Now that the new Doordash pay model is testing, people are asking, is it good or bad? I've been in one of the test groups for two weeks now, and so far my answer to the question: Yes.
There's good and there's bad. In the end, is the glass half full or half empty?
Doordash was pretty much forced into a corner with pressure to change their pay structure. The actual structure was very simple: $1 plus tips. However they introduced a guaranteed earnings feature in which they used an unknown formula of various factors to determine the minimum that a delivery should pay, and if the $1 plus tip came out to less than the guarantee, Doordash would pay the difference. On paper it sounded good. In practice, people discovered that a tip from the customer often did not increase the earnings for a driver, and this lead to the accusation that Doordash was stealing tips. About mid summer, criticism of the policy reached a tipping point and Doordash announced they would change the pay model.
In early September, Doordash began a wave of testing the new pay model in various markets. They divided those markets into subsets, with some on the old model and some on the new model. It seems pretty clear that they were already set on what the model would be, but what they wanted to do was test the variables and see what worked best in regards to getting orders accepted and delivered. Being the geek that I am, I was pretty happy to be part of a test group.
Understanding the new pay model
Let me put it this way: We really don't know what it is. Doordash defines it as base pay plus tips plus promotions. They tell us that base pay is determined by the three D's: Distance, Duration, and Desirability. They don't tell us how any of those are calculated. In other words, the base pay is anything they want it to be. In other words, there is no transparency in the pay model.
Under the old pay model, it was $1 base plus tips plus “Doordash additional pay” (if the tips plus $1 came to less than guaranteed pay). Really the main difference is that they bumped up the base to where it is a minimum of $2 and there is no longer a “doordash additional pay.” But now instead of a set $1, base pay can range between $2 and $10. I wrote earlier that I expected the new pay model to be pretty much the same as the old pay model, the main difference being that they can now bump up the base pay on lower tip orders rather than identifying it as additional pay.
So, what have I found so far? Are they still supplementing tips? Are the payouts better? Has it been good or has it been not as good? Here are a few observations that I've had so far in the two weeks that I've been delivering.
There are better payouts and there are horrible payouts.
There have been a lot of $2 offers. That's the one that has a lot of people in an uproar. When you're used to a $5 to $6 minimum in your market, $2 is a bit of a shock to the system. I have to agree with the criticism on these offers, that it's absurd for Doordash to even think that's a fair amount to offer anyone for a delivery.
This is where I feel like it's a glass half full and glass half empty kind of question. I really emphasize setting your price through which orders you accept. So for me, I'm not bothered by the $2 offers. In fact, $2 for a short delivery is less insulting to me than 30 miles for $9. But that's just me.
When I run the numbers, I am averaging more per delivery. Does that mean that Doordash is actually paying more? There can be a lot of factors involved. Over the last 100 deliveries on the old model, I averaged $2.21 for the total of base pay plus ‘doordash additional pay.' In the past two weeks my base pay averaged $2.73 (it actually averaged $3.25 but there was one $21 base that was an anomoly that I decided not to add in). The Doordash portion of the pay has increased so far by 24%. Understand, this is not as significant as it looks. When you are comparing to $2.21 per delivery, that's not much.
The best thing about the new model, in my opinion: Better information.
In the past, Doordash presented a guaranteed pay amount, not the actual pay. There were many times where a large tip meant the actual pay was significantly higher. Now, Doordash is presenting exactly what the delivery will pay. This is much more like Grubhub in that regard.
I think this is significant. It helps me make better decisions. I can better choose which deliveries meet my pay requirements. It takes away the crapshoot of figuring out which orders might pay better.
My tips have been higher.
Under the previous model, tips were averaging at $4.55 per trip. Since starting this test on the new model, they've averaged $5.38, an 18 percent increase. I'm pretty sure that it's not about customers tipping more than they have before. I also know that 2 weeks of data are not enough of a sample size to draw real conclusions from.
However, I don't expect it to be much different even with more deliveries. I think there are two reasons that the tip amount was actually higher.
- When a low tip is more likely to mean a low total pay, I'm less likely to accept that offer than I was under the old ‘guaranteed amount' model
- Under the old model, without knowing the actual payment amount, I was much more likely to pass on an order that had a higher tip, and under the new structure I have better knowledge that this is an order worth taking.
I'm finding that it's really more of number two than it is number one. I had really expected that it would be more about eliminating the super low tip deliveries, but it really turns out to be more about picking up more of the higher tip offers. Half of my current deliveries tipped more than $4, where under the old model only 1/3 were in that range. In fact, the tips over $7.50 were 18% compared to 11%. I think in the end, having more information about what the order will pay ended up being more profitable.
I made some predictions in earlier articles. How do those look so far?
I wrote a couple of things in the past when details started coming out. It's too early to tell if I was right on those things, but I'll touch on those topics and see what it looks like so far.
I wrote in the article linked above that I expected to see that base pay will be $2 on almost all orders and there would still be the same lack of transparency without a breakdown of how much is distance, duration, or desirability. My experience so far is that this remains true.
I thought the tip amount would continue to impact the base pay. That does seem to be the case but maybe not to the extent I expected. On my deliveries so far:
- Average base fee when the tip was $5 or more: $2.47
- Average base fee when the tip was between $3 and $5: $2.86
- The average base fee when the tip was less than $3: $3.50
I also noticed this:
- When the tip amount was $5 or higher, less than a quarter of the deliveries had a base pay of more than $3
- When the tip amount was less than $5, more than half of the deliveries paid a base pay of more than $3
The bottom line is that as a whole, they are paying out more out of their own pockets when the tip is better. As a whole, I stand by the idea that this is a watered down version of the old model. The difference is, they aren't supplementing EVERY low tip order like they did before. As long as people accept $2 offers, they will throw out $2 offers.
When they stated they would be testing the new model in some markets, I think some were thinking, “I thought they knew what the model was, why are they testing it?” I speculated that the part they are testing is the desirability factor, trying to find out how often they can lead with a $2 offer and trying to find the sweet spot for however low they can go while still getting orders delivered.
My observations are that this seems to be the case. It does seem like fewer $2 offers are popping up now that a couple of weeks have gone by. That obviously could be just coincidence, and it could be my bias is interfering with my perception. The problem is that I don't accept enough of the $2 to $4 offers to get a good picture.
I have seen some offers come across at $2, and a few minutes later the same one comes back in the $3.50 to $4.50 range. I took one of those out of curiosity. The total trip was 2 miles, there was no tip and the base pay was $4.11. It was originally $2. So it's very clear that Doordash is adjusting the base pay and doing it pretty frequently during the life of an order in order to make sure that deliveries are accepted.
How are they doing getting orders delivered?
When you look at it, this looks a lot like Grubhub. The highs are higher and the lows are lower. People are rejecting lower pay offers a lot more frequently now. So you wonder, are they going to have the same problems as Grubhub?
I don't think so. When you drive long enough, you get a feel for when things are really busy, when orders are stacking up, all of that. You see it in the frustration of restaurant workers when orders (usually Grubhub) are waiting to be picked up. I'm not seeing that so far, even in the really busy times. I think that is because Doordash seems to be a lot more flexible than Grubhub when it comes to adjusting the pay. They can resubmit offers to other drivers more quickly than Grubhub can as well. Doordash is going to struggle some with some later than usual orders, but I don't think it will be as bad as a lot of people think.
So, is the new Doordash pay model a good one?
Why it's good
My experience so far is, I like it better. Prior to the new model, Doordash orders were taking up about 25% of my business. These past two weeks they're closer to 40%. The payout on the orders I accept has been higher. Maybe the biggest difference I'm noticing is that in the past I focused mainly on times there was peak pay. I'm finding a lot more profitable orders during non-peak hours now, and that's encouraging.
Why it's not so great
My biggest reason to think the new Doordash pay model is not as good: there is something frustrating about seeing a $2 order, I won't lie about that. I like the way Tony (Team LMDU on Youtube) put it recently, asking “Why we gotta play these games?” There's a point where you know that they know that $2 is unacceptable. There's an understanding that the offer will probably get rejected a few times before they bump it up, so why not start with a bit higher? The obvious answer to the question is, because they can get away with lower. There are some people who will take those orders.
I'm going to be honest: part of me wants to get on those people for being dumb enough to take those. But hey, they have as much right to their choices as much as any of the rest of us. I think more than anything my frustration is that it's a clear sign what kind of integrity Doordash has (or doesn't have) when they take advantage of those people who do accept the orders.
How I feel overall about if the new Doordash pay model is a good one
I think, in the end, it's not the model that matters. The truth is, there is no pay model. Without any transparency, without any indication of how they actually determine the base, all it is is Doordash paying whatever they think they can get away with paying. That's not a pay model.
But I have to say, in some ways I like how they do it. In a way, it's like a negotiation. $2? Nope. $3.50? Naaaaah. $5 and we'll throw in a $7 delivery going the same direction? Okay, I can do that.
Doordash will continue to play some of the games they play, but to me it doesn't matter. What matters is if there are enough offers that are worth my time that I can make what I need to make. I like that I have better information. I like that there seems to be a clearer distinction between the orders I don't want to take and the ones I do. I'll be honest, the constant $5.50 orders were always in that fuzzy in between land where it's like, it COULD be okay if I can get it done quick. Changing away from that to something where I know what I'm getting really makes Doordash a stronger option for me.
Here's the deal: Grubhub cut prices by quite a bit, and a lot of drivers were able to increase their earnings. I don't see that this pay model is going to be a cut as much as Grubhub's was, but even if it is, that doesn't bother me as much. I do have better information on which to make a decision and because of that, I believe I can be more profitable than before on Doordash deliveries. That one good, to me, outweighs the negative in my opinion.