mytaxi Increases Commission in Germany

[Rat Catcher]

The introduction of variable commission has already seen the company increase it's take by 10% despite German taxi drivers uniting to resist the change.

https://techcrunch.com/2014/03/12/mytaxi-marketplace-model-first-evaluation/

Introducing a radical new pricing model to an existing business is not for the faint-hearted. Just ask veteran German taxi app startup, mytaxi (founded back in 2009), which last January was preparing to shift into a new gear by switching from a fixed fee to marketplace model pricing in its home market of Germany.

Instead of mytaxi taking a set 79 euro cents fee per booked trip, drivers would be asked to choose the percentage revenue share per journey to give to mytaxi — via a slider that initially allowed them to select a proportion of  between 3 and 30 percent of the final fare to hand over to mytaxi.

The road to this brave new marketplace model did not run smooth, however. Quite the opposite; mytaxi co-founders Sven Kuelper and Nic Mewes found themselves spending “hours and hours” on the phone in the mytaxi call centre trying to reassure sceptical cab drivers who thought the new pricing was a dastardly trick to force them to pour a third of their revenue into the company coffers.

There was even a demonstration of around 150 drivers outside mytaxi’s Berlin office against the new pricing model.

The company responded to the driver mistrust by reducing the maximum revenue share in the new pricing model to 15% (instead of 30%). And, well, by spending a lot of time trying to reassure drivers about why they were shifting to a marketplace model and asking them to give it a go.

Ultimately a union-style agreement was struck among cabbies to universally select the lowest possible revenue share (3%) — which was at least an agreement that drivers would start testing the waters of the new order.

“The taxi drivers were demonstrating against the new pricing model. That was incredible,” Kuelper tells TechCrunch. “And that was because the pricing model was new, it was something the taxi industry hasn’t experienced before, there were plenty of misunderstandings in the market because it was so new.

“But then at the end of the day most of our taxi drivers said ok we will give it a try — after convincing them via call centre, via thousands of emails. Nic my partner and I spent hours and hours in the call centre trying to explain this new pricing model and what is behind it.

“They were very very sceptical… They were afraid that they couldn’t get any tours if they don’t put 30% inside of the driver app.”

The result of the outreach to sceptical drivers was that most agreed to give the new system a try (some 17,000 of mytaxi’s 18,000 Germany drivers agree — so mytaxi did lose a portion of drivers as a result of the new pricing model).

“In Germany there’s no real alternative to mytaxi except the old traditional dispatch centres. We had 18,000 registered taxis in Germany, and at the end of the day it was 17,000 who said already I’ll give it a try with the new pricing… so we lost around 5% of our taxis,” says Kuelper.

Six weeks on from kicking off its experimental new pricing project, mytaxi has released the first tranche of data on how the model is working — and it shows a small increase in the average commission paid by drivers per journey: 87 euro cents, up from the 79 cent fixed fee of the old model.

This is despite around 50% of the journeys (in February) being assigned to drivers at a revenue share of below 5%. “We have a price increase, but a pretty low price increase,” notes Kuelper.

But he adds that the new pricing model has been worth the turmoil for another reason: an increase in the job acceptance rate — up from 85% to 91%.

“Our problem was is we had plenty of bookings — plenty of people who wanted to get a taxi — but we couldn’t assign all these tours because the price was fixed at 79 euro cents. And there were special hours during the day where the taxi driver said ‘no I’m not going to spend 79 cents on a tour because there are plenty of street hails’. And that was our problem — our problem was our success rate,” he says.

“That has shifted really tremendously. We have a huge impact on our total bookings because suddenly most of our bookings really take place — they work.”

mytaxi’s marketplace model is an alternative to the surge pricing system of taxi startups like Uber, which require the customer to accept a price hike if they want to get a cab during periods of high demand.

mytaxi’s system means the price for the customer does not change, but the revenue share for the driver varies based on factors such as whether it’s a weekend or a week day.

“When we have a lot of demand out there in the street, especially during the weekend then the cab price really decreases — then it’s always around between 3% and 5% [revenue share]. And then during the days it increases up to 8%, 9%,” notes Kuelper.

mytaxi average revenue share under the new pricing model has so far been 7%, it said today.

mytaxi is still clearly in the experimental stage with the new pricing, so has not yet rolled the system out to its other operational markets (Austria, Switzerland, Poland and Spain). That isn’t likely to happen til the end of the year, according to Kuelper.

And, after all the trouble it has had to go to to win over cab drivers to the new pricing system, he stresses that mytaxi has no short-term plans to increase the upper limit on revenue share — not for the next three years at least, he tells TechCrunch.

“I think we leave it as it is for now because otherwise we risk the trust that we so desperately tried to get back,” he says. “Because we’ve experienced such huge debate here… if we would put it back to 30% then I think we would risk losing a huge stack of our fleet.”

mytaxi has also tweaked the algorithm that assigns jobs to drivers to prioritize distance to the customer and quality of the driver, over and above price. Again, with the aim of reassuring drivers they are not being manipulated into handing over more revenue than standard market variables demands.

What has mytaxi learnt from the experiment so far? “We learnt a lot in regards to our communication. We learnt that trust is very very important — that you always have to have a good level of trust to your customers,” says Kuelper.

Having the courage of your convictions when trying something new is also key, he adds. “Everyone was so sceptical when we launched the new pricing model but we launched it and now it works out and everything’s fine and we are really really glad about the results.

“You always take a huge risk when you are implementing something so special and when you are the first.”

They're unlikely to experience any resistance when they introduce variable commission to Ireland, even if they go straight in at 30%.

[watty]

Why stop at 30%?  According to this July 2016 story from Rideshareguy.com,  Uber are getting around 40% in real terms!

TNCs like Uber and Lyft have long advertised that they charge only a 25% commission of the fares they earn. However, these figures ignore the “Booking Fee” that both companies assess on top of each ride, which goes solely to the TNC. The resulting effects of this fee and the 25% commission mean that when passengers step outside of their Uber and only see a $5 charge, the driver will only get around half of that.

To make matters worse, Uber and Lyft have consistently cut prices so that most drivers are now driving twice as far to earn the same $10 dollars that they made only two years ago. The result is that drivers are forced to drive longer hours while incurring heavier expenses.

[john m]

All predicted on Roys .WORKCAPTURE .Pity NONE of the so called reps ever stood up to them .12% commission no PUC and 5 minute waiting not a murmour but offer drivers a fare increase and reps are trying to stop it .

  I remember a young lad who toiled away to get a small bonus and was refused .This showed the sort of cunts we were dealing with .

[Rat Catcher]

Stir only 87c average per job in Germany at the time that piece was written. They get that on a €7 fare here after the driver allows €2 discount.* I wonder how much discount the German drivers allow on each job?

*excludes free waiting time.

[Taxi driver42]

And do they rip stickers off in Germany too?
Allegedly

[the driver]

I assume that Mytaxi are going to offer us the 3% deal in the next few weeks.Just seen that they only have 17,000 drivers in Germany which is about 4 times the size of Ireland.They must have been delighted to get Ireland's reputed 11,000 drivers onto the system seeing as we are paying 12%.This really shows we must take action against them now.

[Rat Catcher]

Can't see them offering 3% here. The slider would be more likely to run from 6% to 30%. However, we now have the radius slider so it would make more sense, from the company's perspective, to automate the commission slider with commission rates determined by the number of drivers within their predetermined radius of the job. Perhaps 30% when 10+ drivers are available, 27% when 9 are available, 24% when 8 are available, etc...

[john m]

Can't see them offering 3% here. The slider would be more likely to run from 6% to 30%. However, we now have the radius slider so it would make more sense, from the company's perspective, to automate the commission slider with commission rates determined by the number of drivers within their predetermined radius of the job. Perhaps 30% when 10+ drivers are available, 27% when 9 are available, 24% when 8 are available, etc...

  Self defeating Rodent .100 drivers on the Green job from the Shelbourne commission would be say 30% nobody would cover it .job dosent get covered Mytaxi lose the customer as they cannot get a My taxi cab .Same might apply if there was only one driver available in a plot .If cars are that scarce he might accept then cancel as he finds street hails that are looking for the scarce taxi in the area .More likely they will apply the commission based on your grade .Bronze 20% to encourage you to upgrade to Silver @15% or upgrade to gold @12% with ungraded casual traders @25% .There has to be some commercial reason  why they grade drivers Gold Silver Bronze .They already told us they average the grade over a 3 week cycle ...What you are suggesting is the inverted UBER principle where surge pricing will not apply to the passenger but instead they will apply it on the drivers side to  punish the driver for doing his job  I can see the merit in your suggestion .If drivers want to pay less commission dont be idol cover more work as the less available drivers in the plot the less commission those drivers will pay .Any hoo the one thing we can agree on is they are looking for ways to increase their share of our earnings .

[Rat Catcher]

I contest that your suggestion is self-defeating. Charging less to drivers that do more work significantly reduces their take. If they offered a job at 30% to 11 drivers I reckon it'd be covered. In fact, drivers would get used to racing each other to press accept first so the jobs would get covered even faster than they are now at 12%.... and the full-time scum will blame the part-time scum for covering them, the pre-dereg scum will blame the post-dereg scum, the young scum will blame the filthy stinking dirty pensioner scum, the white scum will blame them blacks, the union scum will blame the other union scum, the other other other other other union scum will blame non union scum, etc, etc...

[john m]

I further contest your contestion of my suggestion .By encouraging more drivers to reach the nadir of Gold status they will of achieved getting more jobs covered .Having tried using Mc Gregors and Masloes theory of needs they will just play on simple avarice and Freuds Ego V Id theory where they will rely on drivers wanting to be the best boy in the class .I could possibly see a situation where they will run a promo offering free Fleecies or pullovers or polo shirts to drivers who achieve Gold or Silver status on a regular basis .These garments will be worn by drivers as a badge of honour and will provide advertising for the brand .Wouldnt be surprised if they even offered you such a garment if you actually do drop in to the Dungeon ..sorry Depot .

[Rat Catcher]

I think your missing the point of the commission slider, erm. It is to allow drivers pay more for jobs when they are of most benefit i.e. when business is quiet. 11+ drivers available to cover one job would suggest trade is slow enough to charge the maximum rate.

Rewarding or penalising drivers for their loyalty is a different ball game entirely. Schemes like the level up bonus may be utilised for that purpose.

[john m]

The slider scheme will fail drivers will learn how to manipulate it by turning off the app when they are in a high availability zone as it would be mutually benificial to all in the long run to do so .Im sure some semi enumerate driver will come up with a plan .

[Rat Catcher]

The German drivers just agreed to leave all their sliders at the lowest point, 3% in their market. We don't have the kind of unity to do that here. I reckon it would be a success here, particularly if the radius slider was used to determine commission rates as suggested above.

The problem is that drivers already favour full-fare street work over buying discounted app work so there aren't many covering jobs at peak times or at any time in the city centre.

[Taxi driver42]

Try getting a taxi on a fri or sar nite between 1and 4 in townno chance with any app

[Rat Catcher]

They could cover peak/city work if they allowed drivers charge full fare (including PUC and waiting time) and capped weekly commission at a realistic level.