How would you price a Tier 1 and Tier 2 Uber subscription?

Per day, 8 hrs of drive = 480 minutes per day
Every trip is approx 30 minutes + 10 minutes break = 40 minutes
Total number of trips + break = 12 trips / day
Trip could be 5 miles or 30 miles , assuming 15 miles per trip
- 15 miles * 1.50$ + 5$ = 25$ (approx)
- Total earned per day = 25$ * 12 trips = 300$ per day , per month (20 days ) = 6000$
- Total number of miles per month = 15 * 12 * 20 = 3600 miles

Competitive pricing :

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Taxi costs = 3$ per mile

100 mile card = 300$ per month

200 mile card = 600$ per month

Cost based pricing :

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For 100 mile card to drive 3600 miles , we need = 3600/100=36 cards

To earn 6000$ , cost of each card needs to be 6000/36 = 166$

For 200 mile card to drive 3600 miles, we need 3600/200=18 cards

To earn 6000$, cost of each card needs to be 6000/18=333$

To gain profit of 40%,

100 mile card to be sold at 232$ ~ 230$

200 mile card to be sold at 466$ ~ 470$

@Nag · Answer 2 · 2021-08-14T14:55:54+0000

Step 1 - Clarification

What is covered as part of subscription? e.g. Service fee waiver or pre paid 100 miles etc., Any time of the day restrictions, Type of ride

Step 2- Product/Company

Uber is a ride hailing app, its the market leader in its segment, the app itself is in growth phase and the market is also in growth mode. Lyft is the closed competitor. Uber is not profitable hence the objective would be to remain competitive and become profitable

Step 3: Objective

Competitiveness, Increase market share, Revenue and Profitability

Step 4: Pricing strategy

Cost basis, Competitive

Step 5: Compute price

Assume two subscription levels 100 miles/month and 200 miles/month

Had the user used taxi, it would be cost 100 x $3/mile and 200 x $3/mile viz. $300 and $600 respectively -->A

Cost basis computation:

Assuming car operates for average 3000 miles/month

Cost/month to operate the service= Salary of driver + EMI of car + fuel + Maintenace + Insurance =~$5000/month

Assuming 70% utilization of car miles due to waiting and idle time= 70% of 3000=2100 miles

I need to earn $5000 by driving 2100 miles

If i had sold 100 mile cards, I will get 21 cards and each card can be sold for 5000/21= $238 for breakeven

If i had sold 200 mile cards, I will get 11 cards and each card can be sold for 5000/11= $454 for breakeven.

Thus, I can sell 100 mile card for $260 and 200 mile card at $500.

All variable described can be modelled as a quadratic equation which can then run against data sets to compute the variables

Step 6: Summarize the solution