Time‐based zones: an alternate pricing strategy

Abstract

Service industries, such as public bus transport, are time‐bound, which makes it impossible to inventory their service output. The potential revenue from an empty seat on a bus is lost for good once the service run is complete. Conversely, when demand for a seat on a service run exceeds supply, the revenue is also lost. As public bus transport has a high fixed to variable cost ratio, these demand and supply imbalances have a significant impact on cost recovery performance. Addresses a number of factors that influence the cost recovery performance of public bus transport using data from one of Australia’s largest operators. It considers the shortcomings of current fare price structures and how these may be changed to reflect operational cost drivers in a way that improves cost recovery performance. The various non‐monetary costs passengers incur when purchasing and using public transport are also considered along with methods of reducing these to increase the revenue‐generating performance of operators’ fixed capacity.

Citation

Phillips, B. and Sanders, P. (1999), "Time‐based zones: an alternate pricing strategy", Journal of Product & Brand Management, Vol. 8 No. 1, pp. 73-82. https://doi.org/10.1108/10610429910258020