How to successfully launch and grow an on-demand transportation service

In a previous blog and webinar, we gave a high-level introduction to on-demand transportation. Watch and read the first installment for everything you need to know about microtransit. 

It may seem straightforward, but launching an on-demand public transportation service involves more than implementing new technology. Successfully launching and growing a microtransit service — sometimes referred to as demand-responsive transport — takes a considerable amount of planning and preparation to ensure its popularity is in line with the investment. In order for a new microtransit model to succeed, it’s critical to understand how to choose the right vehicles and drivers, set attractive fares, rely on best-practice marketing tactics, and recognize how to regularly monitor and calibrate the service.

Choosing the right vehicle

This is a bit of a trick question: There is no one “right” or “wrong” vehicle, as the type of vehicle will be dictated by the kind of service being designed, but a few guiding principles can help operators make the right choice. It’s important to consider factors like:

• Vehicle capacity: A vehicle with seating capacity between six and 14 people will work the majority of the time. Choosing to exceed more than 14 people in one on-demand vehicle might increase the number of stops, resulting in a poor quality of service for the customer who was first on board.
• Customers’ accessibility needs: A service doesn't need the entire fleet to be accessible, because riders can self-identify as requiring an accessible vehicle. With that in mind, aim for about 30% of a fleet to be accessible. That will provide economic efficiency while also meeting customers’ needs.
• Country-specific regulations: Some countries impose additional taxes/levies on on-demand services that choose smaller vehicles, while others have special regulations on requirements for things like seatbelts and rider age restrictions.
• Electric and autonomous vehicles: On-demand services often use a mix of traditional combustion engines as well as electric vehicles, because while shared transport naturally reduces emissions from single-occupancy vehicle trips, the latter does even more to reduce the environmental impact caused by carbon dioxide emissions. As autonomous vehicles become widely available, they can be ideal for an on-demand service as well.

Choosing the right drivers

Using drivers who observe the rules of the road and maintain a focus on safety is, of course, paramount, but it doesn’t end there. Hire drivers who also have:

• Excellent customer service skills and the ability to engage customers;
• Local knowledge of the service area;
• A comprehensive understanding of the technology from the customer’s perspective;
• The ability to explain the service and how to book/use it; and
• The ability to deal with different types of customers, including difficult customers and/or situations.

Setting the fare

Fares can be designed with a multitude of end goals: to maximize ridership; lower the cost per trip; increase farebox recovery and the use of other public transportation services; get private cars off the road; and/or encourage ride sharing. They can also influence the customer behavior. Using distance-based fares, for example, will naturally encourage customers to make shorter trips versus longer trips when the outcome is relatively the same. This can incentivize customers to travel to the closest transit center, which helps with rider aggregation and vehicle utilisation while attracting more riders to existing transportation infrastructure. Plus, the easier you make it for people to pay, the more they will use the service. Payment methods include payment through the app using a credit or debit card; tap-and-go payment on board the vehicle; payment integration into the public transport payment method; and even cash if/when the customer base requires it. It’s important to regularly review the pricing setup and structure and make adjustments as needed. Research and analysis will help cities and transit operators understand what choices customers currently have and where the on-demand service provides additional value, and fares can be set accordingly. Finally, fare promotions are an important tool when building a customer base and for increasing ridership. For example:

• Offer the first two (or more) rides for free to get people using the service.  
• Offer a fare-free period for a first- or last-mile service for commuters, which gets people using the service every day.  
• Use existing riders to promote the service. Get them to refer the service to their own networks in exchange for two additional free rides once their friend uses the service. This is a cost-effective method of growing ridership.
• Adjust fares based on times of day to increase ridership levels at a time when they normally might be low.
• Create a subscription model, which offers guaranteed revenue for your service, and convenience and lower fares for customers.

Marketing on-demand transport

A marketing strategy should be based on some key practices:

• Lifecycle-based marketing: Understand the unique challenges in driving engagement at every stage in the customer journey (acquisition, activation, engagement) and deploy strategic initiatives tailored to each phase.
• Customer segmentation: Identify core use cases and commuter behaviors, and tailor the content and cadence of messaging to these unique commuter profiles.
• Multichannel presence: Develop a multitude of touchpoints (digital advertising, out-of-home inventory, and paid/earned media) to reinforce key messaging and drive conversion.
• Real-time data: Understand real-time behavioral trends to strategically deploy hyper-relevant messaging quickly and easily across the native products (email, in-app, push messages).
• Virality: Develop an intuitive and frictionless referral program with customizable incentive structures that create opportunities for commuters to become your biggest ambassadors.

Monitoring and calibrating the service

On-demand transport is not “set it and forget it”; rather, aim to always be improving to ensure the service you’ve designed is right for your customers. Track important metrics, including:

• Utilization rate
• Rideshare rate
• Average wait time
• Average detour time
• Average walking distance
• Offer rate
• Offer acceptance rate