Insights 05 February 2019 By: Madeleine Funes

Customer Acquisition and Cost Cutting: Can Both Work in Tandem?

Mass transit operators across the US are struggling with the rising costs of attracting new riders, and cumbersome legacy ticketing and payment processes, according to a survey we carried out in late 2018. The good news is that mobile technology can address both issues, provided transit agencies can agree on making investment in mobile solutions a priority initiative.

Of the 103 transit operators we surveyed, rising costs and increasing ridership were their top concerns. More than a quarter (26%) said rising costs were their biggest challenge; 40% of metro mass transit operators cited rising costs as their biggest challenge, followed by 28% of private transportation providers, 25% of regional agencies, and 23% of national agencies. Another 20% of transit operators overall said acquiring new riders was their biggest challenge.

Having a mobile-first solution in place can address core business and revenue challenges by lowering the cost of every payment transaction And operators can have a significant impact on passenger experience and rider volumes too, simply by modernizing their ticketing and payment systems.

Mobile app implementation must be a priority

In fact, a well-designed mobile app can streamline the ticketing and payment process, providing a better rider experience while also reducing transit operator costs. However, differing views within transit agencies on implementing a mobile solution are preventing some operators from realizing those benefits.

Overall, 13% of transit operators say that implementing mobile technology is their biggest operational challenge. Only 17% of those responsible for payment/ticketing cited increasing costs as their biggest organizational challenge, versus 31% of those in IT and 29% in project management. On the other hand, 33% of those responsible for payment/ticketing cite acquiring new customers as their biggest challenge, versus 13% in IT and 21% in project management.

These numbers strongly suggest that on the payment and ticketing side, transportation professionals are less worried about costs, partly because new mobile payment and ticketing solutions are easier to implement and are cost-effective. Whereas respondents focused on broader IT and project management are dealing with more complex solutions that aren’t as simple or economical to roll-out as mobile.

At the same time, professionals responsible for payments and ticketing are worried about customer acquisition because the success of their solutions depends largely on adoption by riders. This is reflected in downloading transit apps, for example, or pre-storing payment information in the app. A well-designed app can help increase ridership by making planning, booking and ticketing travel very easy and convenient.

The takeaway: The inability of some transit operators to even consider new mobile solutions holds back many potential improvements in passenger experience and operations. The good news is that mass transit operators can easily reduce payment/ticketing costs while also making their service more attractive to new riders—increasing revenue—by implementing the right mobile app.

Learn more about US riders expect from ground and mass transit operators in our report Modernizing the Passenger Experience in US Ground Transportation, the first in a multi-part series exploring challenges and opportunities in the US Ground Transportation sector.