Why it makes sense for councils to market buses
INSTEAD OF PAYING OPERATORS TO RUN EMPTY BUSES, GOVERNMENT SHOULD FOCUS ON ENCOURAGING CONSUMERS TO PAY FOR FULL ONES
Competition isn’t working
The bus market outside London is deregulated. This means anyone can run any bus route they choose. When deregulation was introduced, it was expected that it would lead to competition driving down prices and driving up quality. What has, in fact, happened is the emergence of large regional monopolies, dominated by a handful of PLCs.
The reason for this is that it is almost impossible to start a new bus service. This is despite the fact that bus market share is idiotically small for the potential benefits a bus service provides.
Someone travelling exclusively by bus could travel all year and spend no more than a driver spends simply insuring their car. For such an economically compelling proposition, there has to be a reason why just 5% of journeys are taken in this way.
The reason is that competition in the bus market is broken, with, in most places, a mediocre product delivered by monopoly PLCs.
It’s not through lack of potential supply: there are around 1,000 bus companies in the UK. If the market was working, they would be able to start new services and increase market share.
So let’s imagine one of them spots an opportunity. It could be a connection under-served. Or served badly by the incumbents. Or served expensively by the incumbents. Or not served at all.
Let’s imagine they want to put a toe in the water with a low-cost experiment. To set up a basic bus service might cost, say, £250k. To market that bus service effectively would probably cost £millions.
As soon as they’ve figured out which routes work, someone else will come along and free-ride on the back of all their marketing investment to run a nearly identical service.
This is a feature of buses that makes the bus market distinct from other retail offers. You would not, having decided to walk into McDonalds, expect to find KFC’s rep bobbing up behind the counter.
As a result, operators tend to stick to the routes they already run. The consequence is a series of monopolies - not through collusion but monopolies nonetheless.
Moreover, marketing new bus services is fantastically difficult. With no visible street presence, everything needs to be ‘push’ marketing. Google, the most popular marketing channel that exists, isn’t viable as, by definition, your bus route didn’t exist before so no-one is going to search for it. Therefore, you’re left with marketing on Facebook - the only other meaningful online advertising channel exists. Effectively there’s a ‘Facebook tax’ on inventing a new bus route - and you’ll still end up printing lots of leaflets! Small wonder that virtually no-one ever does this. Investing a five figure sum to test a market is one thing: throwing a six figure sum at Mark Zuckerberg is quite another.
Step in the caped crusader councils
This could be resolved by local authorities taking on the role of marketing bus services. At a stroke, the two big issues with operators taking a punt on new bus routes are removed: the advertising cost is eliminated, and the free-rider problem is heavily reduced. An operator is put in the same position as someone contemplating opening a new cafe on the high street: they need to focus on product, confident that their potential customers will discover their existence.
It may seem a strange suggestion that the local councils takes on the role of advertising bus services. After all, they don’t advertise any other industry. But councils spends over £1bn a year supporting bus services, so it is right that they should have a policy objective to encourage as many users of those services as possible. Not just for sound environmental reasons but because the more people that pay to use buses themselves, the less requirement there will be for Government to pay for socially necessary services.
(C) Harry Pope, Flickr - full buses beat empty onesAs an objective, seeking commercial full buses as opposed to subsidised empty ones is an objective that has environmental, social and financial benefits.
The principle of councils spending money on achieving their objectives is not a new one and advertising is one of those costs in which economies of scale are huge: both in media buying and content production.
2019’s “Get ready for Brexit” ubiquitous extravaganza of advertising cost £46m, last year’s flu jab campaign cost £4m, the NHS Change4Life programme was 10 years, and cost £14m. I still remember it (and still feel guilty when I exceed my alcohol targets…). More recently, the “This Girl Can” campaign to encourage women’s sports was an £8m campaign. Add all of this together and you get an advertising campaign you could see from space: and it would still cost only 25% of the amount Government has saved every year on reduced bus subsidies.
Now, I’m not suggesting £70m is spent advertising buses every year. But I am suggesting that a substantial, repeating budget is set. That budget should be a mixture of ‘brand bus’ advertising to encourage adoption, and targeted support of new routes as and when they appear.
This would, of course, mean an up-front investment as, initially, both the existing forms of support and the new costs would have to be incurred. But the principle is that it is better to encourage users to pay to travel on full buses than for councils to pay for empty ones. On that basis, the cost of supporting bus services will gradually decline as bus market share increases.
Obviously, for this to work, we have to believe that it is possible for bus use to increase. In an industry used to decline, that’s a change of mindset.
But railways were in decline, until the 1990s and then they weren’t. London buses were in decline until the 2000s and then they weren’t (though they are now, but that’s another story!). Bus market share is 5% and bus is both an ecologically and economically attractive proposition.
Give people the knowledge to make the choice, and they’ll start making it.
