Service Diversification, Individualization, and Monetization: The Future of the Transportation Industry

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The “one-size-fits-all” model no longer works. Consumers are increasingly seeking customized services — and it’s revolutionizing business models in every industry. In this guide, Philippe Van Hove, Zuora VP Southern Europe, outlines 3 key ways the subscription economy is changing the relationship between companies and consumers in the transportation industry, with real-life examples from transportation/mobility companies including SNCF, Blablacar, and CityMapper

The term “uberization,” now overused, refers to an ever-present reality in the transportation industry: the imperative need to create an engaging relationship with the customer.

Speed of service is not enough: the consumer now demands flexibility and customization.

As a result of these changing market conditions, traditional players are caught between users who no longer buy in to historical consumption practices and startups which have placed users at the heart of their growth strategies.

To persevere and grow in a hyper-competitive environment, companies in the transportation sector must enrich the customer experience. Here’s how:

 

1. Service Diversification

The rise of digital technology has moved the lines of the transport industry. The freedom to move quickly from point A to point B is no longer a privilege, but an asset. Industry stakeholders are therefore strongly encouraged to differentiate themselves on the quality of service.

The SNCF provides a good example: when the company was in a monopoly situation, it had to rethink its offers in depth to take into account the restrictions of purchasing power and the evolution of users.

In response, SNCF adopted a continuous innovation approach and launched the new TGVMax targeted to appeal to the young public that had abandoned its traditional offerings. With TGVMax, travel is now thought of as a value chain that goes beyond the journey: dematerialization of tickets, loyalty, and even facilitation of arrival with hotel suggestions.

Unlimited subscription travel satisfies both the quest for smart shopping and a desire for freedom. The SNCF model has attracted more than 100,000 new customers and reached its monthly goal on the first day of marketing, proving SNCF’s ability to reinvent itself.

Mobility companies are reaching beyond mere “transport,” which has a purely utilitarian dimension and thinking in terms of offering users a journey. The journey begins when the transport is no longer a waste of time, but becomes time for oneself.

Lyria, for example, highlights the dreamlike dimension of travel. RATP, a French public transportation company, promotes the Navigo card as a means of payment for transportation, arguing that taking the train offers valuable reading time.

More and more, mobility players are relying on enhanced comfort, a friendly atmosphere, and an extended range of services. From a Bergsonian perspective, it is a matter of preferring duration (subjective, influenced by our intuition and emotion) to time (mechanical and objective).

 

2. Service Individualization

Every company’s mission should be to engage its customers with their service offerings. As Michael Ballé and Godefroy Beauvallet say in Lean Management, “in a world saturated with products of all kinds, a customer is only enthusiastic about a product if he finds a magical dimension (…) Amazon is magic because you can buy in one click, and all products in the world are at your fingertips.”

To develop products or services with a high potential for magic, it is necessary to understand their value from the customer’s point of view and constantly rethink your organization.

Blablacar understands this well, embarking on insurance services and preparing to open transmission lines. And SNCF, as previously discussed, has also adopted a more agile and customer-focused startup model.

For many players, the change requires a platform for their activity. The idea is to aggregate a multitude of services in order to monetize a wide range of uses, as Zuora Founder and CEO Tien Tzuo explains in his book Subscribed: Why the Subscription Model Will Be Your Company’s Future – and What to Do About It? The data collected over time makes it possible to better know the customer and to establish a virtuous cycle of continuous improvement and individualization of the service.

This is the goal of City Mapper, for example, which focuses more on the route of the user than on the means of transport. The application suggests the most direct routes between point A and point B, whether customers use the metro, bus, tram, or even a VTC. These suggestions are made in real time depending on the state of the traffic.

This evolution prompts companies to reconsider their ecosystem of partners and to consider co- innovation as a necessity.

3. Service Monetization

Ultimately, to engage the customer, companies must offer them “unique, memorable and economically valued experiences,” as Joseph Pine & James Gilmore pointed out in their research for the Harvard Business Review in 1998.

In the beginning was the product; then came the service.

At present, it is possible to develop solutions that make this service as personalized as possible: in the transport sector, it is the right vehicle that arrives at the right time. In the future, based on usage data, it will be possible to predict travelers’ expectations, if this is not already the case today.

The economic paradigm has changed profoundly: it is no longer so much a question of property as of experience. It is through experience that customers are retained and engaged. Car manufacturers know that the future of their industry depends less on the sale of vehicles than on the monetization of connected services, which the individual can consumes as she wants, when she wants.

Insurance “à la carte,” presently an aberration, will become widespread. By this logic, transportation à la carte will also prevail, and the preferred economic model will be the subscription model.

From transport to travel, from ownership to experience, the various players in the transportation sector must redefine their growth strategy to remain in step with contemporary usage.

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