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This is a Test. This is Only a Test. Four Takeaways from Doordash Testing the New Pay Model

You may have noticed Doordash Testing the New Pay Model at scale now, especially if you are active in any driver forums.

There is panic. You see all the “see? I told you so” folks who didn't want the model changed. Dashers are in an uproar.

It's a test, people. It's only a test. Give it time, don't jump to conclusions.

Doordash Testing the New Pay Model: This is Only a Test
Doordash Testing the New Pay Model – This is only a test

Understand How Testing Works

Here's the thing you must understand: Testing does not mean this is what the final product is going to look like.

You have to understand how testing works on things like this. It's something that you especially see in marketing. Marketers will put out several different messages that are all similar. They tweak words, they tweak images, they tweak headlines. They measure the results. And then They tweak some more until they find the right combination.

That's what Doordash is doing right now. This is the first time they are actually testing the new pay model at scale, to the point where enough people notice it. They're going to tweak, they're going to try different things.

Their Objective: Why is Doordash Testing the New Pay Model?

I keep harping on this message, but it's important. Doordash has to get their deliveries completed. If the restaurants accept the delivery orders, prepare the food, and the food sits there and isn't picked up, the restaurants waste a lot of money because they don't get paid for this. If restaurants lose too much money, they quit using Doordash. And then, If customers don't get their orders? THEY quit using Doordash.

How do you think Doordash passed Grubhub in the first place? Grubhub is already experiencing this problem.

If Doordash pays too little, drivers won't accept the deliveries. And if that happens too much, Doordash loses their edge over Grubhub. They fall back with the pack.

They cannot let that happen.

So the question is, how low is too low?

THAT is what Doordash is Testing the New Pay Model to find out right now.

Desirability and the New Pay Model

Let's take a look at the pay models:

The current pay model is base ($1) plus tips plus promotions plus “Doordash additional pay.” The Doordash additional pay is added if base plus tips adds up to less than the additional pay.

The new model will be base plus tips plus promotions. The difference is the additional pay is going away.

But, is it?

Look at what they said would calculate a base pay based on the “estimated duration, distance, and desirability of the order.” (the words were theirs, emphasis mine) What that means is, if they find the order is not desirable as it stands (once the tip is figured in) they will add to the base to make it desirable enough.

How much is enough?

THAT is what Doordash is testing the new pay model to find out right now.

Doordash will adjust the desirability part of the base pay enough to get orders accepted.

But they're only going to adjust it JUST enough.

We know that Doordash tends to adjust the guaranteed pay on a delivery right now if it's not being accepted. If too many dashers pass on an order, they increase the value until someone accepts. But here's the problem: It takes time to offer an order, have it rejected, offer it again, have it rejected again, and so on. If it has to be offered too many times, the order is now in danger of being late.

So they can't start with too low an offer. They need to figure out where to start out.

This is what they are testing right now.

Think of it this way: Have you ever gone to a garage sale, found something you like, made an offer, and they accepted it right away? Did you think to yourself, maybe I could have offered less?

That's what Doordash is testing right now.

Say the customer doesn't tip. They know the order isn't desirable. So they use that desirability feature of the base pay and make the base pay $6. Would they have taken it for $5? Would someone have taken it for $4? How many Dashers would do it for $2?

Developing a base line.

I'm pretty sure Doordash knows that most drivers aren't going to accept a $2 delivery offer. But a few will. Is there a high enough percentage that they can get away with offering $2 deliveries right off the bat? THAT is the part of the pay model Doordash is testing right now. If enough people accept the $2 offers, they can start there. Otherwise, they move up, test some more, adjust again, test some more, etc., etc.

Because they are offering $2 offers right now, do not assume that will be the norm. The bottom line is, they have to get those orders delivered. They are smart enough to not pay too low and leave it that way. But right now they need to understand patterns, they need to know where to go with this.

Four Takeaways from Doordash Testing their Pay Model

Using Dashers as Guinea Pigs and Statistics tells us a lot about how they view their Dashers.

I had a comment on another article from Steve in Dallas. He was one of the lucky ones to be tested. His wife also dashes in the same market and she's still on the old model.
Steve said he made about a fourth of what he would normally earn.

I understand how the testing works and why they do the testing, but watching this testing also says a lot about the ethics of the company. I'm sorry, but people aren't dashing because they love just driving food around. They're doing it to earn a living, or to supplement their income. To suggest that $2 for a delivery is anywhere near acceptable for total payment for a delivery when it costs more to do that is unacceptable. Doordash is playing with the livelihood of the people who are ‘lucky' enough to test the new model, especially when they test the low end of the model.

Doordash wasn't ready to make this change.

Doordash announced a new model would happen in July. After that it was pretty much crickets. In late August, they sent out details of the new pay model (without much detail). They said it would happen next month. It's next month, and they're just now starting to actually test the actual model in a way that's noticeable. It's apparent now that the actual change will happen later this month.

I'm pretty sure this was a very sudden decision. I don't think that this was about them dragging their feet as much as it is them needing time to figure out just what this pay model needs to involve.

The timing of this is bad for Doordash.

Doordash cannot afford a PR nightmare right now for two reasons: AB5 and IPO. With pressure mounting in California to force them to use employees, bad press about how they treat their Dashers would be disastrous. After Uber's disastrous IPO and post-IPO performance, investors will be nervous about buying stock in Doordash. This is not a good time to piss off so many drivers that Doordash cannot fulfill their orders and loses market share.

I think this means that Doordash is not going to let the final product be anywhere near as bad as it looks. Obviously, that assumes that the powers that be are smart enough to understand the ramifications if they don't. I'm losing confidence in that.

It is more important than ever to set your price by accepting and rejecting orders.

I talk about this in more detail here. Doordash is testing their pay model and playing a game of ‘how low can you go?' If you accept those $2 offers, that's telling them they can go that low. Hold your ground.

If holding your ground means not getting enough orders, you absolutely need to have other options. You need these options open anyway in the event that Doordash really does botch this new pay model that they're testing.

Hold your ground. Let them know your price. If they aren't willing to meet your price, find someone that will.

Could this help someone else? Please share it.

Dasher

Thursday 12th of September 2019

I would not worry about DD, in so many instances it charges the customer much more for the food than the menu price. I have seen as much as a $10 discrepancy on a medium order. The driver never sees any of this money. I was told that DD SETS the menu price not the vendor, I think this is wrong, even though I drive for DD, I rarely order from them. Because while I do not mind paying a delivery fee and tip, I do not want to pay more for the actual food.

ronald.l.walter

Thursday 12th of September 2019

I'm curious. Since you deliver you might know the answer on this - but do you find that the places where Doordash charges so much more are ones where the Dasher has to place the order?

Doordash gets a commission for the sale on top of the delivery fee they charge the customer. I think they have different levels of partnership and that determines how they do it. There are a lot of places that the price through Doordash is the same or close as it is on their menu and in those instances, Doordash is just taking a commission off the sale price. I think you'll find those are usually the orders that are prepaid. But other places, the restaurant wants their full price and isn't willing to pay a commission out of it. In those instances, Doordash marks it up and they get their money from the markup - and I'm guessing most of those are the restaurants where we have to pay with the red card or place the order. Anyway, just a hunch.

Brent Taylor

Tuesday 10th of September 2019

I think in the short term if you charge customers more (realistically what it should cost to have food delivered) less customers will opt for delivery. For others, especially if presented well, it will make no difference. Food delivery is a discretionary purchase of those with the disposable funds to pay for it. But in the long term, because food delivery has become so popular, really across the income spectrum, the market will rebound and even grow. And if Doordash, for example, gets the reputation of taking care of their drivers, of being a great company to deliver for, then both customers and restaurants will support that.

The key is communicating that the costs of delivery are not being met, and that drivers are absorbing that inequity.

Nancy pool

Wednesday 11th of September 2019

i will not go no lower than 5.00 i have been fulltime since i strted but i have cut down my hours because they changed thepay scale .im approved to drive for another company so itd up to them if they want to loose drivers because yhat is going to happen with new pay scale

ronald.l.walter

Tuesday 10th of September 2019

I agree completely. I come from the telecom world, and I really date myself by saying this but I remember a time when long distance service at 25 cents a minute was a HUGE bargain. There was such a race to zero that no one pays for long distance any more. It feels like gig companies are starting that same thing - trying to outdo each other on delivery fees. It really takes one company to step up and do the right thing.

And you are TOTALLY right about charging realistically. Hello, Mr. Customer, you are hiring someone to bring food to your house, usually for a half hour of their time, give or take, and your driver is using their car. Do you really think $4 is a reasonable amount to pay for that?

Brent

Monday 9th of September 2019

It was simple. Pay the guarantees you were giving without using tips to pay them. But there’s an easier formula. Estimated mileage = $ guaranteed. If that costs DD too much then charge restaurants and customers more. Of the latter, seen this marketing making delivery as cheap as if the customer went and got the food in person — so why not stay at home?

ronald.l.walter

Tuesday 10th of September 2019

I think you hit the nail on the head there. People want to essentially hire someone to bring their food to them without paying a reasonable amount for that hire. These apps cater to that by lowering delivery fees and lengthening the deliveries. And now they have backed themselves into a corner. They can't charge restaurants more - they're already at about a breaking point where restaurants are pushing back. And if they charge the customer more, the customer goes somewhere else. And it's the driver who gets screwed in the end.

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