Rewarding passengers to gain a competitive edge

Competition on the Swedish railway is on the rise as new players enter the market. While procured rail traffic was exposed to competition in the early 1990s, the deregulation of commercial domestic traffic first began in 2007 and was only fully deregulated in 2010. Since then, SJ’s competition has grown and major players such as MTR are currently applying for a service position. In an interview for Global Railway Review, Thomas Silbersky, Director of SJ’s Sales and Marketing Division, discusses the advantages of SJ’s passenger loyalty programme in today’s increasingly competitive market.

“When the aviation, energy and telecom markets were deregulated in the 1990s, there was less customer activity in the energy market, but more in the telecom market, where a greater product and price differentiation was achieved,” comments Thomas. “However, the state-owned companies, Vattenfall (energy) and Telia (telecom), continue to be the largest players in their respective sectors. In the aviation market, which has greater similarities to our market, SAS was only exposed to serious competition in the 2000s; we are now seeing some greater differentiation there, with several players collectively challenging SAS, which adversely impacted the company and culmi – nated in a crisis in autumn 2012.”

However, Thomas continues to explain that there are several challenges that are more specific to the rail market: “Delivery will largely be similar between the competitors – we have the same infrastructure comprising tracks and platforms. The hardware’s design is inherently sluggish in terms of changes, which means that the faster-paced portions of our offering, such as price, service, peripheral services and the packaging of offers, will be vital components in the contest for customers. The market’s development is entirely dependent on the degree of differentiation and the success of various players’ offerings to match the actual needs of customers. We are well-equipped in terms of knowledge about customers and offerings to various segments. Furthermore, we have extensive experience in driving our customers, by means of trains.”

Thomas adds: “To keep up with increasing competition on the Swedish railway, we need to create incentives to ensure customer loyalty – by optimising our offering. To achieve this, it is crucial to have insight into what customers want and to be able to communicate our offering to them directly. Our loyalty programme, SJ Prio, is one of our important tools for fulfilling these objectives.”

SJ Prio was launched in 2007 and has grown steadily to reach nearly 1,000,000 members. The programme’s conventional structure is similar to those of many airlines. Members collect points by purchasing tickets, items in SJ’s dining carriages and through other SJ Prio partners. For every Swedish krona spent, they are re – warded one point. In addition to purchases at SJ, members can collect points by linking a MasterCard to their SJ Prio card. Members can also be awarded points by certain hotel partners. The points can subsequently be utilised by members for journeys with SJ, purchases in dining carriages or for an overnight stay in a hotel. Additionally, unique adventures have been created for various target groups that can only be accessed by trading in the points. Anyone 16 years or older qualifies for membership in SJ Prio which is personal and free-of-charge.

“The programme is well-known and appreciated among our passengers,” says Thomas. “It has a significant influence on travel patterns and, for example, motivates a high percentage of members to consider travelling more frequently, in order to attain the next level of membership. It is impressive that 1,000,000 of our customers will soon be members of SJ Prio and in order to honour the expectations we have created, it is vital that we continue to develop the programme so that future membership is also perceived as attractive.”

SJ Prio currently has three levels that are based on the number points collected by a member. The lowest level, ‘White’, deals primarily with the core of the programme – collecting and utilising points. The intermediate level, ‘Grey’, includes benefits such as free coffee and Internet during journeys. At the highest level, ‘Black’, members gain extra flexibility and services, as well as access to lounges.

“One of the programme’s success factors was our early focus on a high redemption ratio,” explains Thomas. “Giving back to the customer is fundamental to their perceiving the programme as being of value. We must continuously monitor the attitude to the programme and its appraisal by customers. It is a matter of striking a balance, where it is a clear win-win situation for both the customers and SJ, or one of the parties will choose to discontinue the programme.”

Thomas continues: “One of the purposes of SJ Prio is to enable direct communication with members by e-mail and mobile phones. We have achieved a high frequency of opened e-mails by basing our offers on the members’ profiles and thus increasing the relevance of such communication. I regard this as proof that we are on the right track with our analysis and seg mentation of customer behaviour, our presentation of offers, and that we are packaging the complete offering in a manner that is obviously appreciated, which benefits both the customers and SJ.”

Membership in SJ Prio enables the analysis of information regarding all of a customer’s transactions with SJ over time. Not only are ticket and dining-carriage purchases analysed, but also the manner in which offers and membership points are utilised. The data is processed and subsequently converted to KPIs and analyses, and used to support operations with the task of creating and delivering the services demanded by our customers. By understanding customer behaviour, SJ can generate customer value through, for example, customising offers and benefits that reward a member’s actions. System support is provided through the use of tools such as Siebel and SAS.

“The benefits of the programme are many,” says Thomas. “On the operational level, it enables us, as a train operator, to optimise the load factor on trains, which benefits both SJ and customers. This can be achieved by, for example, our offering extra points when customers book tickets on the fringes of peak traffic. We have also successfully used this method when adding new departure times, to encourage customers to try out and, hopefully, become attached to the new schedule. Our ability to offer points provides us with flexibility, compared with being limited to offering discounts in Swedish krona.”

Thomas continues: “Another operational example is when we offer points to customers for trying out new booking channels. The majority of our customers are already purchasing their tickets through self-service channels, vending machines, computers or mobile phones. Whenever we offer point incentives to those who do not usually book through our website, encouraging them to change their behaviour for the next booking, we have observed a doubling in the use of the channel.”

Thomas continues to explain that several advantages on the strategic level are also being achieved. “It is useful when those of us involved with strategic processes need to analyse customer behaviour and are able to determine whether we have succeeded in attracting new customers, or if it is the same individuals who are taking the trains,” says Thomas. “One concrete example is when we recently performed an analysis of how our customer groups on a particular route changed their behaviour over time. Such information serves as highly valuable input to the process of how we present future products, in order to deliver the greatest value possible to our customers, and naturally, the information gleaned through SJ Prio is not our only source of input.”

In terms of the importance of the informa tion gained from a loyalty programme such as SJ Prio, Thomas asserts: “Of course, the informa tion we garner about SJ Prio members must be complemented by information about all our customers. We must also take into consideration that such information reveals only certain aspects of the members’ behaviour. We need to add what the customers feel and think about various components of our service delivery.”

Thomas continues: “Accordingly, we need to combine the picture gained from SJ Prio with the customer market surveys we conduct. Counting only our on-board surveys, we conduct tens of thousands of interviews every year to capture customer opinions. This may sound excessive, but our customers are the most important thing we have.”

Biography

Thomas Silbersky is the Director of the Sales & Marketing Division at SJ AB. Prior to joining SJ, Thomas was the Nordic Commercial & Marketing Director of Rinkaby Food AS (Arla Foods). He has broad experience in the FMCG industry, including roles as the Nordic General Manager of Tival (Nestle), General Manager of Rönnberg Mccann and Marketing Director of Carlsberg. Thomas holds an MBA from the Stockholm School of Economics.