While Uber has become the status quo for on-demand car service in the U.S., so has its pricing model—the so-called ‘surge pricing’ that multiplies the cost of a fare during times of high demand.
Now Gett, an Israel-based on-demand car service app, is out to lure consumers away from its competitor through its blend of fixed rates, consistent pricing and one very un-Uber promise: No surge pricing, ever.
The idea behind Uber’s surge pricing is simple: When demand for car service goes up, so does the cost of a given fare. But, surge pricing can also drive the cost of a ride into unreasonable territory for a lot of customers and that’s where Shahar Waiser, Gett’s CEO, sees opportunity.
Waiser launched Gett in 2010 and quietly entered the New York City market in September of last year. His strategy? Be the most attractive option when surge pricing takes Uber fares skyward and let the company—rather than the consumer or the driver—take the hit for any costs associated with demand, traffic, weather, or other delays.
Gett isn’t necessarily trying to challenge Uber on prices across the board. Rather, it sees its competitive advantage lies in its price stability and the fact that riders never pay more than they are quoted at the beginning of a ride (not including tax and tip). “There’s no point in coming here and offering the same service at a discount,” Waiser tells Fortune.
The amount a passenger pays for a given route with Gett—say between his/her home and office—remains the same regardless of mitigating factors that can force Uber’s pay system to charge more.
The ride-hailing app’s pricing model grew out of the company’s lucrative transportation business. Though Gett is new to North America (on this side of the Atlantic Ocean the service is currently only available in NYC), it does significant business across the UK, Russia and Israel. Waiser says the company is expected to do $500 million in revenue by the end of this year.
In participating countries the service is available to anyone, but most of its business and impressive growth comes from its roughly 2,500 corporate accounts through which companies arrange on-demand rides for employees and clients. While individuals might tolerate the unpredictability of surge pricing, companies typically won’t, Waiser says.
When the company started it decided to carve up cities into zones and offer fare ceilings for rides originating and terminating within those areas to entice business to sign up. It’s a strategy, he says, that the company has brought to New York City and will translate well for customers.
When Gett launched in NYC last year, it promised that rides in Manhattan between Houston Street in the south and 52nd street in the north would never exceed $10. This week, the company extended its zones and will now have a similar fare ceiling in place from Houston to 72nd street, with $15 as the maximum fare regardless of time of day, duration of ride, or other factors.
Gett doesn’t completely rebuke the idea that incentives are necessary to keep drivers behind the wheel during the worst of times. While Uber boosts fares during the least attractive driving hours, the transportation app simply pays its drivers more out of its own pocket to keep them on the road. Gett drivers are compensated by the minute and the rate they receive can fluctuate just like surge pricing.
The company leverages its big data expertise to set reasonable fares and ensure that it makes more money than it loses, which also means its profit margin is more likely to fluctuate. Given that the app’s prices can be cheaper during times when Uber drivers become most expensive—which are often times when people most need to travel—the opportunity to eat into Uber’s market share is significant.
Though Gett’s New York City service is currently only available to individual consumers, the company will soon launch a corporate version of its transit service for NYC-based businesses. Once passengers begin to see that they can get around the city, even at peak times, for predictable—and fair—rates, going back to surge pricing will be hard to justify, Waiser says.
“We’ve seen enormous success internationally with this model,” he says. “Once people live with the knowledge that there’s a better option, magic happens.”
