Uber Eats added a surcharge of $4 for all food delivery orders under $20. Why did uber eats add this surcharge? How is it going to change user behavior?

Clarifying Question:

Q: Is this surcharge for every user category or only for certain user?

A: Every User

Q: Is this for a paticular location?

A: No

Q: Is this Surcharge is due to high demand as compared to supply in a particular area?

A: No

Q: Is the Uber trying to move the users towards more AOV or trying to convert the user towards the subscription plan.

A: Yes

Problem Statement: Uber Eats added a surcharge of $ 4 for all the food delivery orders under $20. As a PM, I need to investigate how it is going to change the user behaviour.

User group

1. Young People(18-25)

2. Middle Age(25-50)

3.Coorporate Owners

Young People(18-25): These are the people who don't like to cook and like to order 4-5 times a week but they are always restricted by their budget as they are either a student or in the early days of their career.They will get more affected by the increase in surcharge and the behaviour can be changed in the following ways:

• Their mode of shopping will get shifted to offline.
• They will start cooking by themselves till the surcharge prices are high
• They will start looking for monthly or anually subscription which will take away the surcharge pricing from the final bill which is the Uber Eat goal is to move the user towards the subscription plan.

• They will make their order average value more than $ 20 as they order 1 -2 times a week and they have more purchasing power than the young people.
• They will look for the monthly or anually subscription plan which can cut down their surcharge.

I would first try to understand the prompt clearly and ask some clarifying questions.

- Is this initiative location specific/agnostic?

- Is the initiative applicable to all types of users? (First time / Repeated etc.)

- Is the initiative planned to be a specific time-bound activity?

- Any insights on how and where the surcharge flows into the system? (into uber / delivery partners / restaurant partners)

For the sake of this response, I'll assume that this initiative is a general one, applicable to all users and the surcharge collected flows to Uber itself with no sharing % to other partners.

There could be numerous reasons for Uber to carry out this initiative:

1) Chasing profitability / more profit margins?

2) Established a strong market hold & share compared to other brands in a certain area/locality - which they are trying to leverage

3) No real alternatives for the customers apart from relying on delivery services - which they are trying to leverage

4) Delivery partner shortage / Restaurant partners operational issues 

Next, I'll explore the user persona of someone order from Uber. 
 

Students: 18-22 years old, can't cook (mostly), orders as a need, less purchasing power, orders 4-5 times/week, AOV lesser than $20.

User behavior change for Students:
- Frustrated, would try to explore other options/alternatives.

Alternatives (in the order of likelihood) :
- Grab an alternative of the same value from an offline store.
- Share with a friend to inc. OV > $20. 
- Consider subscribing to a better plan which could eliminate the surcharge (if any).

Early working professionals: 22-30 years old, can cook but are busy during weekdays / they prefer ordering out during weekends, orders for convineance, relatively higher purchasing power, orders 1-2 times/week, AOV in the range of $20.

User behavior change for Early Working Professionals:

- Would be relatively less concerned but still would try to explore other options/alternatives.

Alternatives (in the order of likelihood) :
- Would consider Batch cooking for the weekend.
- Consider subscribing to a better plan which could eliminate the surcharge (if any)
- Would prefer increasing their AOV to greater than $20.

Miscallenous / Commoners: 25+ years old, can cook but prefers ordering out once in a while, orders for exploration, avg. purchasing power, orders 1-2 times/month, AOV greater than $20.

User behavior change for Miscalleneous/Commoners:

- Would be very less concerned /heavily concerned (subset) but still would try to explore other options/alternatives. But since they are not frequent customers, their AOV's tend to be greater than $20 when they do.