between the consumer use occasions for taxi and limo service, however, we’ve noticed that pricing structures are adapting as well. So, what pricing structures are we seeing used frequently in 2014?

1) Per-mile pricing

Once the near-exclusive domain of taxis, this type of pricing is gaining steam in the limo industry. And why not? There is an argument to be made that this is the most “fair” way to price, and certainly it’s easy for consumers to understand. Many regulatory authorities will only allow this style if the price is established beforehand, however, so be sure you quote the rate upfront if that’s the law in your locality (and frankly, this is a much better consumer experience).

2) Per-minute pricing

The limo industry has always had hourly pricing, but what about per-minute? It’s more common than you might think, and helps operators to be compensated for time and effort, in addition to mileage. Be careful though, especially if you operate in a city with heavy traffic – there are few worse consumer experiences in ground transportation than seeing an astronomical bill based on bad traffic outside of the consumer’s control.

3) Per passenger pricing

For years a popular choice with specialty providers, in the age of ride-sharing, this pricing style has come back into focus, especially for those providers with a customer base heavily skewed to retail. If you have street pickups (“hails”) or ride-sharing as part of your business, this can be a quite sensible way to price those products.

4) Zone-based pricing

The old reliable. What’s so good about zone-based pricing? If you’re operating an airport pickup or dropoff business, the taxi industry’s pricing models often make this decision for you. And as a consumer, it’s both simple and predictable. We have seen increasing use of hybrid models, however, with zone pricing used for airport business, and a per-mile option for point-to-point work.

While these are the four most common pricing styles in our experience, it will be interesting to see how ground transportation pricing evolves in the coming years. Either way, Limo Anywhere will be there to support your business’ needs.


 

Thoughts on demand-based pricing

One of the largest shifts in the ground transportation industry since the advent of the “app-based competitors” – or “TNCs” – has been the proliferation of dynamic, demand-based pricing in the marketplace. While the ground transportation industry has always used hourly minimums, truly dynamic pricing – which was primarily the domain of airlines and hotels in the early 2000s – has now become a significant part of the pricing equation in ground transportation, shifting the supply and demand landscape in what are likely irreversible ways. While there are staunch advocates of both static and demand-based pricing models, there are certainly pros and cons, and the decision to use or avoid surge pricing can have material impacts on your business.

Pros of Demand-Based Pricing

  • Keeps drivers and affiliates happy and engaged, even when conditions such as traffic or weather make operating more difficult; if you use independent operators, this can be a very high priority
  • Enables higher revenue per ride and per vehicle during times when the cost of acquiring additional supply to service additional rides may be high
  • Allows companies to “stay open for business” at all times by better balancing supply and demand, driving brand loyalty and customer retention
  • Better matches pricing to customer needs, ensuring the highest-priority ground transportation needs are able to be served

Cons of Demand-Based Pricing

  • Can be difficult to pass through to corporate customers who have pre-negotiated rates and a long-term agreement or contract; static pricing may be a requirement to win a new account
  • It can be very difficult to find the “just right” price that balance supply and demand accurately
  • Operating a truly data-driven surge pricing strategy requires expensive human resources and data analytics tools
  • Risks alienating long-time customers who are accustomed to certain rates for certain routes

If your business is primarily driven by retail customers and/or if you are heavily reliant on independent contractors, demand-based pricing may be a great tool for your business. Conversely, if your business is heavily corporate or you own vehicles and employ drivers, it may be a less attractive option. Regardless, it’s a pricing model that’s likely here to stay, the decision of whether to use it should be deliberate and informed, and it may be worth revisiting quarterly or annually to review whether it’s right for you.