DEEP DISCOUNT FARES: BUILDING TRANSIT PRODUCTIVITY WITH INNOVATIVE PRICING

Abstract

Deep discount fares, a new approach to public transit pricing, enables transit operators to increase both revenues and ridership simultaneously. The deep discount approach can help achieve substantial increases in productivity and meaningful reductions in operating subsidy requirements. This prepayment, target marketing strategy can successfully offset the ridership-reducing effects of a fare increase or revenue losses typically associated with a fare reduction. The deep discount fares strategy emerged from insights gained through innovative transit market research methods and reflects new views of the transit-riding market that challenge longstanding industry perspectives. Its application emphasizes market segmentation, fare prepayment, direct marketing and aggressive promotion, and clearly demonstrates how the industry's continued lack of emphasis on marketing actually reduces revenues and increases subsidy requirements. The strategy also offers opportunity to increase the commitment of transit users, focus increased attention on consumer preferences, develop a more positive image for the transit operator, expand opportunities to gain business community support of transit use, and generally strengthen transit's appeal vis-a-vis the automobile. It can thus be a cornerstone of new strategic action plans for enhancing local transit use and appeal. This article includes examples of transit industry experience to date with deep discount fares.

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