Thames Clipper 500 words

Thames Clipper

Personal Reflections

The Thames Clipper is nothing more or less than a somewhat exotic form of mass transit.  It is essentially a busline that floats.  Probably the most similar operation is the Staten Island Ferry in New York City.  Both are rather ordinary public transit operations that operate on water in place of right of ways or streets. Both offer fantastic vistas of the cities which the serve and are popular with tourists or even for day trips.  In both cases the backbone of the operation and its revenues are the commuters that use it regularly to get to work.

The point of advertising a commuter transportation system seems rather futile.  This is not to be confused with efforts to entice the public to the use of mass transit in preference to private autos to reduce congestion, pollution and parking problems in crowded centre cities.If the system offers convenient service both in terms of wait and transport times and to and from convenient points it will gain ridership.  If it offers this at an attractive price it will gain even more ridership.

The promotion of a system like Thames Clipper to tourists is probably only marginally effective.  In the peak summer months it makes sense in that it will increase load factor in the off peak periods.  The same can be said of various types of promotional outings.

The key to profitability in a passenger transportation business is load factor, the proportion of available capacity that is utilized.  In a simplistic example, if a boat with the capacity for 100 passengersmakes 10 trips per day from point A to point B it has a theoretical capacity of 1,000 fares.  If it collects 900 fares it is operating at 90% of capacity or a 90% load factor.  Margins are determined by the load factor, as the cost of operation is virtually identical if the system is operating at 50% of capacity of 100%.  The fuel used will vary only marginally, the depreciation and maintenance on the facilities and equipment will be the same, and the personnel costs to operate and maintain the system will vary little if any.

The only rational for a promotional effort would be to increase the load factor, and then the benefits of the increase would be compared to the cost of the promotional effort.  If the promotional efforts increase revenues only enough to pay its own costs in would be effectively neutral in terms of operating efficiency.  If incremental revenue from improved load factor exceeds the cost of the program it is profitable and worthwhile.  If it fails to do so it is a negative, and should be avoided.  As the determination of incremental revenue is less than a perfect science a fairly substantial increase in load factor would be necessary to justify the promotional effort.

The real key question here is the viability of a promotional campaign for Thames Clipper.  The key learning experience was that in order to develop a meaningful and effective marketing campaign it is necessary to thoroughly understand the nature and economics of the business that is the subject of the campaign.  The underlying learning question here is the balancing of benefit with costs in a campaign of this sort.  It is clear that the cost of each element must be carefully compared to potential revenue benefit.