Answer to creating value from nothing - Solving Pricing Issue Take II

Take II on "One of the Real problems Product Manager tackle - Here is the riddle."

To determine how much more to pay drivers per trip, you can consider the cost of acquiring new drivers and the average net revenue generated by drivers. If the cost of acquiring a new driver is $2,000 and the average driver generates $500 of net revenue per month at a 20% take rate, you can calculate the pay per trip required to break even on the cost of acquiring a new driver as follows:

Break-even pay per trip = CAC / (average net revenue per month / number of trips per month)

= $2,000 / ($500 / 20)

= $20

Since the prevailing wage drivers are used to earning for this trip is $20, you would need to pay drivers more than $20 per trip in order to increase the pay for drivers.

To maximize net revenue, you could consider increasing the pay for drivers by an amount that is sufficient to attract more drivers to the platform, while still maintaining a positive net revenue. For example, if you were to pay drivers $22 per trip, you would still generate a net revenue of $3 per trip (assuming a 20% take rate), which is a net increase in revenue of $1 per trip compared to the current situation where only 70% of rides are finding a driver at the prevailing rate of $25.

It is important to consider the impact of any changes to driver pay on rider churn, as riders who have experienced "unable to find a driver" situations may be more likely to churn. You may want to consider implementing a bonus or incentive program for drivers to encourage them to accept more trips, rather than increasing the pay per trip for all drivers. This would allow you to target the additional pay to drivers who are actively participating in the platform and helping to increase the supply of rides, while still maintaining a positive net revenue.

My earlier take on this: 

Answer to creating value from nothing - Solving Pricing Issue (

Solution to New Riddle  Posted:

Real Problems We Tackle: Pricing #2 My Take on this: Part I (
Data Science Project for Price Optimization:


Ajmal Muhammad 可汗

I am Open-Source Advocate, Cloud Consultant, I have experience in Digital Transformation, Security, Data Analytics, ML/AI, PMO, Product Managment focused on Growth Strategies and enhanced customer experience and Experience design. I’m passionate about creating usable digital products. I have worked with incredibly talented people across different companies. Skilled in Entrepreneurship, Startup, Open Source, Digital Transformation, Cloud, Security, Data Analytics, AI/ML Consulting, Investment Valuation, Seed Capital, Board of Directors and Advisory. Strong business growth professional with a Postgraduate Diploma focused on International Business from University of Cambridge. |► Connect with me on | linkedin

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