Market segmentation
Market segments: groups of people or organizations that are similar in terms of how they respond to a particular marketing mix or in other ways that are meaningful for marketing planning purposes.
Transit agencies can use a market segmentation strategy to improve their competitiveness as well as better serve the needs of their customers. An effective strategy would:
- Increase ridership (both by increasing the frequency of riding and attracting new riders).
- Increase transit's share of mode choice in your market.
- Efficiently allocate resources to markets that represent the greatest potential for change in light of
changes to the marketing mix.
- Enhance the image and reputation of public transportation to increase support for public funding
While transit agencies typically do not generally think in terms of profits and sales, they can still benefit from the use of market segmentation research and the resulting strategies. Researching the market can help agencies identify customers' preferences and effective promotional strategies.
Bases for Segmentation Predetermined segmentation involves defining groups based on known characteristics, such as: transit dependent vs. choice riders, student commuters vs. work commuters, and residents of high-density areas vs. suburban residents.
For example, in 1995, the San Diego Association of Governments (SANDAG) and the Metropolitan Transit Development Board (MTDB) developed a market-based strategy to target potential riders in specific transit corridors. By focusing on the State Route 94 corridor, the MTDB found that even though the demographics in the corridor were well-suited for transit, ridership was lower than expected. Further research identified perceptions of safety as a key concern affecting ridership in the corridor. The MTDB developed a ridership guide to increase awareness of routes and safety precautions, and mailed the guide to over 20,000 households in the corridor; the results were a success, with ridership up in the corridor. The MTDB has since applied the strategy to other corridors.
Market-defined segmentation uses actual market investigations, notably analysis of survey results. There are many variables that can be used to classify segments, including usage rates, disliked modes, life style, ethnicity, etc. Through a post hoc analysis, agencies can gain a better understanding of their market. For example, surveys about a new rail service can show the different types of travelers who might use the service, such as those who care only about functionality or others who prefer rail over bus. The agency can then better prepare marketing strategies and estimate ridership and revenue.