Let’s talk pricing
Written by Patrick Nangle, CEO of Modo
On June 1st, we introduced a structural change in our approach to pricing. We chose to “unbundle” our pricing. While this change had limited impact on Modo Plus members who have always been paying for a combination of time and distance, Monthly and Business members – who used to have 250 kms included per booking – would be charged for both time and distance; without any bundled kilometres. This has elicited some feedback from members and tells me we need to do a better job explaining our thought process behind the changes.
More than half of our members are co-owners of Modo. They contribute to our co-op’s capital by buying $500 in shares. Effectively, thousands of us co-own hundreds of vehicles, which are accessed through a digital booking platform. This model makes it possible for all members to enjoy the benefits of carsharing, while paying their fair share of the operating costs. Those who have not bought shares pay a modest monthly fee and slightly higher time rates instead. The sharing economy in the truest sense of that expression.
As a member-owned co-operative and social enterprise, Modo defines success differently than most businesses. By putting people before profit, we achieve success through beneficial impact on members’ household economics and through positive impacts in the communities we serve. In other words, we’re successful if our members can reduce their transportation related costs, while living in healthy and sustainable communities.
We aspire to make our vehicles as affordable as possible, by keeping costs low and targeting only a modest profit. That said, there are some corners we won’t cut, such as vehicle safety and cleanliness, and paying a fair, living wage. As the only certified Living Wage carshare provider, we don’t outsource work to contractors paying minimum wage, we believe that is the right thing to do for our employees and important to our community and our members.
Our intent with the unbundling is to better align our prices with the way we incur cost. This way we all pay our “fair share”, without some member trips subsidizing the trips of others. Some costs are more fixed (e.g. rent, salaries, insurance and parking) and best captured in a time rate, while others are more variable (e.g. fuel, repairs and maintenance) and best captured in a distance rate. We also added something new, the “co-op innovation fee”, to recognize that we need to continue to invest in new technology and processes, which needs to be funded on an ongoing basis. We determined the fairest way to do that was with a small fee per trip, approximating members’ relative usage.
When we analyzed the price differences resulting from the structural change, we determined it would be rather small for the vast majority of trips members take, but recognized there would be some exceptions. One of those exceptions is the iconic Vancouver to Whistler trip – typically a full day or two in duration and 250 km return, which resulted in them being considerably more expensive. We believe the recent announcement of our new Day Tripper, will be a good option for most members taking these types of trips.
I hope this helps clarify our thought process behind the recent price changes. While the impact to members will vary depending on the mix of trips taken, it is clear that for most people, shared ownership and use of cars is still far more affordable than bearing the cost of individual ownership. I do hope that you will continue to make our co-operative your carshare of choice and use Modo where it is the most affordable and convenient option available.
– Patrick Nangle, CEO