08
Feb

2010

The Freemium Model of Transit

Post by Steven Dale

There are hundreds of ways public transit could pay for itself. Public transit operators have simply chosen the least effective and most out-dated of them all:  Fares.

The thing about fares is this: They always go up and customers are never happy about it.

The airlines realized this years ago and stopped worrying about fares. Premium drinks, lounge access, loyalty programs, in-flight wi-fi, upgrades to executive first class, priority boarding . . . Their business switched from selling you fares to selling added value to your fare.

Smart night clubs don’t sell you a cover charge, they sell you free entry with limousine service from your hotel.

Software companies don’t sell you a computer program, they sell you a premium version of a program they gave to you for free.

Google doesn’t sell you a thing. They give it all away for free and make their money off of the traffic their model creates.

It’s called the Freemium business model, and is becoming so commonplace we almost forget how much is given to us for free nowadays. Free works.

As I’ve said before, we need a new model of public transit. So why not Freemium Public Transit?

Most businesses would pay millions of dollars for the competitive advantage public transit systems have: A captive market of individuals who predictably use the same two stations twice a day, five days a week. Transit operators should make their money not off of transit, but off ancillary, premium services that are enabled by this competitive advantage.

Don’t nickel-and-dime us with constant fare hikes or try to make up revenue by selling advertising space we’ll ignore. Sell us things we want, need and covet:

  1. Cost-effective, prepaid, by-the-minute wi-fi.
  2. Library book drop-off and pick-up stalls.
  3. Parking ticket payment service.
  4. Netflix/Zip drop-off and pick-up service.
  5. Daycare.
  6. Rewards programs. Ride transit 20 times and receive a coupon to The Mandarin Chinese Food Buffet.
  7. Your daily groceries waiting for you on your way home.
  8. Business printing services.
  9. Local logistics stalls to facilitate local bartering.
  10. City Hall permit application kiosks.
  11. “First Class” vehicles.
  12. Paid public transit loyalty programs that reward you with transit passes to other cities you travel to.
  13. Expense receipt scanning services.
  14. Courier services.
  15. Anything you can imagine.

Public transit stations would morph from being the grossly inefficient wastes of space they are now to essential hubs facilitating the daily lives of their riders, customers and neighborhoods.

Think about it. If your public transit was free, what Freemium services would you pay for?



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Comments

  1. Never mind what Freemium would buy, what about convincing transit agencies to create Freemiums? Transit systems know nothing about added value because, in many cases, their monopoly status grants them a license to neither value their customers nor give them that added value.
  2. I agree wholeheartedly. Transit agencies should experiment with the Freemium model. People would be far more responsive to transit if transit was developed as a service. Make our lives easier, better and more enjoyable and transit will have all the money they need.
  3. The key to free public transit is understanding that transport is a system, not a product. A system works when it has critical mass. The current private-auto system does have that. But the externalized costs are enormous. These externalities are paid by loss of health, taxes, and the environment -- i.e. subsidy. Fares on public transit serve to discourage use and raise the unit cost, ultimately preventing a return to critical mass.