Characteristics Of Transportation Modes

Published Date: 02 Nov 2017

The purpose of this chapter is to review the transportation system in general and focus on railroad market in Egypt. To know different modes of transportation, factors that influencing the passengers to differentiate between these modes, and the concept of marketing in the railway. So, this chapter will cover characteristics of transportation modes, classification of rail transport, passengers’ requirements, railways market, and marketing concept in transport services, railway marketing plan, market segmentation and marketing strategy.

2.1 Overview

A transport system, international or local, relates closely to the definition of large technological systems: technological systems contain complex, problem solving components. The state of transport system is a result of the measures and action carried out by the producers, 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).

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 may become natural monopoly. So, the train services are generally non-competitive and they require heavy regulations (Cantos and Campos, 2005). 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 Railways are information intensive, and often base their activities on outdated technology and operating methods.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 (Fularz, 2005).

2.2 Characteristics of Transportation Modes

Sometimes, it may impossible 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 Tuzkay (2009) the characteristics of the transportation modes are:

Rail transport is used for heavy and bulky loads over long land hauls without paying great charges. Some of the advantages are constancy, low-cost guarantee, greater reliability and are not influences by the weather and traffic conditions. The main disadvantages are inflexibility and particular routes between fixed terminals. Also, they do not stop at intermediate points and there are some damages result from fueling; maintenance and cleaning rail car.

From door-to-door transportation, the most commonly used mode is road transportation. Its core benefits are the flexibility and the ability to reach hardy places. The disadvantages are high maintenance, fuel expenses and weight limitations. Also, air, water and soil pollution.

Rail and road modes are limited to land use; but, an important part of international trade is carried out by sea transport. Sea transportation contains three basic kinds which are 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, there are no obligation 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 to find appropriate ports is hard. Also, tank cleaning and fueling are harmful for water.

Air transportation is the most proper mode when slow speed is unacceptable. However, aircraft operations cause noise, and waste disposal problems.

Generally speaking, railway service has the 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 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, goods 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, regardless 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.

Transportation of containerized goods: 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 through national and foreign postal establishment.

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 and not including cargo handling.

2.4 Factors Influencing the Usage of a Transport Alternative

The model of buying behavior shown in figure 2.1 identifies the factors that influenced the consumer’s when making a decision.

Marketing stimuli

-Product

-Price

-Promotion

-Place

Other stimuli

- Political

- Economic

- Social

- Technological

Buyer’s black box

Buyer Buyer

Characteristics decision

Process

Buyer responses

Product choice

- Brand choice

- Dealer choice

- Purchase Timing

- Purchase mount

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 choose among different mode of transportation. Some of these factors will be described as following:

Service frequency: Factors related to the spatial and availability of service at both ends of the trip and the presence or absence of service near origin and destinations are major factors in any decision.

Accessibility: the more accessible the mode, 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.

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. Decreases in journey time increases passenger demand more than other variables. 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 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).

2.5 Requirements of Passengers

The basic requirement of passengers is the assurance of adequate transport services through provides a service with a good performance and high quality. 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).

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).

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 yielding 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 similarity 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.

2.6 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 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. Also, it 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).

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).

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).

ENR is taking part in the European Union Twinning Project: Egypt-France for reforming railway safety, a program that focuses on operational safety. 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. 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).

2.7 Railways Market

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 referred to its infrastructure. This category includes the stable way (tracks) and buildings (stations, freight facilities, viaducts and tunnels) (Agunloye and Oduwaye, 2011).

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. 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).

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).

2.7.1 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. 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).

2.7.2 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).

2.7.3 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 limiting the competition that has been seen as unnecessary.

2.8 Public Transport Service Marketing Concept

Although historically the transport industry has given short shrift to marketing activities, it is increasingly recognized as a sure means of attracting additional customers to transport services. Because transport 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 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 transport 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, 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).

• While transport is an intangible, 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 ).

2.9 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. 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. ability to achieved within the limited resource facing the railway.

-Related to overall corporate objectives; and most importantly.

-Relevant and reactive to the customers’ needs.

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

In fact, marketing includes variety 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 plan 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. The meaning of these variables is demonstrated according to railway marketing environment as following (Simkin, 2000):

Product

Railways offered service to customers, both existing and potential. However, the term also implies some concept of the attributes of a service - its basic design, essential features; appearance, 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, in the past core businesses have suffered most from the absence of efficient 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 journy time (or interval between departure and arrival); the coach seating standard and arrangement; decoration, cleanliness and riding comfort of the rolling stock; the nature and standard of meals provided; comfort ability, 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

The price contains the 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 utilization of the product or service.

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

Governments organize the maximum level of fares charged for special categories of service, while railway organizations have the ability to discount fares below these maximize, in order to create more business or to adapt demand in some way, e.g. by transferring demand from heavy to light traffic periods. Discounts may be provided for: ticket bulk purchases (e.g. weekly, monthly, yearly tickets); off-peak travel (time of day or seasonal); special group travelers’ like student and militaries (ESCAP, 2007).

Promotion

Promotion activities designed to enhancing customer awareness and encourage demand for products or services. These activities include: advertising, public relations, personal selling and offers. Railway sales forces have mainly had a passive or reactive, rather than a proactive, role, servicing existing customers rather than looking for new customers, order taking rather than order generating. Also, these sales forces have not been organized in a way which would support 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. In many railway systems, there is no passenger sales force at all and selling activity is limited to ticketing or reservations offices, which in reality have an "order taking" function (Rahman, 2005; Carmona, 2005).

Place

Place means not only the locations of manufacturer facilities, but all locations that related to 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. Place mean channels of distribution for the product. The most effective channels of distribution for the railway are travel agents in the case of rail passenger services and freight forwarders, in the case of rail freight services (Rahman, 2005).

People

In a railway organization the most important resource is people. So a railway’s people resources will be vitally important to the realization of its marketing goals. It will be problem and sophisticated to 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. Therefore, total customer awareness from the very top to the lowest levels of staff in the railway organization is very important to enhance customer loyalty and satisfaction. This in turn will require that a customer awareness culture be build throughout the railway organization by its senior management, who must first make change to themselves in order to be leader to all of the staff (Bitner, 1992).

Process

The process is an integral part of the railway’s delivery of its product (i.e. service) and will have a critical role in determining whether in the end the product will satisfy customers. 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 contrary with these needs and the railway must be ready to change its process accordingly (Carmona, 2005).

Physical Evidence

Physical evidence refers to the physical evidence accessible to customers in the design and appearance of railway facilities that their needs are actually being met. For example, the design, layout and signage of passenger stations, must express 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 appropriate to all categories of travellers to use (Rahman, 2005; Bitner, 1992).

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.

2.10 The Railway Marketing Plan

In addition to its importance as the primary source of input of customer related data as well as revenue forecasts to the corporate Plan, the marketing plan has a vital role for expression of: the organization’s commercial objectives; the strategies for realization of these objectives; and the actions necessary to implement the strategies. Essentially, 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 important requirement of any marketing plan 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).

2.10.1 Market Segmentation

A good marketing plan must include 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. 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, 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 are 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, 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 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 characteristics may be appropriate. 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 combination with tour and hospitality agencies have developed specialized services to provide 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 providing the needs of low and lower middle income passengers and linking villages or area 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 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, 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).

2.10.2 Developing Marketing Strategies

As with marketing objectives, the strategies that achieve these objectives must be practical, actionable, relevant and responsive to customer needs. Also, Strategies must be related directly to marketing objectives identified for each market segment (Rahman, 2005).

A marketing strategy for a public transport organization is typically planned to consider two mechanisms: the selection of a target market and the establishment 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 transport organization will achieve its marketing objectives. Thorough understanding of the customers and their needs is the first step in developing a suitable strategy. After that, the organization can use its own strengths or unique 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 organization wishes to address. Ideally, this group of people has a need for public transport and has the motivation and ability to purchase such services. Selecting the proper target market may be the most important decision a public transport 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.