A Transport System International Or Local

Published Date: 02 Nov 2017

A transport system, international or local, relates closely to the definition of large technological systems: technological systems contain messy, complex, problem solving components. The state of transport system is a result of the measures and action carried out by the producers, operates, and users of the system. Producers and operators are organization or companies, which can be categorised according to their main duties, such as policy formulation, infrastructure construction and maintenance, production and operation of services for transport system, and production of transport related services. Individual people, the whole population, are the users of the passenger transport system (Tuominen, 2007).

If transportation systems are planned and managed precisely, the systems can increase the productivity and quality of life at the same time. The transportation systems should ensure efficient movements of passengers and freights but, such a system should not deplete the natural resources and badly affect the environment. Although the cost of transportation is mostly chosen as the main evaluation criteria for transportation mode selection, many criteria should be considered to prefer a transportation mode to another (Tuzkaya, 2009).

Railways have been the backbones for public transportation and center to urban development. Because of the substantial capital costs on the infrastructure, the railway service precaution may easily become natural monopoly. So, the train services are generally non-competitive and they require heavy regulations (Cantos and Campos, 2005).

In order to face competition and improve efficiency, the railway industries in many countries have undergone substantial reform in the last two decades. The market structure has been renewal with the introduction of open railway access market. Independent service providers are allowed to enter the railway market to create competition in an effort to improve service quality (Wong and Ho, 2010).

2.2 Transportation Modes

Sometimes, it may not be possible to use one transportation mode instead of the other because of the geographical, infrastructural and freight type. However, the advantages and disadvantages of transportation modes should be taking into consideration for transportation projects (Tuzkay, 2009).

According to Rondinelli and Berry (2000) the characteristics of the transportation modes are:

Rail transport is the most commonly used mode for heavy and bulky loads over long land hauls (in general, greater than or equal to 200 km) without paying great charges. Trains can provide reasonably high speed, low cost and they are conveniently linked with other modes of transportation. Some of the advantages are constancy, low-cost guarantee, greater reliability and they are not influences by the weather and traffic conditions. The main disadvantages are inflexibility and specified routes between fixed terminals. Also, they do not stop at intermediate points. From the environmental aspect on railway, there are some damages result from improper fueling; maintenance and cleaning rail car.

From door-to-door transportation, the most widely used mode is road transportation. Its main benefits are the flexibility and the ability to reach rugged places. The ease of freight loading/unloading, lack of necessity for rigid timetables and the existence of widespread transit roads are advantages. The disadvantages are high maintenance, fuel expenses and weight limitations. Also, fuel burning, motor oil, brake and transmission fluids, coolants, solvents, and the pollution goes to air, water and soil.

Rail and road modes are limited to land use; but, an important part of international trade is carried out by sea transport. Sea transportation can be classified into three basic kinds: river and canals, coastal shipping and ocean transport. The main advantage of sea transportation is the ability to transport large amounts of bulk freights, liquids and containerized freights by ships. Also, it is the cheapest transportation mode and there are no duty or transit-passing transactions between the starting and arrival points; however, the damage risk is high, transit times are long and there is a boundary and inflexibility with regard to finding appropriate ports. Tank cleaning and fueling are also harmful for water.

Air transportation is the most suitable mode when slow speed is unacceptable. However, aircraft operations cause noise, engine emissions and waste disposal problems (Tuzkay, 2009).

Generally speaking, railway service has following strengths compared to other modes of transport, when demand is high:

• High transport capacity;

• High speed;

• Long distance;

• Punctual (congestion free compared to road);

• Safe;

• Low cost; and,

• Environment friendly (JICA study team, 2011).

2.3 Factors Influence the Usage of a Transport Alternative

Consumer’s decisions are influenced by several factors. The model of buying behavior shown in figure 2.1 identifies the factors by which a consumer can be influenced when making a decision

Buyer responses

Product choice

- Brand choice

- Dealer choice

- Purchase Timing

- Purchase mount

Other stimuli

- Political

- Economic

- Social

- Technological

Buyer’s black box

Buyer Buyer

Characteristics decision

Process

Marketing stimuli

-Product

-Price

-Promotion

-Place

Figure 2.1 Model of buying behavior

Source: Pessers, 2007

The factors identified in this model influence the decision when consumers have to choose between the usage of passenger transport and another alternative. In the airline sector the other alternative can be (train or car) however for the bus and train sector the other alternatives are the bicycle and car. The ‘other stimuli’ can also be called the environmental factors or PEST (Political, Economic, Social, and Technological) factors. As shown in figure 2.1 the buyer characteristics in the ‘buyer’s black box’ influence the decision the consumer makes. The marketing and other stimuli enter the consumer’s ‘black box’ and produces certain responses about amongst others- the product, brand and purchase frequency (Pessers, 2007).

According to Krizek and El-Geneidy (2007) several factors influence anyone’s decision to use transit versus other modes. Some of these factors will be described as following:

Service frequency: Factors related to the spatial and temporal availability of service at both ends of the trip and, of course, the presence or absence of transit service near origin and destinations are major factors in any decision. Also it is reported that ridership is expected to increase by 0.5% in response to each 1% of service increase (Evans, 2004). Accordingly, any changes in these factors are expected either to increase or decrease the demand for transit.

Accessibility: the more accessible the bus stop, the more use. Ridership depends on additional variables such as service variability and /or socio-demographic information. The variability and frequency of service are two basic factors that affect demand.

Some research indicates that decreases in journey time increases passenger demand more than other variables (Rodriguez and Ardila, 2002). The transit service demand is relatively inelastic when it comes to changes in price.

Journey time and cost: for public transportation the elasticity of demand is related to all aspects of time and cost. Passenger demand will decrease by 3.9 percent for a 10 percent increase in journey time, while demand will decrease by 7 percent for each 10 percent increase in entrance, and waiting time.

Value of time is a key concept in transport planning in terms of mode choice decision of users, economic evaluation of travel time savings and relative importance of time in transportation models. It can provide information on expected return on the introduction of faster services. Although time savings constitute a major portion of the benefits of transportation projects in developed countries, it is usually ignored in developing countries (Alam et al., 1999).

2.4 Railroad Market in Egypt

The first railroad in Egypt was a result of a British desire to secure its main access road to India. Consequently when the Suez Canal was opened to international navigation in 1869, the foreign interest in railroad development in Egypt stopped. However, the loss of direct foreign interest in Egyptian railways did not mean the end of the period of railroading in Egypt. On the contrary, the Egyptian railroads created their own rationale of development and growth, which, interestingly and indirectly served foreign interests (Nasr El-Din, 2005).

On a daily base, approximately 2.3 million passengers use trains that managed by the Egyptian National Railroads (ENR) to reach their destinations. Therefore it is fair to say that the ENR plays a major role in Egypt's economic activity. Once, a new powerful and centralized state was recognized; and though it is possible to view the introduction and building of railroads in Egypt as just another positive externality of creating a powerful central state - especially one with a huge and (by the standards of the time) modern bureaucracy. Once the railroad service was established, it proved of vital importance in supporting the new state. Not only help the central government to control the country and spread its authority over every part of it, it also facilitated the moving of armies and was a major employer and source of revenue for the state treasury, with all the socioeconomic consequences of playing these roles (Nasr El-Din, 2005).

ENR is taking part in the European Union Twinning Project: Egypt–France for reforming railway safety, a program that focuses on operational safety. Without overlap, the study team noted a serious lack of industrial safety protocols at many of the maintenance shop facilities. Excess scrap; poor lighting; lack of personal protective equipment; scarcity of modern facilities with required equipment; and a lack of safety practices, such as safety training or job briefings, generally contribute to poor working conditions that typically lower productivity and safety. The study team developed a system safety plan and training program based on successful U.S. practices; nominally focused on a traffic management system, the plan also had sufficient back-up documentation and a phased implementation plan to expand to full workplace safety. Investments in signaling, communications, computer technology for better operational systems and procedures, track upgrading and maintenance, training facilities, and human resources and training are being made, along with organizational restructuring (Matherly, 2009).

2.5 The Basic Characteristics of Rail Transport

A railway can include two major components. Basically these are the items which "move" the rolling stock, that is the locomotives, passenger carrying vehicles (coaches), freight carrying vehicles (goods wagons/freight cars) and those which are "fixed", usually referred to as its infrastructure. This category includes the stable way (tracks) and buildings (stations, freight facilities, viaducts and tunnels) (Agunloye and Oduwaye, 2011).

The concept of rail transportation as a public or social service, irrespective of profitability, is another element that has determined the industry’s organization and performance around the world. The low rolling resistance of steel wheels on steel rails made railroad transportation very fuel efficient and relatively cheap. This allowed railroads to quickly grow as the first mass transportation system, especially for passengers, beginning in the years of the industrial revolution (Cantos and Campos, 2005).

Transportation consists in displacing an purpose with given characteristics from one point to another, starting and arriving at given dates under specified conditions of quality and safety. The first obvious characteristic of the transport product is its very high differentiation, mainly in terms of geographical heterogeneity: since every trip can be defined by its departure and arrival nodes, in any country one can define an unlimited number of different potential products. For railways, because most networks are meshed, it is also true that for each "product" there exists some flexibility in terms of its trail. Concerning the time dimension, note that the product is hardly storable so there is little time substitutability even if it happen frequent delays. Considering transport in such highly differentiated terms is not always helpful, but sometimes aggregate categories of broadly similar services are more useful in practice. A standard difference can be made between passengers and freight (Seabright, 2003).

Railways are characterized by high capital intensity, labour intensive, and their complexity of business requires intensive management and coordination. Railways are information intensive, and often base their activities on outdated technology and operating methods. They require from their employees highly specialized skills, and are unionized organizations (Fularz, 2005).

2.5.1 The Demand for Rail Transport

The demand for rail transport is derived from the capacity of rail to satisfy a more fundamental demand for mobility. Usually each traveller has a demand for a particular service from different places to another. Similarly, each package has a specific demand (though typically without a return); so the sector should consider mainly passenger demand. Such demand for a service translates into a demand for a mode of transport that provides this service. Different modes can be considered as supplying the service with different characteristics, which are alternatives for each other to varying degrees (Seabright, 2003).

The elasticity of demand for passenger rail travel will determined according to:

the price of the rail services themselves;

the price of competing modes of transport such as car and air;

the time of travel by rail;

the time of travel on competing modes

Many passengers have strong preferences for the mode of travel they use, perhaps because they have invested in vehicles, jobs or (more generally) lifestyles that make replacement between transport modes difficult. However, estimated long-run elasticity’s are significantly higher, and over a longer time period it is clear that rail has been losing market share rapidly to other modes, though how much of this is because of an increasing preference for flexibility, and how much to changing relative prices and travel times, is less clear (Oum et al., 1990).

The different characteristics of passenger services include speed, comfort, reliability and flexibility (or adaptability to the traveller’s particular requirements). for example, road overcrowding means that rail is often more reliable than road transport (in the sense that the arrival time is predictable to a greater degree of accuracy), while rail is less flexible than road (in the sense that a car can take the passenger all the way to the final destination instead of only to a station along the way). Various mediators (such as travel agencies and logisticians) can increase the flexibility of rail transport by acting to bundle transport services (including rail services) more effectively than the individual customer acting alone. The extents to which travellers have different requirements depend typically not just on their own characteristics as individuals, but also on the purpose of the travel. For instance, travel for business purposes is more sensitive to time and reliability than are most forms of leisure travel (Seabright, 2003).

To analyse rail demand, public transport is subdivided into standard rail transport and alternative forms of public transport, rail transport is not treated as a homogeneous service: the two modes of rail commutation, standard rail and auto rail transport(is rail commutation with auto transport utilised for the secondary home-station trip), have widely differing money costs and travel times. Given that public, auto and auto transport rank in ascending order for money cost and in descending order for travel time, one effective range of modal choice may be constrained by income level (McDonough, 1973).

2.5.2 The Supply of Rail Transport

According to Seabright (2003) rail transport can be an alternative for cars, buses or aircraft, or even for inland waterways depending on the distance and on the characteristics of the primary and final nodes. But although they may be to some extent equivalent on the demand side (because they share desirable service characteristics to varying degrees), these different modes are very different in respect of both technical and economic properties.

For instance, rail transport is highly capital intensive compare to other modes. This arises from the high cost of achievement, equipment and maintenance of tracks and stations; as well as the cost of acquisition, operation and maintenance of the rolling stock. The result is that rail transport is characterized by strong economies of mass, as well as some economies of network size. These economies of network size are the overall result of purely engineering considerations, which have a tendency to favour scale, some economies of coordination, and some diseconomies because of complexity in the management of large organizations. There is also a strong need for coordination between infrastructure operation and service supply, though opinions have changed over time as to whether such coordination requires vertical integration.

2.6 Passenger of Travel Behaviour Model

Travel behaviour model consists of three main components, which are passenger disposition, passenger choice set and passenger decision as illustrated in figure 2.2. The model starts with assigning each passenger a set of characteristics, which will have major influences on the travel choices, to know their preferences. These could include age, income, education, car ownership / availability, etc. Because travel demand is based on activity demand, a passenger is then given a series of activities to accomplish, which we call activity schedule. The activity schedule consists of activity location, timing, duration, and purpose, from which we can understand travel frequency, travel distance, travel purpose and origin-destination. Some passenger characteristics could have major influence on the travel choice. For example, travelers could be divided into three segments based on their travel purposes between each origin-destination pair: commuters, leisure travelers and commerce travelers (Carrier, 2003).

Therefore, travelers in different segments will have different behavioral assumptions when facing different alternatives. For example, leisure travelers would be more flexible in time-shifting than commuters who are expected to be at work at a specific time. Each traveler also gets assigned a decision window, a maximum willingness to pay, and a set of passenger disutility. The second elements is passenger choice set which consists of possible schedule mean a number of journey options are generated for each single passenger based on required departure time, arrival time, and origin-destination. Passenger Previous experience can affect passenger’s decision making that influenced by the seat availability, punctuality and safety. The passenger’s product choice and ticket type choice influence their decision for travelling and travel behaviour (Li et al., 2006).

Passenger disposition

Characteristics

Activity schedule

Decision window

Maximum willingness- to-pay

Passenger disutility

Passenger choice set

Possible schedule

Previous experience

Product and ticket type

Passenger choicepassppp

Figure: 2.2 Elements of travel behaviour model

Source: Li et al., 2006

2.7 The Cost Structure of Railways Companies

Railways costs are often classified into four categories: (1) train working costs, which include the costs of the provision of transport services (fuel, crew, maintenance and depreciation of rolling stock); (2) track and signalling costs (including the operation, maintenance and depreciation costs of the infrastructure); (3) terminal and station costs; and finally (4), administration costs (Campos and Cantos, 1999).

2.8 Classification of Rail Transport Services

In the Services Sectoral Classification List, which was drawn up during the Uruguay Round based on the United Nations Provisional Central Product Classifications (UNCPC), rail transport services is listed as a sub-sector of transport services and includes five sub-categories which are: passenger transportation, freight transportation, pushing and towing services, maintenance and repair of rail transport equipment, and supporting services for rail transport services.

According to Mukherjee and Sachdeva (2004) a brief description of each of these sub-categories are demonstrated below:

(a)Passenger Transportation: This sub-sector includes two kinds of services:

Interurban passenger transportation: This refers to interurban passenger transportation provided by railway, in spite of the distance covered and the class used.

Urban and suburban passenger transportation: This refers to transportation of passengers between two cities or between an urban and a suburban area.

(b) Freight Transportation: This sub-sector includes the following services:

Transportation of frozen or refrigerated goods: This refers to the transportation of frozen or refrigerated goods (e.g. fresh food products in particular refrigerated cars) by railway.

Transportation of bulk liquids of gases: This refers to transportation of bulk liquids of gases in unique tank cars by railway. These cars may also be refrigerated.

Transportation of containerized freight: This refers to transportation by railway of individual articles and packages collected and shipped in specially constructed shipping containers designed for ease of handling in transport.

Mail transportation: This refers to transportation of mail by railway on account of national and foreign postal authorities.

Transportation of other freight: This refers to transportation by railway of freight, not integrated elsewhere.

(c) Pushing and Towing Services: This sub-sector includes railway pushing or towing services, on a fee or agreement basis, e.g. the movement of wagons between terminal yards, industrial aspects, etc.

(d) Maintenance and Repair of Rail Transport Equipment: Maintenance and repair activities in this sub-sector include repair services of transport equipment, on a fee or a contractual basis and do not include maintenance and repair of railway infrastructure, which is covered under the structure and related engineering services sector.

(e) Supporting Services for Rail Transport Services: This sub-sector includes railway passenger terminal services, not including cargo handling, and other supporting services for railway transport, not classified elsewhere.

ENR operates five categories of passenger services which are: intercity services, express services, local services, suburban services, and special services.

Intercity passenger services. Which describe as long distance, high quality services (in term of comfort and speed) serving only big cities operate on the Cairo-Alexandria route (18 pairs of trains per day, some continuing to Marsa - Matrouh) and the Cairo-Luxor-Aswan route (12 pairs of trains). The main competitors to intercity passenger services are private cars, bus services, and air transport.

Express services. Long-distance, lower-quality services (not air-conditioned coaches, lower

speed) serve big and medium cities on routes also served by intercity services, as well as other routes in the Nile Delta (Cairo-Damietta, Cairo-Port Said, Cairo-Suez, Alexandria- Damietta and Alexandria-Port Said). Customers are mainly low-income people, who cannot afford more expensive intercity services. Competitors are mainly buses, mini-buses (14 seats), and taxis (seven seats).

Local services. Short-distance, low-quality services mainly connect rural communities to cities and markets, for low-revenue people. These services have an important social dimension. Ten routes operate (nine in the Nile Delta, one in Upper Egypt).

Suburban and special services. Suburban services are operated by ENR in the Cairo and

Alexandria areas; they account for about 3 percent of total seat-kilometers and 3 percent of Rail freight transport. Plays a limited part, freight provides 8 percent of total traffic volume but accounts for about 27 percent of traffic revenue. Although it does not cover the fully allocated cost, freight traffic is quite likely to cover its direct costs (Baeumler, 2005).

Passenger transport accounts for 92 percent of the physical activity of ENR and 73 percent of traffic revenue in 2004. Passenger traffic steadily developed from the early 1990s until 2001 (when it reached a record 66 billion passenger-kilometers), then dropped very sharply in 2002 (to 39 billion passenger-kilometers). Since 2003 traffic has recovered and reached 53 billion passenger- kilometers in 2004 (similar to the 1997 level). The present market share of the railway is reportedly about 40 percent of the total public transport market (Baeumler, 2005).

2.9 Requirements of Passengers

The basic requirement of passengers is at first the mandatory service, the assurance of adequate transport services. Adequate transport services are available, if the local passenger transport is a complete alternative to the motorized individual transport and if it allows equivalent living conditions. Major goal thereby is the mobility of the population. The degree of fulfilling these requirements is reflected in the evaluation of the "local passenger transport barometer".

In 2007 the mean of German Global Service Satisfaction lay in an ordinary range. The general tendency in terms of the fulfillment of requirements yet raises continually .The offering quality thereby is important. Meant is the traffic significance, relevant for the "quality of traffic performance and the degree of realization for heterogeneous quality dimensions’’. These are called fraction values/ qualities. Table 2.1 for example describes the perception of the performed service quality by customers, which then is being classified as quality demands (Bramey and Wuppertal, 2008).

Table 2.1: quality criteria in the local passenger transport

Source: Bramey and Wuppertal, 2008

Quality category

Description

Availability

Amount/extent of offered services regarding area, time, frequency and conveyance

Accessibility

Access to public transport including interfaces to public conveyances

Information

Methodically granting information about the public transport system in order to simplify the planning and realization of journeys

Time

Time aspects regarding planning and realization of journeys

customer support

Service elements for achieving the greatest analogy between standard service and customer requirements

Comfort

Service elements to make journeys relaxing and comfortable

Safety

Customer’s impression about personal safety arisen from both actually performed safety arrangements and measures that enable customers to be aware of safety arrangements

Environmental impact

Effects on the environment due to provision of local passenger transport

Services

2.10 Railways Market

If we compare the performance of railways throughout the world, we can observe striking differences. On the one hand we have advanced economies, where this type of transportation has acquired a relatively high market share, and on the other we observe that in most developing countries railways are strongly underperforming (Fularz, 2005).

Railways are an integral part of the transport network, play a crucial role in facilitating trade. The performance of this sector not only affects the global competitiveness of products trade but also the performance of other service sectors such as tourism. Over the past two decades railways across the world have undergone significant restructuring/liberalization, which has improved their productivity and efficiency. The extended presence of monopoly in rail transport services has inevitably resulted in various monopoly-induced inefficiencies. Railways are more energy efficient and environment friendly as compared to other modes of transport like roads.

Prior to the 1980s, due to the public nature of railways, requirement of huge investment and uncertain returns, railways were mostly under a monopoly, often a public monopoly. In the 1980s, with increasing financial stress on the governments, technological developments in the transport sector and general trend toward liberalization and globalization; countries started restructuring their railway systems in order to increase productivity and efficiency of the sector (Mukherjee and Sachdeva, 2004).

For a land locked country (for example, some of the European countries), railways are one of the most important modes of international trade and cross-border movement of people. In developing countries such as India and China, railways are the main type of mass passenger transport at a price available to the majority of the population. Railways are also a fundamental component of the intermodal supply chain. The railway system increased in countries such as China and Thailand but declined in countries such as Brazil, Japan, France and New Zealand (Mukherjee and Sachdeva, 2004).

2.10.1 Commercial Successes of Railways

Railways are experiencing successes in heavily populated urban areas, where their market share can be even higher than the share of motor vehicles, as in the case of Tokyo. Rail mode carries over 78% of all journeys into central London in the morning rush hours. Railways serve 40% of traffic between the city centres of Manchester and Leeds and 55% between Manchester and Newcastle. The train operator Euro star UK Ltd controls 60 % of the market for the Paris- London route. Its share for the Brussels-London route is 40 %. Another high speed operator of the Paris-Brussels route carries on average 13,700 passengers daily, compared to Air France airlines carrying only 450 passengers daily (Fularz, 2005).

2.10.2 The Influence of Rail Transport on Urbanization

Of special importance is the performance of railways in urbanized areas. Here, the opportunity costs of not using the railway infrastructure (costs of pollution from private vehicles, congestion costs on roads) are the highest. Many observers share the opinion that the cities are the market of the future for rail passenger transport. The demand structure for transport services allow for frequent train services with attractive commercial speeds (Takatsu, 2003).

2.10.3 Recent Trends in Railway Reform

Railways have some specific particularities. They are characterized by large, unavoidable fixed costs such as tracks and stations, and the costs of those facilities are considered as sunk. Estache, Goldstein and Pittman (2000) observe that in nearly all countries railways has been one of the most heavily regulated sectors of the economy. Government control supervises nearly all the areas of commercial activities of the sector. Entry, exit, prices, technology, operating procedures, and ownership are subjected to strict regulations aimed at restraining the competition that has been seen as unnecessary (Fularz, 2005).

2.10.3.1 Changed Demand Patterns

Not long ago, textbooks convinced readers, that railways were a natural monopoly. The idea behind the intervention in the market structure has been to control the economic power resulting from the domination of a single enterprise serving the whole market. Government ownership was thought to be a solution to the potential or actual abuse of market power that could result in the case of an unregulated monopoly. Another reason was the general perception that there existed large economies of scale. According to this traditional thinking, the costs of providing services declines as the scope and scale of rail operations increase (Fularz, 2005).

The economies of scale have in recent years been strongly reduced because of more segmented transport markets, where a strong need exists from both passengers and shippers for more tailored and customized services. Besides, intensified competition from other transport modes has reduced radically the extent of economies of scale in reducing transport lots, pressing down delivery times and generally demanding a type of service that is rather unique for each customer (Kopicki and Thompson, 1995).

2.10.3.2 Reasons for Poor Performance

Kopicki and Thompson (1995) have suggested that publicly owned railways often lack the perpetual adjustment to the needs of their customers, this "continuous reinvention", needed to survive in a constantly evolving economy. In contrast, privately owned railways respond to competition with a perpetual stage of market adaptation, reinvention, and strategic realignment. Such constant adaptation is not always visible in the case of publicly owned railways.

Whilst the "internal" quality of a public transport service can be measured on the basis of the targets performance, often set by the service provider and a measure of "true" quality depends on customer perceptions of the service performance but it considered more difficult to measure. Performance measurement has been the subject of considerable argues in terms of the comparative analysis of models using ‘expectations-performance’, ‘importance performance’ and ‘performance-only’ to know the level of satisfaction (Thompson and Schofield, 2007).

2.11 Public Transport Service Marketing Concept

2.11.1 Factors Influencing Patronage

Although historically the transit industry has given short shrift to marketing activities, it is increasingly recognized as a sure means of attracting additional customers to transit services. Because transit provides a service, it should obviously be concerned with how customers view and evaluate the services it provided with a view to improving their quality. Marketing should thus concentrate on the needs of existing and potential transit customers with the objective of satisfying those needs with a variety of suitable products and services (Mashiri et al., 1999).

The successful development of an effective transit service is thus heavily dependent on the extent to which marketing principles are utilized. In this regard, criteria used to develop, evaluate and select marketing techniques could include cost-effectiveness, ease of implementation, and community support. External factors to be measured should include, economy and customer demographics, while internal factors should include the service itself, staff size, financial constraints and culture. Customer satisfaction could be achieved through emphasis located on each controlled element of the marketing mix for each target segment of the market (Mashiri et al., 1999).

According to Carmona (2005) the elements of the marketing mix for services which have been ignored by operators, as mentioned below:

• Defining what customers need, including their public tastes over time through (marketing research);

• Providing the service at an acceptable level, levels and quality measured in terms of the service characteristics such as frequency, reliability, comfort and safety (product). Since travel is a derived demand, if the types and levels of those activities that require passenger transportation change, the demand for public transport service is expected to change;

• Providing the service at an acceptable price measured in terms of the fare systems, levels, price discounts, concessionary fares, and subsidy (price);

• Providing service where and when it is needed on good facilities such as routes, termini and stops and ticket sale, information sources and different channels (distribution/place);

• Telling customers about the services provided using relevant tools of communicating such as advertising, sales promotion activities, publicity, public relations and the provision of timetables and fares (promotion);

• Public transport is produced and consumed simultaneously; the driver and various operating staff are necessarily part of the production process as well as the front line sales and customer care they need to be qualified as much (people). Public transport personnel influence the service delivery process through their behavior and interaction (process).

In addition, the market for transit services comprises of individuals with heterogeneous tastes, and the level of demand can be expected to vary between different geographic and socioeconomic subgroups of the population; and

• While transit is an intangible and directly perishable product, for instance, seat kilometers not sold on a particular trip cannot be stored or resold. Physical presence is also clearly an important element of the marketing mix in respect of the vehicle and its environment, color, furnishings, destination display, cleanliness, and protection from the elements (physical evidence) (Mashiri et al., 1999; Bitner, 1992 ).

2.12 Marketing in Railway Sector

The railway has been facing tough competition with other modes of transport for the high rated traffic, which pay more revenue. On the other hand, the railway is called upon to carry traditional low rated important such as food grains, fertilizer, coal, stone, petroleum, salt, sugar etc... as a national carrier to the remote corners of the country. To make Railway a profit-driven and market-oriented commercial organization, the adaptation of a market-led philosophy is important.

The marketing objectives of railway must be:

-Practical and realistic - i.e. capable of being achieved within the likely resource restrictions facing the railway.

-Related to overall corporate objectives; and most importantly.

-Relevant and reactive to the actual needs of customers.

Marketing objectives must reflect the principal thrusts of the Corporate Plan (Rahman, 2005).

2.12.1 Marketing mix, or the seven P’s

There is still a popular misconstruction that the term "marketing" is compatible with "sales" and "advertising". That is only to some extent true. In fact, marketing includes the full range of activities needed to achieve intended and profitable exchanges of products or services between two parties. These activities are aimed at changing one or more of four variables known as the marketing mix, with the intention of improving the organization’s profitability. These variables, also known as the Seven P’s, are product, price, promotion, place, people, processes and physical evidence. It is useful to describe each of these variables in terms of their meaning in a railway-marketing environment (Simkin, 2000).

Product

Railways, this is the service offered to customers, both existing and potential. However, the term also implies some concept of the attributes of a service - its basic design, or its essential features; its presentation, or how it is packaged; its associated support level (which is usually related to the capacity of the organization to deliver an acceptable standard of support for the product, or service); and its branding, or its association with a particular image or identity.

The core products of railway organizations are transportation services, but increasingly railway organizations are diversifying their activities in fields, which are not wholly related to their core business, such as commercial property, or real estate, development. The product descriptions covered here are related to the core business of railways, since it is these core businesses, which in the past have suffered most from the absence of systematic marketing techniques and which in the future stand to benefit most from their application (Rahman, 2005; Carmona, 2005).

For a railway passenger service, the design and appearance characteristics of the product are generally: the direction covered; the service frequency; the achieved transit time (or interval between departure and arrival); the carriage seating standard and configuration; the decor, cleanliness and riding comfort of the rolling stock; the nature and standard of meals provided; the comfort, cleanliness and convenience of station or terminal facilities; and the convenience of connections with other rail services or with other transport modes (Rahman, 2005).

Price

This denotes the published or negotiated value of the exchange transaction for a product or service. It should be well-known that price must represent value to both parties - to the producer or service provider in terms of the profit margin yielded and to customers in terms of the value for money derived from consumption of the commodity or service.

For a railway passenger service, the price of the service, or the fare, paid by passengers. Fare rates usually vary with the standard of service used - for example, a first class seat might cost more than double a third class seat. (Glein, 2011).

Promotion

In the framework of railway marketing, promotional techniques are becoming more widely used for passenger business, but are as yet relatively little used in the case of freight business. Of the different forms of promotion, sales representation has been the most commonly used in railway business.

However, railway sales forces have mainly had a passive or reactive, rather than a proactive, role, servicing existing customers rather than seeking out and securing new customers, order taking rather than order generating. Furthermore, these sales forces have not been organized in a way which would assist them to actively promote railway services and secure new business. Only a relatively few railway organizations have encouraged market segment specialization by their sales personnel, with the result that most railway sales forces have not been able to develop the specialized knowledge of individual market segments needed to be able to effectively sell railway services to these segments. The lack of specialization is, particularly, evident in passenger marketing cells, where all too often sales force activity has no specific focus of any sort (Rahman, 2005; Carmona, 2005).

Place

"Place" means not just the locations of producer facilities, but the locations of all points of sale at which customers may have access to the product or service. In the case of railways, these will include not only passenger stations and freight terminals, but corporate/regional/divisional headquarters, centralized railway reservations offices, hotels, travel agents, and freight forwarders’ offices and terminals. In the wider sense, "place" will mean channels of distribution for the product. Outside of the railway organization itself, the most effective channels of distribution for the railway "product" are likely to be travel agents in the case of rail passenger services and freight forwarders, in the case of rail freight services (Rahman, 2005).

People

It almost goes without saying that people are a railway organization’s most important resource. So it is that a railway’s people resources will be vitally important to the realization of its marketing goals. It will not matter how advanced and sophisticated are a railway organization’s management systems if the railway’s existing and potential customers do not feel that railway staff are listening and responding to their needs.

What is required, therefore, is total customer awareness from the very top to the lowest levels of staff in the railway organization. Predictably, this in turn will require that a customer awareness culture be instilled throughout the railway organization by its senior management, who in most cases must first make the mental transition themselves, or be prepared to be swept aside by personnel who already have (Bitner, 1992).

Process

Railway processes, especially operational processes, have evolved over the 170-year history of the development of the railway as a common transport mode. In many instances these processes have changed in response to the development of competing transport modes, especially road transport. What is important is that the processes must be compatible with serving the needs of railway customers. If a customer requires regular and frequent dispatch of his loading on scheduled fast freight trains, then a railway’s policy of operating infrequent, slower and longer trains will obviously be incompatible with these needs and the railway must be prepared to change its process accordingly. The process in effect is an integral part of the railway’s delivery of its product (i.e. service) and will have a crucial role in determining whether in the end the product will satisfy customers (Carmona, 2005).

Physical Evidence

Physical Evidence refers to the physical evidence available to customers in the layout and presentation of railway facilities that their needs are actually being met. The design, layout and signage of passenger stations, for example, must be such as to convey the impression to travellers that the railway really wants their business. This it will do by ensuring that platforms, ticket/reservations offices, waiting rooms, toilets, baggage lockers, bus interchange and transfer facilities, etc; will be comfortable and convenient for all categories of travellers to use. These facilities also have a critical influence on customer acceptance of the railway product (Rahman, 2005; Bitner, 1992).

2.13 Effective Marketing Mix Elements for Passenger Transport Companies

Every marketer is supposed to know the marketing mix elements however, how do they become effective for passenger transport companies? Pessers (2007) identified how these marketing mix elements could be useful for public transport as illustrated in table 2.2 and describes for each marketing mix element which evaluation elements it influences mostly (this influence can be on the actual performance but also on the perception consumers have).

Table 2.2 the public transport marketing mix

Source: Pessers 2007

Marketing mix elements

Explanation for public transport

Influence on the evaluation elements

Product

The transport and material answer on the demand for transport from A to B.

Mainly influences safety, reliability and speed.

Personal

The compliance of personnel in vehicles, at stations, at the information desks and on the phone

Influences all aspects: safety,

reliability, speed, convenience,

comfort and emotional experience

Process

The time, physical and emotional efforts it takes for consumers to use public transport.

Mainly influences convenience and comfort.

Place

The stations, the ticket sales and information desk

(Automaton).

Mainly influences speed and convenience.

Promotion

Clearness about what a consumer can expect and why.

Mainly influences the perception

about all aspects.

Price

The tariff of the journey, information provision, Phone services and (in the short future) the public transport Smart card.

This is the counterpart of quality. The better the quality, the more people are prepared to pay for it.

Physical evidence

The facilities of vehicles and stations.

Mainly influences the perception about all elements.

2.14 The Railway Marketing Plan

Apart from its importance as the primary source of input of customer related data as well as of traffic and revenue forecasts to the corporate Plan, the marketing plan has a vital role as the vehicle for expression of: the organization’s commercial objectives; the strategies for realization of these objectives; and the actions (with assigned responsibilities) necessary to implement the strategies. Necessarily, the focus of the marketing Plan is at the level of individual traffic, or market, segments, and certainly an important element of the marketing plan is the definition of these segments. Realization of objectives set for individual segments will collectively result in achievement of the overall corporate objectives as identified in the corporate plan. An essential requirement of any marketing plan is that it must be both practical and actionable. The marketing plan deals, primarily, with implementing the marketing strategy as it relates to the selected target markets and the marketing mix (ESCAP, 2007; Glien, 2011).

2.14.1 Market Segmentation

A good marketing plan must contain techniques for segmenting the market. Markets consist of buyers and buyers are not homogeneous in terms of their demographic profiles, wants, purchasing power, geographical location, buying attitudes, and buying practices. Therefore it is unlikely that a broad marketing strategy applied across the entire spectrum of a railway’s customers will succeed, because the needs of some (or probably most) customers will not be met in this process.

By contrast, separate marketing strategies focused on individual customer groups, each consisting of customers with similar characteristics and needs, are more likely to succeed. This customer group is called market segments and the process of identifying and separating these groups for the purposes of developing marketing plans and strategies and of managing sales force activities is called market segmentation (ESCAP, 2007).

First, the railway’s customers will be segmented into broad market or business groups, such as:

• Commuters

• Medium-Long Distance Passengers

• Freight Customers

• Parcels and Express Freight Customers

• Commercial Property Lessors

Commuters who use railway services to travel between their homes in the suburbs of a city and their places of employment in the city centre. Such as journey cover distances of no more than 100km.

Medium-long distance passengers used to denote passengers using rail to travel over distances of greater than 100 km (ESCAP, 2007).

Freight customers, the subdivision into market segments is likely to be based on a combination of commodity type and handling mode (bulk, break-bulk and container).

Parcels and express freight customer, no obvious basis for the segmentation to this type, it is likely that this market may be subdivided on the basis of time-sensitivity (e.g. for the night delivery, second day delivery, etc) (Mukherjee and Sachdeva, 2004).

The commercial property leasing market will be desirably be segmented in terms of end use, e.g. warehousing, retail trade, hotel accommodation, etc., and possibly also in term of lease tenure (short, medium and long term) (ESCAP, 2007).

Next, these broad groups will be divided into market segments. For commuter traffic, it needs subdivision of the market, although in the case of a few of the region’s railways (notably that of Indonesia), premium or first class commuter services are provided with the aim of capturing higher income business travellers, who might otherwise use private automobiles.

For medium-long distance passenger traffic, segments based on demographic/ income characteristics may be appropriate. Again, some of the region’s railways have focused on business travellers, while some (e.g. the Indian railways) have very successfully targeted group tour travellers and in conjunction with tour and hospitality agencies have developed specialized services to cater for the needs of this segment (ESCAP, 2007).

Many of the region’s railways have an obligation to provide "welfare significant" services, such as economy class services catering to the needs of low and lower middle income passengers and linking villages or district towns with key cities and the capital. Within the higher income, business or tourist segments thus identified in the medium- long distance passenger market, there may be a further subdivision into service-based segments (e.g. air-conditioned sitting car services and air-conditioned sleeping car services) (ESCAP, 2007).

For freight customers, the subdivision into market segments is likely to be based on a combination of commodity type and handling mode (bulk, break-bulk and container). Other segments are mainly commodity-based. Each freight segment generally has its own requirements in terms of loading/transport cycle, wagon type, handling method and tariff (price). Bangladesh railway can easily identify several commodity-based services like clothes, bulk commodities and other exportable goods. The commodity segments actually identified will be of particular significance to the railway seeking to segment its markets (Rahman, 2005).

2.14.2 Importance of the Railway Marketing Plan

The formal marketing plan is one of the most important outputs of the marketing process. Marketing plan should be developed as an integral part of a railway corporate plan, and that it should identify marketing objectives and strategies which will support the achievement of the corporate objectives, as outlined in the corporate plan. However, unlike the corporate plan which will not normally be revised every year, the marketing plan should be revised annually, although it should also cover a longer planning timeframe (e.g. five years) (ESCAP, 2007).

2.14.3 Developing Marketing Strategies

As with marketing objectives, the strategies devised to achieve these objectives must be practical, actionable, relevant and responsive to customer needs. They must also relate directly to marketing objectives identified for each market segment (Rahman, 2005).

A marketing strategy for a public transit organization is typically designed around two components: the selection of a target market and the creation of a marketing mix that will satisfy the needs of the selected target market. A marketing strategy provides a detailed explanation of how the public transit organization will achieve its marketing objectives. Thorough understanding of the customers and their needs is the first step in developing a proper strategy. After that, the organization can use its own strengths or distinctive competencies to fill those needs better than the competitors (Glein, 2011).

According to Moyo (2005) a target market is the specific group of people that the agency wishes to address. Ideally, this group of people has a need for public transit and has the ability, willingness, and authority to purchase such services. Selecting the appropriate target market may be the most important decision a public transit organization must make during the planning process.

Dibb (2005) mentioned that market segmentation process include three stages: segmenting, targeting and positioning. During the segmenting stage, customers with similar needs, behaviors and characteristics are grouped into segments. The targeting stage involves determining the relative attractiveness of the discovered segments and deciding where resources should be allocated. Positioning involves developing marketing mix programmers which match the requirements of customers in the targeted segments.