Welcome back to our third blog in our series on how to win ‘the battle for the customer'. In this blog, we present the "expansionist" companies and we analyse how to provide better passenger experience.
Downward pressure on fares, upward pressure on service quality and innovation, and greater efficiency are – in theory at least – benefits that competitive markets tend to deliver. In the passenger rail sector, these objectives could be better achieved through greater competition between train operators – so called ‘on-rail’ competition. Some rail companies are actually seizing the opportunities presented by an open market to:
- grow their networks,
- diversify revenues,
- attract new customer audiences by operating international – the expansionist railways.
How to expand to a profitable rail service?
As the dust settles after the first wave of deregulation in Europe, it has become clear that expansionist rail companies seeking to take their operations across borders are facing competition. In new international markets, expansionists also have to compete with the current domestic rail operator – who will possibly be a ‘consolidator’, seeking to build their domestic network and strengthen their market position against new competitors.
International cooperation between regions also has an important role to play when it comes to cross-border travel, with all the economic benefits this can bring to both countries. However, there has been a spate of cross-border service withdrawal, with much outcry, putting the question of profitability of running such services.
But what should expansionist rail companies do to capitalise on international services and become profitable?
- Adjusting their distribution strategy to effectively sell to both domestic and international travellers, across all distribution channels.
- Adhering to industry standards, essential for rail companies forming strategic partnerships, in order to facilitate the sharing of timetable, tariff and reservations information.
- Combining rail travel with cross-selling products such as hotels and destination would integrate rail into the travel ecosystem, thus giving expansionists better visibility in the travel booking process.
To successfully expand and gain market share in new and international markets, expansionist rail companies will look to establish competitive differentiation through their customer offer. They will need to get on the top of the traveller wish list when it comes to the booking decision. This coupled with a new strategic outlook on distribution time to market, will see an introduction of more real-time and up-to-the-minute campaigns to counter competitive promotions. Focussing on, and addressing, the traveller demand by analysing customer data - and that means Big Data, will provide new sources of revenue.
Expansionist rail companies are in a perfect position to fulfil travellers’ needs and expectations of modern rail travel: a survey conducted by YouGov on behalf of Amadeus found that almost 60 percent of respondents indicated that they would like to be able to reserve “connecting rail travel and other modes of transport” from the rail station. Cross-border services and better integration between services will allow expansionist rail companies to address this need.
CREATING NEW REVENUES
One of the principal opportunities for subsequent expansion of international operations is the potential to create a new, fast-growing source of revenue and differentiate their offer.
Expansionist rail companies can explore revenue opportunities such as ancillary services including onboard Wi-Fi and meals, which will necessitate the identifying and addressing of traveller needs. To increase revenues via ticket sales, reaching the traveller, wherever they are in the world, via the distribution channel of their choice will be imperative.