In all of the bus industry’s efforts to build strong, well marketed and communicated products, what thought is given to prices?

The age-old saga remains that for potential new and occasional customers, it is difficult to find out the fare before boarding the bus to pay. While it may seem a trifling issue to those of us who travel by bus or who know the general range of our fares, we should not under-estimate the barrier this can create to new custom.

Imagine stepping into Next, choosing clothes and shoes, and then getting to the till without knowing the prices. Clothes vary in price by some margin. Would you feel comfortable stood in front of a bus driver, at the head of a queue of regular passengers, not knowing if the fare is literally loose change or if it requires £10 to be proffered? Is that a step into the unknown that potential customers are even comfortable enough to take?

We live in a fickle society and one where people increasingly want to price match – perhaps even price matching bus against taxi, petrol costs, or the prospect of asking someone else for a lift In an age of online shopping, and resultant easy price comparisons for all manner of products and services being possible, how does the prospect of getting to the front of that queue affect peoples’ willingness to give buses a try?

Thetrainline.com manages to provide every possible bit of information on rail journeys – times, prices, via points, railcard options. And yet by comparison, bus operators are still some way from providing pricing information with such ease for all their journeys.

Do we know how well we actually do in informing even existing customers of the better value tickets we sell? Even evening, off-peak, day, weekly and monthly options are not universally understood in my experience. Once we start to talk about ‘zones’, eyes will begin to glaze over. Talk about ‘stages’ and I am sure that people think we operate on another planet.

At TCUK we’ve been looking at pricing and fare structures for a number of operating companies within more than one group during 2013. One thing that is really striking is the needless complexity of fare charts;
huge tables of small increment single fares that have clearly grown up over many years, no doubt with a few twists here and there in the past to take account of regular complainants, new housing developments, route diversions, and long since forgotten competitor services. When you look at them in all their complexity, it is clear to see the logic of simplicity. Explaining the vast array of fare stages would be impossible, without then trying to show return prices! Simple fare structures with the minimum number of fare bands provide much more marketable and easily explained and remembered fares.

There are fare structures that stand out as beacons of unattractiveness. No names mentioned: £6.40 single, £7.20 return, £7.00 day ticket. As a customer, if I want to make the return journey I’ll buy a day ticket because it’s cheaper than a return. My perception is probably not that I’ve just bagged a day ticket for less than the return, but that I’ve been forced into buying a day ticket for unlimited travel that I don’t want, just to get the best deal. I wonder what the logic is that a return is more expensive than a day ticket, probably thinking that it’s some nasty ploy!

Worse still, if I want to travel to see a friend, stay for the night and return the next day, I have to pay £12.80 instead of £7.00. Would I do it? Probably not at that price!

And I bet (actually I know because I’ve seen the data) that few people ever buy a single end-to-end on the route. I can deduce that the price is simply a barrier to one-way journeys. The question in my mind is why have a single fare that is so high and unused. Much better to peg the single back to sit in line with the return at about £4.00, which may actually put some bums on seats!

Price is not everything, we are told; frequency is the principal driver of bus usage. I have to say that I’m not actually so sure these days. There is now clear evidence of resistance to price increases, and we live in a society where the recession has driven retailers fighting for survival to promote value harder than ever. There’s an ongoing debate about the relationship of fares to quality where on-the-road competition exists. Stagecoach used its Magic Bus product to differentiate its own markets, selling traditional high quality bus services at status quo fares, while running lower specification cheap buses alongside them. The market segmentation seemed to work well in student towns and cities, and certainly presents us with interesting anecdotal evidence of consumer choice. The problem of course, is that few customers do have that choice. High fare operators will always argue that their customers pay for their quality, but in reality most have no choice!

I think food retailers are ideal in making us think more about how we price our services and products; not because food is a direct comparator to bus travel, but simply because the food retailers work so hard to get their pricing right.

In 2007 (a while ago, but nevertheless the principle is relevant again today), there was a ‘battle of the chickens’. Asda and Tesco were locked in a price war, continually claiming to be the best value retailer. There was a constant ding-dong of new offers, price promises and comparative basket of prices being thrown at consumers. But then, to quote directly from The Guardian: “When Asda slashed the price of its 1.55kg chickens by 22%, the market was both appalled and attracted, with customers clearing shelves of the birds while farmers warned that they could not produce safe, healthy chickens at such low prices. Tesco will now sell the same size bird for £3.39, a rise of 4%. It is, hopes [Tesco], a price increase that will draw the shoppers through the doors by reassuring them of the quality of produce and humane farming methods, combined with a fair deal for producers.”

We shouldn’t think too deeply about the welfare of chickens in setting bus fares; but there is clearly no single answer in respect of quality versus price!

But perhaps we should look more closely at the promotions and language that supermarkets use to entice not just their rivals’ customers to them, but to encourage their own committed customers to spend more and to buy more, and their occasional customers to commit to them for their whole shop.

We assume that ‘singles’ and ‘returns’ are self-explanatory terms. I’m of a mind to believe that we should undertake a small piece of research nevertheless, just to understand whether what we understand clearly is what our potential customers also understand – just for reassurance perhaps? When it comes to other products perhaps we do get overtaken with fancy names though. I’m sure that to an existing Stagecoach customer, a ‘Goldrider’ is a product they understand. I’m not so sure though, that someone driving round in a car is as clear about their alternative transport cost?

I’ll admit to getting a little bit excited about prices (yes, fares!). There are two things that really interest me. The first is to understand how simple we need to make the offer, and how simple we can make it, to make the communication of fares simple enough that we are able to market fares for individual journeys and routes effectively.

The other thing that I’m interested in is something that has only occurred to me in the past few months. In Tesco (the Isle of Wight has yet to be graced by Asda), there is little marketing of multi-packs any more. The fact that 40 litres of wood-based cat litter is proportionately cheaper than 10 litres is no longer that marketable a fact. We pretty much know that the bigger the bag, the less the marginal price. But what there is an absolute bombardment of ‘three for the price of two’ offers. Even these take different forms – three for the price of two, and buy three and get the cheapest free, for example. It occurs to me that consumers must be better at responding to these offers. So perhaps we need to be more imaginative in selling our products. Perhaps for example, instead of selling a monthly ticket at a 25% discount on the cost of a weekly, we should be selling it as buy three get one free?

The pricing of bus travel is very much a matter of horses for courses. It will depend very much on local conditions – in the local economy as well as the local market for travel. But one thing really strikes me – that perhaps the bus industry has yet to fully exploit the power of its pricing strategies and structures. Perhaps developing new pricing structures and marketing strategies is a relatively cheap way of achieving revenue maximisation that we have been missing for too long?

 

About the author

Prior to forming tcuk (Transport Consultants UK), Marc Morgan Huws worked for Go Ahead Group as a divisional director at its Go South Coast business. He has previous experience in the local government, campaign management and public affairs

www.transportconsultantsuk.com

 

 

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