Lyft to Give Drivers 5-Star Ratings and Automatic Tips. Here’s Why That’s Smart Business

November 15, 2018, 10:26 PM UTC

To passively increase its drivers’ take-home earnings, Lyft plans to add a default tipping option for its passengers. The ride-hailing service will also revise its star-based rating system, giving drivers a boost from riders who don’t rank their trips.

Lyft is in heavy competition with leading ride-hailing service Uber for passengers, but also for drivers. As app-based hailing has matured, turnover rates among drivers remain high, both from those knocked out of the system by failing to achieve consistently top-ranked passenger ratings, and those who exit because they can’t achieve a livable wage no matter how many hours they work, or even the equivalent of minimum wage.

New York City recently enacted a law that will require an effective wage as high as $17.22 an hour for Uber, Lyft, Via, and other services’ drivers.

That makes Lyft’s plans a defensive action as well, as many drivers keep both Uber and Lyft’s hailing apps open, and decide between the two on a ride-by-ride basis.

Starting in December, some riders will see an option to set a default tip percentage that will be applied automatically when they don’t rate the ride and add a tip. And while tips can currently be left only after a ride is complete, passengers will also have the option to tip while a ride is in progress. The rollout will reach more Lyft customers as 2019 starts.

Lyft said that redesigning the app’s tip screen in a version released in June 2018 resulted in 20% more earned from tips.

For ratings, Lyft is moving to a more sophisticated mix of rider intention, reasons for a poor score, and statistical clarity. Also beginning in December, passengers who don’t rate a trip will count as a 5-star review, something the company said makes sense because passengers often skip reviewing trips without problems.

Lyft will also drop the lowest-rated review for each 100 rides a driver completes, a common technique to reduce statistical noise. Finally, the company will now ask riders for a reason for a rating below 5 stars, and evaluate whether the response was about the driver or car, or about situations outside the driver’s control, such as traffic or weather. If it’s not the driver’s fault, the score won’t be applied.

A Lyft spokesperson said that drivers would get in touch with the company about one or two “outlier” low ratings they received that lowered their overall average. “This new safeguard will help ensure that our drivers don’t have to worry about irrelevant factors, and they can stay focused on providing great service,” the spokesperson said, noting the requirement to add a reason gives passengers a way to express non-driver feedback without penalizing their score.

Drivers for ride-hailing services like Lyft and Uber live and die by these companies’ rating systems. Drop far below a 5-star average, both the maximum and a perfect score, and [anything below 4.8](we will be continuously removing each driver’s single lowest rating for every 100 rides they give.) for Lyft means a driver needs “improvement.”

While Uber’s valuation may be $120 billion by the time it launches a stock offering and Lyft’s a more “modest” $15 billion, drivers in many cities fail to earn minimum wage when gas, auto maintenance, tolls, and other expenses are figured in.