Self Selection of Customer Base

Allowing your customer base to select itself

Your typical cab menu in Gujarat would look like this

The base rates are pretty high when you convert them to per kilometre rates for short distances. The high per kilometre base rate would be fine, if it weren't for the fact that they calculated the 3hours/40kms from "Office-to-Office". And most offices are conveniently located 10 kms from everywhere. The driver knows that you have no way of proving otherwise and he will take full advantage of it. This is something cab companies need to fix in their rate card - or do they?

This rate card allows the cab company to do two things

1) The Extra Kms column in the middle: Anchors the customer. It exactly lines up with the outstation rates when converted to per kilometre rates. And it is significantly lower than the per kilometre rate calculated from the first two columns. The availability heuristic suggests that customers will use this as a comparison and feel good about getting a good deal for a long trip. Read more about anchoring in this excellent and extremely readable paper from the founding fathers of this area.

2) Allows the cab company to shoo away people from using their services for short trips. Implicitly sends a very strong signal that this company is not here to compete against the likes of Uber/OLA/Meru/TFS. This allows them to zero in on their segment.

So it would seem that Jitu bhai knows what's up.

There is one drawback though. As a customer of short distance travel, this makes me feel cheated.(for longer distances, 10 km. extra doesn't add up to too much either way) And this will mean that even if I were to take a long trip at a later date, I would rather not go with cabs from this company, because I feel that they cheat their customers. So they are also shooing away potential customers.

It would seem Jitu Bhai needs an MBA.