Railway

Introduction Passenger SegmentFreight Segment Commercial Advertising Brand Makeover How should Indian Railways make the best of the market and reinvent its brand image in order to keep up with the business scenario and customer preferences? Our Approach Increase Revenue Passenger Segment Freight Segment Achieve operational efficiency Reinvent Brand Image Brand positioning Advertising& Promotion Customer value Hierarchy Advertising PPP Encouraging private competition Introduce new class(es) Dynamic Pricing High-speed corridors Value-added Services Increase rates Increase Axle-load Increase Maximum Moving Dimension (MMD) Upcoming high-speed network Commercial Publicity Targeted Advertising Push the new image Deploy more trains Existing track network New brand image Lease rail tracks Unanticipated Increase fare New logo Basic Expected Desired Formulating the research matrix Problem Statement Increasing Revenues of IR Improving Brand Image Existing and potential revenue streams. Current perception of IR among people Measures of Brand Image Research problem Financials, Budget, perception of IR Information Requirements Secondary and Primary Research Sources of information Secondary Research Background reading & Literature review Qualitative interviews With Consumers and also with Indian Railways officials Quantitative Survey Analysis of Present Scenario and Evaluating Options • Political inertia to alter Status Quo, mostly driven by vested interests • Social Responsibility v/s Profit Maximization • Too much Red Tape  Station infrastructure and property is a state subject • Investment is limited by the budget allocated to IRFC • Running Double Decker trains for suburban transport and some other routes is difficult owing to catenary height constraints • Archaic Labor Laws • Cannot hire and fire workforce like in the case of an efficient market Passenger Freight Advertising PPP Competition Brand Promotion Customer Extremely high subsidy in a select set of goods makes system inefficient If govt. actually wants to help the poor, then instead of only reducing passenger fare, government should use either cash coupons or uniform subsidies across consumption spectrum to keep price ratios intact Passenger Freight Advertising PPP Competition Brand Promotion Customer Fare increment in existing Classes: Difficult due to political issues Flexi class F A R E Dynamic Prices in Flexi Class Introduction of new Class is possible Time based Dynamic Pricing in existing AC trains/coaches • Argument of Social obligation does not hold for AC segment •Overnight train should have higher fare than day trains •Weekend trains should be priced higher than weekday trains Regular Fare in 3rd AC Number of tickets sold • Pilot Product Between Ahmedabad –Mumbai •With current GDP level enough People are not willing to pay for time saving •Very Low Internal Rate of Return • Break Even not possible Passenger Freight Advertising PPP Competition Brand Promotion Customer Passenger Freight Advertising PPP Competition Brand Promotion Customer Lower freight rate compared to road freight tariffs in India Large rakes enable higher load carrying capacity compared to roadways Presence of rail sidings eliminates multiple handling and last–mile connectivity costs Location of production and consumption centers - Bulk commodities involve greater primary movement due to industrial use - Therefore, their movement is restricted among select routes Higher lead distances - Concentration of bulk commodities in select regions leads to higher lead distances for freight movement - For lead distances of 500-600 km, transportation by rail is more cost-effective Passenger Freight Advertising PPP Competition Brand Promotion Customer Declining share of Railways –29 per cent in 2010-11 from 35.6 per cent in 2005-06 • slide is expected to continue, albeit at a slower pace Because capacities of the Indian Railways, even with the expected additions, will not be sufficient to meet demand Passenger Freight Advertising PPP Competition Brand Promotion Customer Freight Segment Increase Maximum Moving Dimension (MMD) Rigid, no much scope for increasing the dimensions owing to safety reasons Increase rates Increase Axleload Deploy more trains Fairly competitive, any further increase might shift customers to road transport Is an option, let’s consider it Capacity constraints even at manufacturing level Passenger Freight Advertising PPP Competition Brand Promotion Customer Wooden Sleepers 45-kg rails Fish-plated joints Steam Engines IR Axle Load (in tonnes) 20.32 on most lines 22.9 on few routes Concrete Sleepers 60-kg rails Long Welded Rails (LWR) US: 30 tonnes Australia: 37.5 tonnes Electric/Diesel Engines IR: Remained the same Current limit set in 1968 Hammer Blow: A phenomenon observed with every rotation in Steam Engines (only) - Tends to increase the impact loading on the track by 25-30% 45 v/s 60 kg rails, Wooden v/s Concrete sleepers, Fish-plated joints v/s LWR - Superiority, improved strength and reduced severity of impact Passenger Freight Advertising PPP Competition Brand Promotion Customer Design can have axle loading up to 30 tons except for an extra 50 mm of sub-ballast [1] Track quality similar to others around the world , but axle load substantially lower [2] Ex: In North America, with similar tracks on wooden sleepers-> handles 29.83 tons [2] In Australia, the permitted axle load is 37.5 tons. IR allows a meager 54% of this [2] To take axle load to 29 tons , IR has all the required parameters except for the below: -Crossings are 1:12.5 instead of 1:20 for which suitable speed restrictions can be imposed - Limit for hollow wear of the wheels will have to be restricted to 3 mm instead of 5 mm Rs. 1,000 Cr of revenue lost: Different actual& stenciled tare weights for BOXN , BCN [4] Passenger Freight Advertising PPP Competition Brand Promotion Customer Weight in Tonnes/ Revenue in Cr Rs Axle Load No. of Axles Gross weight Tare weight Payload (RDSO spec.) % increase in Axle load % increase in Payload Freight Tonnage (Crore Tonnes) % increase in Freight Tonnage Incremental Revenue/year (Rs Cr)2 Incremental Revenue/year (Rs Cr)3 Current 20.32 4 81.28 22.47 58.81 101 - Scenario I: Increase Scenario II: Increase Scenario III: Increase to 25 Tonnes by 30%1 by 2 Tonnes 22.32 4 89.28 22.47 66.81 10% 14% 115 14% 9,334 7,800 25 4 100.00 22.47 77.53 23% 32% 133 32% 21,843 18,252 26.42 4 105.66 22.47 83.19 30% 41% 143 41% 28,451 23,774 Assumptions: 1) Steam engine used to increase impact by 25-30%, which no longer is the case. Assuming a figure of 30%, which is very conservative given we didn’t adjust for other improvements like concrete sleepers etc. 2) Here, philosophy used is % incr Freight Tonnage& incremental Revenue, will be same as % incr in Payload 3) Here, the philosophy used is to find average freight earnings per Tonne and get incremental revenue by appropriate multiple (2/4.68/6.1). Facts used: No. of wagons= 177,000 | Wagon Turnaround= 4.5 days | Average Earnings per Tonne= Rs. 679 4) Considered a simplistic case assuming BOXN wagons Passenger Freight Advertising PPP Competition Brand Promotion Customer Passenger Freight Advertising PPP Competition Brand Promotion Customer Delhi airport's expected advertising revenue is around 100 Cr. With 5 times the footfall, imagine the potential of Delhi's railway station!! Estimating Indian railway stations’ Advertising potential Advertising Potential for Delhi Airport ( 3 Crore visitors every year) Advertising Potential for Major Indian Railway stations (accounting for lower segments, reduced Exposure time) Total Annual Footfall across Country Total Footfall after rejecting 30% footfall at small stations Total Advertising Potential Across Major Stations Approx. Advertising Potential inside train (at 1% of passenger fare revenue) Total Immediate Advertising Potential Rs 30/ footfall 10% that the of Air travelers 800 Crores 560 Crore 1600 Crore 250 Crore 1,850 Crore Passenger Freight Advertising PPP Competition Brand Promotion Customer Targeted Advertising • Huge Customer Information database, highly valued in advertising industry SMS Advertising (80 characters- actual message, rest 80 characters- target ad) PPP Model for Commercial Advertising • Put entire station available for adoption for Advertising for fixed Fee • Clean and hygienic stations: Direct Incentive to private Company • Sampling of FMCG items inside train: Travelers have ample time for feedback • Vinyl coating for individual trains, as the earlier nationwide consolidated tender didn’t work Relative Contribution of new sources such as commercial publicity would increase Five Fold (From 0.2% to 1.8% of total Revenue) Passenger Freight Advertising PPP Competition Brand Promotion Customer Flexi class with dynamic pricing ala airlines model Dynamic pricing: Time/Spatial/Service based pricing Dedicated High Speed tracks, do not make economic sense at present VAS: SMS- Train delay information, Potential Revenues- Base case= Rs. 280 Crores Prepaid Auto/Taxi/Coolie: Help strengthen brand image Buying of platform tickets through SMS Freight: Increasing load carrying capacity leading to ~Rs. 8,000 Cr or 14% of additional revenue in the base case and ~Rs. 25,000 Cr or 40% in the best case scenario Targeted Advertisements: customization based on customer purchasing profile Commercial Advertising potential: If the potential is exploited then it could generate Rs. 1,850 Crores Passenger Freight Advertising PPP Competition Brand Promotion Customer Country India Russia Germany Revenue Per Employee 21 11 6 Revenue Per Employee ( In INR) 719,784 2,100,685 9,157,627 Despite all good things Indian Railway is extremely inefficient Limited Financial Resources: Prioritization is extremely important Suggested Initiatives • Speed increment for passenger and other slow trains • Centralized pool for Special trains: Slated to improve resource utilization • Add Sitting coaches (such as JanShatabdi coaches) to normal long distance trains • Recruit fewer employees, improve processes to make up for the shortfall • A pilot PPP Project on an existing Track Passenger Freight Advertising PPP Competition Brand Promotion Customer Employee per km for Indian Railways is double that of Russian Railways: One of the major deterrents to operational excellence. As this eventually lead to higher employee costs, which at the current figure of 50% of revenues is very high Central pool for special train coaches and engines: Slated to improve resource utilization Consider adding Sitting coaches to normal long distance trains For a high traffic route (Delhi - Mumbai) IR could allow private player to use IR infrastructure either on a lease or revenue sharing basis Given limited financial freedom, prioritization of allocation is extremely important Standardize speed across a wide spectrum of trains Passenger Freight Advertising PPP Competition Brand Promotion Customer Passenger Freight Advertising PPP Competition Brand Promotion Customer • For passenger segment demand exceeds supply. Hence – advertising not required to entice more people – advertising campaign required to build the brand: Indian Railways Identifying important dimensions Cleanliness Punctuality Connectivity Convenience Availability Customer friendly Affordability Safety • • • • • • Hygiene and cleanliness in trains and stations Train reaching destination on time Connectivity to different places Convenient boarding and travel Availability of tickets Customer focus with a human touch • Prices of the tickets • Safety of passengers and their belongings Quantitative Survey Findings: Most important concepts that emerged: Availability (75%) Affordable (54%) Punctuality (63%) Customer Friendly (51%) Passenger Freight Advertising PPP Competition Brand Promotion Customer 1. Though Railways are Affordable but they should be more Reliable as well Punctuality 4. Why aren’t the trains punctual? “Why don’t the trains reach on time. It really deters my desire to travel by trains” Reliability 2. Reliable mode of travel “Indian Railways is not very reliable. Trains are sometimes cancelled and sometimes late” “It is not possible to travel by train. You can’t rely on it, as you hardly get the tickets even in tatkal” Affordability 3. Trains are affordable and they should be “Trains are an economical means of transport and that should remain unaltered for the public” 5. Only few trains are on time. “Trains usually don’t reach on time barring a few of them. I like to travel only by those trains which are usually punctual so that I can plan the rest of the day” Price Availability 6. Availability of tickets. “My first preference is to travel by train but where are the tickets” 7. Price of the tickets should be nominal “The prices of tickets should not be increased. Instead monthly passes for discounted fares should be encouraged” Only few relevant extracts from the interviews have been shown. Passenger Freight Advertising PPP Competition Brand Promotion Customer Red color ‘i’ Drastically different from current Trendy Contrasting color combination • Associated with aggression • New iPhone/iPad generation would relate more • Suggests a paradigm shift in the perception • Higher recall value • Greater impact Passenger Freight Advertising PPP Competition Brand Promotion Customer Passenger Freight Advertising PPP Competition Brand Promotion Customer • Four kind of services need to be looked at: Basic Expected Desired Unanticipated • Reaching Destination • Safety Concerns • Punctuality, hassle free ticket booking • Pantry services (for purchase), Clean toilets • Cleanliness and Hygiene, good quality Waiting Rooms • Less turbulence, Aesthetics of train and station. • Distributing free toffees • Complementary gifts • Starting with the basic services, railways should slowly incorporate all the four kind of services. – improves value proposition provided by Indian Railways – improves its brand image Passenger Freight Advertising PPP Competition Brand Promotion Customer • Treat Passengers with a human face: – Customer facing Railway staff (TT, Enquiry, Security, Ticket counter etc.) encouraged to act humanly with passengers – Needs capacity building in terms of water supply (washrooms), man power and infrastructure – The contract with Eureka Forbes could be improved to have wider reach for the cleaning services – Many passengers have lesser problem with slow speed than with uncertainties and delays – Capacity building, infrastructure improvement • • Cleanliness at Stations and in Trains • Reliability: Operational staff’s bonus should depend on their performance as a team such as efficiency of a station • Better website: – Current server not able to handle huge traffic during tatkal booking – The irctc website should be more attractive and customer friendly • Technological advanced solutions – Cloud Computing – should be used Passenger Freight Advertising PPP Competition Brand Promotion Customer Rebranding of Indian Railways: New logo, different and better perception New logo: Trendy, Appealing to Youth, Higher recall value, Portray s evolving nature of IR Four most important concepts: Availability, Punctuality, Affordability, Customer Friendly Focus on customer service at four levels: Basic, Expected, Desired, Unanticipated Use cloud computing for IRCTC website, especially during 8-9am 28 [1] Report of Don Gillstrom on “IR Track Design Analysis and IR Axle Loads” [2] Summary of report by CANAC, Canarail, CPCS Transcom and LEA on “Gujarat Double Stack Container Project” [3] “Guidelines to Best Practices for Heavy Haul Railway Operations – Wheel and Rail Interface Issues.” [4] “Loss of Revenue Due to Difference Between Actual Tare Weight and Stenciled Tare Weight in BOXN and BCN Wagons” [5] http://www.irfca.org/ [6] McKinsey & Company, Indian Railways: Moving to the Fast Track, McKinsey & Company, Inc [7] Rates Circular No 41, Increasing Permissible Carrying Capacity of Wagons on CC+8 and CC+6 Routes Freight Incentive Schemes: Policy Guidelines, Ministry of Railways, Government of India, New Delhi [8] http://www.indianrailways.gov.in/ [9] Status Paper on Indian Railways, Issues and Options, Ministry of Railways, Government of India, New Delhi [10] Data Book, Railway Budget, Ministry of Railways, Government of India, New Delhi