Customer Inertia, Customer Responsiveness, Customer Differentiation: Letting your customers choose to pay more by self selecting.

In most major metropolitan cities they have some kind of mass public transport to get around, in London they have the Tube, a Victorian built, rather smelly and dirty system of getting around. In Newcastle we have the Metro (run by the company Nexus), a similar idea but it only has two main tracks that basically cover the Newcastle surrounding region to the east of the city on the north and south of the tyne. By and large, the system runs mainly to time, though the carriages are definitely showing their age, and indeed, there’s been a lack of capital expenditure in general in the rolling stock (that’s trains to most people) though admittedly there has been some expenditure on one or two of the main hub stations like the new Haymarket development.

I use the Metro every day. I hate the Metro. I love the Metro.



Why do I love the Metro to start with, well, for me at any case, it’s a nice walk down to the Metro from my house. My local station isn’t too bad, smelly or horrible, and while you might feel occasionally that it’s a bit of a violent place, it’s that sense of ready to erupt violence that only Daily Mail readers of a certain middle class persuasion usually have. I’m sure any American readers of this Blog from New York would find my local Metro rather charming and quaint in comparison, as while the youngsters in hoodies at my local station play-act at being bad-ass, I’m sure most of them are all tucked up in bed by 9pm. They’re feral, but only in the way that a house broken cat is feral when it’s out and about, and turns back into a cute little tomcat when it’s back home wanting some milk. Anyway, back to the point. Why else do I love my local Metro? It’s a nice trip to work. I always get a seat as I’m at the end of the line and it’s a nice 35 minute trip almost straight to my place of work in which I can happily read a book or newspaper.

Why do I hate the Metro? Well that’s simple. For every bit that I love my easy morning trip to work, I HATE my evening trip. It’s a sardine can. Basically between 4.30pm and 6.30pm if you’re on a Metro that’s going to my end of the line it’s horrifically packed at peak times. Beyond the obvious of why I hate this, what I REALLY hate is the lack of response you’d expect from almost any other type of business. If the Metro company Nexus was any other type of company it would simply increase the number of trains at peak times to respond to customer demand. But no. As the timetable for Haymarket shows, trains run every 12 minutes at daytime and peak times, in other words, they’ve made no increase in trains beyond what they normally have for peak morning times. I hate this, any other type of business and I’d be long gone.

So what did I do yesterday? Despite my reservations, and my almost certain knowledge that the sardine can phenomenon is going to get worse, I renewed my Metro pass for around £450 and, like any good little accountant I worked out cost to myself, based on how many days I’m in work etc of around £2.14 a day return, £1.07 each way. That ain’t bad. Whatever my hate side of the equation, whatever issues I have with the Metro, I simply can’t get into work by car or bus cheaper than that on a per day cost. So I set myself the test of: what would actually make me change? I’m unwilling to change to another mode of transport at £2.14 as it undercuts a car by a vast amount. If I wanted to buy a car and drive to work even a small £12,000 Polo + on costs + petrol + parking is going to make the daily trip around £31 in total costs (Now I can tell I’m an accountant at heart!). In other words Nexus could, quite possibly increase the cost of travel to me by a factor of 5 or 10 per day, and I’d still happily pay it as it would still be cheaper than the alternative.

And this is what really riles me about public sector businesses like Nexus. Any other business. I’ll say that again; *any* other business, faced with this, would see the perfect route to letting customers pay more: simply introduce a premium or first class seating area and let customers self select how much they’re willing to pay. Let your customers differentiate themselves for you as a business according to their preferences. This is Business Marketing 101. If you have customers who are able to pay more, and have significant issues with packed to the gills trains like sardine cans, why not introduce new rolling stock which has first class/premium compartments and allow those who are willing to pay more to opt out of the sardine can? Let your customers vote with their feet, and allow those who want to choose to pay more to avoid the crowds do so. I’m sure there’s a reason they haven’t done this so far, probably to do with the cost of new rolling stock to start with (which, as I’ve pointed out though, desperately needs replacement anyway though!), and the cost of financing that expenditure. But I see it as such an easy route to more money for Nexus. Why wouldn’t you, when you have 20 year old rolling stock, not choose new trains which allow you to differentiate your customers and charge higher costs for a more premium product?

I Love the Metro, I hate the Metro. And I’d happily self select and pay an additional couple of quid a day to be able to overcome my hate part as a customer and have a nice premium class seat to read my book in on the train home.