Lyft CEO David Risher: Surge Pricing ‘Deeply Unpopular’ With Customers
Lyft found that surge pricing is “deeply unpopular” with customers, CEO David Risher said in his annual letter to shareholders, released Thursday (April 24).
Surge pricing, which the rideshare company calls Prime Time or PT, balances supply and demand by raising prices when demand is high, thereby incentivizing more drivers to get online, according to the letter.
The company knew this was unpopular with customers, but the issue was clarified when Risher hit the road as a Lyft driver, as he does every six weeks or so, and picked up a rider who said she regularly wakes up early to check rideshare prices and if they are too high, doesn’t take the trip she had planned.
“It crystallized in my mind what I’d suspected for a while — it was time to break the PT habit,” Risher said in the letter.
To help eliminate the need for surge pricing, Lyft added features meant to increase the supply of drivers. The company added its Earnings Commitment in February 2024, ensuring rideshare drivers get 70% of rider payments, after fees, and other features in October that provide 5-minute delay pay, out-of-your-way pay and more transparent pay, according to the letter.
“By the end of 2024, we could see that these were the right investments when drivers chose us at record rates,” Risher said in the letter. “In Q4 2024, we had the highest number of driver hours of any quarter in Lyft history.”
In another effort to eliminate surge pricing, Lyft accelerated its work on a Price Lock feature that lets riders lock in a price for the rides they take most frequently, per the letter. It found this to be a “massive success.”
“The number of active passes has increased every month since November 2024, and 70% of Price Lock riders renew each month,” Risher said in the letter. “It’s been such a hit that in February of this year, we extended the hours to accommodate late-night commutes and other rides.”
Risher said that while the data showed that riders were still taking rides during surge pricing, that wasn’t the whole story. They were taking those rides “begrudgingly” and would not recommend Lyft to their friends.
“That difference doesn’t show up on a dashboard,” Risher said in the letter. “So we got to work, reducing PT and cancellations, which increased ride intents over time even as it improved the conversion rate, which led to record-high rides and active riders.”
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