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[haptEr 6 Voueher Program ease Study Get= The transit voucher innovation first appeared in the late 198Os but has since been implemented in nearly 20 regions across the United States The program started in the New York metropolitan area, the largest transit market in the United States. Early market research used focus groups to help identify small employers as a key market; appeals to riders were added later. Both were effective marketing approaches in these early appeals, and have continued to be effective in more recent efforts. The New York voucher program helped to promote increased federal benefits for transit subsidies by employers, and new regulations and laws raised that benefit from $15 per month in 1984 to $65 per month in 1996. Voucher programs were instituted in many new cities including Denver, Philadelphia, Chicago, San Francisco, Los Angeles, Sacramento, Milwaukee, Pittsburgh, Portland, Washington DC, Minneapolis, Seattle, Buffalo, Boston, Norfolk, Louisville, and elsewhere. The programs work best in places where there are multiple operators and a reasonable transit commute market, so that riders have some clout with their employers. Because the program has appealed to small employers, it has proven successful in some single operator communities. However, the program is less successfi~} in smaller communities where transit has a low mode share and where transit users/employees have a more difficult time advocating for the service. .i - . : .;3 ' ~#' . , . ;~ 4~';":~;~-~-.~i.t i ~'i3'v14' ';~ I.,) 3,~. i,\; .hl .1; `;. ,. --t.~.,,~ pm'M' necl . ;4\ BEiTER ~ FARE. BErlER AIR The increased financial incentive of a $65 tax-tree transit benefit per month has been successes! in attracting larger businesses, who can use the tax exempt benefit to employees partly in place of salary increases. The New York voucher program has thus shifted its marketing program from smaller businesses to larger employers. In San Francisco, the voucher program has increased sales over prior years with the use of a brochure that stresses the cost advantages to businesses of partly substituting vouchers for wage increases. Paqe~1

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Vain ease sit ~3= The 1112 CIsan AIr Act Amendment raised the tax- fr0e maxImum tran11t fare to S65 In January of 1116. The first transit voucher program was developed in 1987 in New York City to serve the large and complex Manhattan transit market. The effort was led by the Port Authority of New York and New Jersey, mostly in response to findings from a survey of commuters at the Holland and LincoIn Tunnels. The survey results showed that most auto commuters to Manhattan received auto use subsidies from their employers, which most often meant they were provided free parking. This finding led to thinking about ways to provide transit subsidies through employers. In 1984, the Port Authority hired Richard Oram to focus on employer-based marketing oftransit. The Port Authority considered employer pass programs as an approacI, to marketing to business; however, research by Richard Oram into the use of employer pass programs elsewhere showed there would be problems promoting these in as complex a market as New York City. The research found that the employer pass program was generally only successful in some larger cities with a single transit operator, but notably not in cities where there were multiple transit operators. The complexity involved in receiving, storing, distributing, and paying for fare instruments from multiple transit operators discouraged employer involvement. To counter this, the idea of a regional transit voucher that all transit operators would accept in exchange for fare media was developed. Because bank checks could be used as transit vouchers, the vouchers COUlf] be deposited as regular sales proceeds or cash when received by the transit operators or their sales outlets. This concept became known as "TransitChek." Other research provided further insight into the success of the transit voucher program. This research identified the role of infrequent riders as a share of total transit ridership and as a source of new riders.113 The ability of a transit voucher to subsidize occasional use as well as regular users was another favorable aspect of a transit voucher program relative to an employer pass plan. That is, when an employer discounted a $50 monthly pass by $20, the employee had to ride more than $30 worth before any benefit was derived. But with a transit voucher, a $20 fare subsidy meant free transit for the first $20, which means that the benefit would appeal to many more users. In effect, avoiding co- payments greatly exparlds the market for and impact of transit subsidies. This impact was verified in subsequent research on voucher programs. The TransitChek program worked very well in New York. The program initially appealed to small employers because it was a simple way to provide a welcome employee benefit. A very effective marketing method in the early years was to appeal to riders, who would then lobby their employers to join the program. Nationally, the transit voucher program helped generate interest in the provision of transit fare subsidies, and coincided with sequential increases in the maximum tax-free transit benefit level offered by the Federal tax code. Federal legislation first "codified" transit fare subsidies as a "de minimus fringe benefit" in 1984, ~- P8gB 642

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Y~t880S - Y but limited tax-free transit subsidies to $15 per month. TI,is level rose to $21 in ~ 99 I, by TRS administrative action. The 1992 Clean Air Act Amendments raised the tax-free maximum to $60 in January 1993 and $65 in January 1996. The higher level of tax-free benefit that has been available since 1993 may also account for the increased appeal of the program with larger employers. Some larger New York employers reported in the initial years that a benefit limited to $ 15 or $21 was too small to justify the effort needed to introduce and administer such a program. However, with higher levels of tax-free benefit, transit vouchers could be marketed to employers as a way to save money. A tax-free benefit could be provided partly in place of a raise, resulting in a win-win situation for employers and employees. The success of the New York program brought interest from many other cities to adapt the TransitChek program. Other cities with multiple operators, such as Philadelphia, Chicago, and San Francisco developed programs. In addition, larger cities dominated by a single operator, even those which had pass programs, began to adopt voucher programs. In such cities as Denver, Seattle, and Boston, voucher programs were adopted partly to appeal to small businesses. Employer pass programs in these cities had appealed more to large employers. By 1995, transit voucher plans had been implemented in Denver, Philadelphia, Chicago, San Francisco, Los Angeles, Sacramento, Pittsburgh, Milwaukee, Portland, Washington, Minneapolis, Seattle, Buffalo, Boston, Norfolk, Louisville, and elsewhere. The program has used many names (TransitChek, Transit Check, Commuter Check, T-Bilis, MetroChek, Commuter Bonus), and private businesses began offering voucher program management services to transit agencies. In some cities (e.g., New York, Philadelphia, San Francisco, Milwaukee, and Boston) small service fees were attached to the voucher programs to defray costs and in some ways make them self-supporting. The small cost of some programs is of particular appeal to employers. A key activity in the initial development and the subsequent refinement of TransitChek in New York City was holding focus groups with benefits and personnel administrators. These focus groups, organized by company size, yielded findings that strongly influenced the product design and marketing strategy for TransitChek. A notable early finding was the inverse relationship between employer size and the level of interest indicated in implementing the TransitChek idea. This was an early indication of the role transit vouchers could play in drawing small- and medium-sized employers into the promotion of transit use. In the focus groups, benefits managers expressed what it would take to get their company to adopt a transit voucher benefit. There were three primary concerns. - Page6 3

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Vl~ lawn Ga88 Itudy First, the program had to be easy to administer. Employers were keenly interested in minimizing the administrative burden of any employee benefit program, and would only consider programs that did; not add overhead costs. There was an almost universal lack of interest in selling tokens and passes on site, as this was perceived as awkward and cumbersome. For vouchers, this principle of simplicity suggested that relatively few TransitChek denominations should be used, and that employers should be encouraged to adopt a standard level of fare subsidy for all staff rather than to seek to match individual employee's actual fare outlays. Second, the benefits/personnl! managers stressed that their employees needed to clearly express interest in the program. Employers only adopt a new fringe benefit when a compelling level of employee interest is demonstrated. This strongly argued for a "rider-driven marketing program" that enables employees to convey their interests in the new benefit. Third, other "peers" to which the employer often compared its benefits and compensation levels had to implement the program in order to "validate it" for more serious consideration. This peer effect was found to be stronger for larger employers. The peer factor also suggested smaller employers as a key initial marketing focus, as they are more likely to evaluate the program on its own merits, independent of what peers may do. It also illustrates how employers are generally "competitive and clefensive" regarding benefits - they compete with comparable employers, and are defensive in attempting to maintain the comparability of their overall benefits and compensation packages. The peer effect also suggested that penetrating an industry dominated by larger employers could be hard, but that if this were done at even one employer, it would have recurring value as other employers followed suit. Conversely, the relative ease of penetrating industries dominated by small employers, such as law or accounting firms, was also suggested. The focus groups also helped allay concerns for the perceived "downside" of a transit voucher -- that because it is not a fare instrument per se, employees would have to redeem them separately for a pass or tickets. The focus group participants indicated that administrative ease was critically important, and that their employees would be pleased to be able to redeem a voucher that offered a savings. To most of these New York employers, the idea of on-site sales of fare media was very unattractive, as it was seen as involving far more administration than simply handing out vouchers. _ In the years since the New York program emerged, a range of lessons have been learned. The following summarizes some key findings and notable features from varied settings where transit vouchers have been used. Much of this Pa98~4

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Vet Cases information is based on interviews with staff associated with the various programs. New York As noted above, the New York program had clear guidance from its early focus groups, but early marketing efforts were still exploratory and evolved considerably with subsequent experience and refinement. The New York program remains the most useful experience in transit voucher marketing. The New York TransitChek program began in 1987. A direct mailing was integrated with its rolI-out, but significant impact (measured by inquiry responses and resulting enrollments) also came from a well-orchestrated introductory press conference - staged in a subway station - that yielded excellent coverage by the local newspapers, radio, and television. Most inquiries came from employees seeking to get their company involved, rather than from human resources staff or other employer representatives. The program's enrollment first came from smaller employers (as the research had indicated) and later from a few larger and prestigious organizations. In ~ 995, the average size of an employer participating in the New York TransitChek program was found to be 37 employees. Initially, the New York program used direct mad' to employers to market TransitChek, feeling it was a classic business-to-business marketing effort. Mailings initially went to larger employers, (e.g., a mailing to the 20,000 largest businesses in Manhattan). The response to the early months of the program revealed that smaller employers were far more likely to enroll than were larger ones, so further direct mailings were sent to smaller employers, including those with as few as 5 employees in target industries and zip codes. This built enrollment considerably. Another highly successful effort that focused on small employers was a flyer inserted in quarterly tax bills sent by the United States Department of Labor for unemployment insurance. Another early marketing lesson, drawn from distributions to the over 100,000 pass-by-mai! subscribers for the commuter railroads, was the value of rider- driven marketing. This led to broad use of subway and bus interior posters, and later to direct handouts at major rail stations. In fact, on a cost per inquiry generated basis, the latter was found to be the single most cost-effective marketing action. Occasional direct mailings and relatively constant rider-driven marketing methods accounted for most of the growth of the New York program for its initial five years, when the tax-free maximum fare subsidy was $! 5 and $21 a month. In ~ 993, however, when the maximum tax-free fare subsidy rose to $60, TransitChek sales expanded sharply. The new sales were a mix of new customers and upgrades by previously enrolled customers. The higher "cap" expanded interest in the program to larger employers. By 1997, TransitChek had In ~Jl5. the average Size of an 0mp'0yer part~cIpatIn!l In the New York TransItehek pro-tram was found to be 37 0mp'0yees. Palled 5

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vet - ranea~s~ expanded to selling vouchers to over 6,000 employers in tile New York, New Jersey, and Connecticut market. Over 100,000 TransitCheks are currently issued every month, and total annual sales are expected to approach $50 million. it is notable how consistent the growth of the program was with the results of the focus groups described above. Enrollment in the initial years was dominated by small- and medium-sized employers, but in the mid-1990s, larger employers were also induced to participate. Recent sales records appear in Figure 6-1 below. Figure I: New York TransR8hek Sabs by Year 50 40 In O 30 - ._ 20 10 1991 1992 1993 Year 1994 1995 1996 Adding on to the interest generated in TransitChek by larger employers, the New York program obtained substantial grant funding to expand the marketing program to include an even larger salesperson-based marketing force. This grant was specifically geared toward addressing the provisions of the Employee Commute Options (a part of the Clean Air Act that required larger employers to reduce their pollution emissions); the TransitChek program was an ideal solution for many of these larger solutions. Key sales tools were materials developed to explain how a tax-free benefit saved compensation resources for employers. (This is achieved when an employer substitutes a tax-free benefit for taxable salary.) {RS provisions for the transit benefit indicated it could not be offered as a salary reduction plan, but it could not be implemented prospectively with a lower cost of living increase than would otherwise be provided. The net impact of substituting tax-free benefits for taxable salary increases is notably more after-tax compensation for employees, at slightly less total cost to employers. Adopting TransitChek without new costs to the employer is compelling, but does not lend itself to simple brochures or to the rider-driven marketing strategy. Rather, to enroll a mid-size or larger company, a skilled salesperson would most often have to explain these ideas to a number of mid-level executives with varying levels of experience in the effects of taxable vs. tax-free compensation. With a roughly constant marketing budget of about $1 million a year through the 1 990s, there was a need to assure that the funds were welIspent. A notable measure of effectiveness for voucher marketing efforts was devised by New York staff. It is easy to track the number of inquiries and relative cost per Page6 6

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Van Case So inquiry resulting from different communication methods, such as car cards vs. flyers vs. ads in business newspapers. As noted above, on this basis, New York found direct flyer distributions to transit riders in major stations to be the most effective way to generate inquiries. Yet, it was also concluded that inquiries are at best an interim measure of impact, so other potentially more revealing measures of marketing effectiveness were evaluated. The relationship of new enrollments to the different marketing mechanisms was initially sought, but this proved impossible to establish due to the many different contacts and stimuli needed to generate certain enrollments, sometimes spanning years. What was settled upon was a year-to-year comparison of total new sales (i.e., sales to new employers) vs. the marketing budget for that year. This also avoided valuing a new large account the same as a small one, as would happen by tracking only the number of enrollments. Using this "marketing cost per new customer dollar of sales" basis, New York staff report greatly improving return or cost-effectiveness on their marketing. The "marketing cost per new customer dollar of sales" was noted to have fallen from $0.57 in 1992 to $0.] ~ in 1996. This is notable given that as any product ages, return from its advertising can diminish. The New York program has sought to offset this effect by constantly increasing the efficiency of its marketing expenditures, and appears to have succeeded. The New York program has made the transition from its early years when the transit voucher plan largely sold itself via rider-based efforts, to a more conventional marketing program using a sales force. Yet, the expense of the sales force was absorbed not as an increased cost per se, as much as by a substitution of resources from other marketing activities. As the sales force came on, the program made less use of direct mailings and ri~ier-based marketing, for example. New York staff described their ten-year experience selling TransitCheks with the following analogy. Some "low hanging fruit" - small employers that enroll in the program based on their own efforts, such as by reading a brochure or from employee requests - can be enrolled with minimal effort, but the "higher fruit" take more focused effort to capture. New York staff now plan an even more sophisticated marketing approach, entailing database management, careful review of sales records and participation levels, and analysis of standard industrial classification (SIC) codes for their enrollees. The intent is to assess how to better target sales force efforts and to obtain maximum impact from their marketing resources. For example, it was determined that 46 percent of all TransitChek participants active as of May ~ 996 were in three major SIC categories: legal services, business management services, and finance/insurance/real estate. P8Bl 6-7

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V8l~ Pill Gage StUdY I Philadelphia The Philadelphia TransitChek program, which is managed by the Delaware Valley Regional Planning Commission (DVRPC), began in 1991 to serve Greater Philadelphia, Southern New Jersey, and Delaware, and it expanded to serve Pittsburgh in ~ 992. It has had far lower marketing budgets than the New York program (less than $100,000 a year compared to New York City's $1 million), but also has generated useful marketing experiences. One key lesson from the program is DVRPC's experience with multiple denominations. The program began with just $15 vouchers in 1991 but expanded to add six new denominations as the maximum benefit level rose. From 1993 to 1994, the program offered $7, $15, $20, $2l, $30, $45 and $60 TransitCheks. Having concluded that the range of subsidy options did not provide a perceived benefit to employers - it seemed to complicate and discourage the decision to initiate the program, in fact - in 1995 the number of instruments was reduced to just three, though a fourth remained available but was not promoted to new customers. Partly for this reason, sales grew in 1995 and 1996. An analysis of the level of inquiries by source of the response | (i.e., the marketing medium used) was performed in November 1 1995 to March 1996. The marketing elements used included bus I and subway posters, commuter rail posters, in-station posters, a ~ television spot provided by a program sponsor, and program | brochures. As some of the inquiries were received via a voice I mail system that made it impossible to identify the source of the call, a significant "other" category also was needed, but could be removed for a re-allocated share. Fifty percent of the source inquiries for Philadelphia's TransitCheck program were from commuter rail, while television spots accounted for only ~ percent of all inquiries. Figure 6-2 below shows the distribution of the inquiries with the category "other" removed. This data suggests the key role played by the more suburban, higher-income commuter rail users relative to other transit riders in advancing the voucher program. The Boston Commuter Check program also had findings similar to those above, and other data (see San Francisco, below) provides even more corroborating evidence to this end. New York's finding regarding flyer distributions at major commuter stations (noted above) also supports the critical role of white collar commuters in marketing the program. Pages 8

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v - ~ea8~swy Figure 6-2: Souree of Inquiry for Philadelphia's Transiteh0k Brochures Bus 6 /0 Posters 24% Commuter, Rail 50% Subway Posters TV Spot 16% 1% In-Station Posters 3% In 1997, radio ads were also used to promote the program in Philadelphia; inquiries also were tracked. The one-minute spot aired ~ 6 times at a cost of $4,963. Inquiries that could be directly related to tile spot totaled 2S, and the cost per related inquiry was thus nearly $200. Of course, media ads also support other marketing and have image benefits. Yet. as auto commuters are the ~, primary audience tor radio spots, the low response Is not surprising. While auto users are the ultimate target for fare subsidies, they are not the primary target for its marketing. The employer must be motivated to make the enrollment decision, and as existing transit riders are the most immediate beneficiaries of those decisions, non-rider marketing is less likely to have the desired impacts. The limited impact of radio ads also was seen in Chicago. When the advertising program shifted from an emphasis on radio to rider-based methods, program inquiries and enrollments grew dramatically. The Philadelphia program is also careful to keep a close relationship with the enrolled employers. After a first order is received. a "Certificate of Recognition" plaque is sent as an acknowledgment (with an understanding that it will also be placed on display for employees). A newsletter for participants is also sent four times a year, providing relevant updates on transit issues and to . . . . . prompt re-orclers by occasional purchasers. A "year end tax tip" mailing is also done, reminding smaller customers that they can get a tax benefit by buying slouchers for the following year in December. Additional transit marketing support services also are offered to program participants, e.g., TDM support services provided through DVRPC's local "Mobility Alternatives Program." San Franeiseo The San Francisco Bay Area Commuter Check Program began in 1991. It has been quite well received, despite limited and sporadic (grant-based) marketing support that averaged only about $ ~ 00,000 a year, not including the approximate P88864

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v~neas~sb~ one-third time provided to the program by a marketing ~nanager at the Metropolitan Transportation Commission (MTC). In ~ 992, the Bay Area's Commuter Check program was honored by a California Governor's Mobility Award, and in 1997, it received an ENW(Environmental Award) presented by the American Lung Association. Through April 1997, a total of $15.9 million in Commuter Checks had been sold to over ~ ~ 50 employers. The key design feature of the program, and an aspect that is continually marketed to employers, is its simplicity. This simplicity translates into administrative ease in using the program. Voucher sales in the Bay Area have grown, as shown in Figure 6-3 below. Figure G-3: San Franciseo Bay Area Commuter cheek Sales by Year 6 5 4 3 2 1. I L _ ~ L it: ~ : of; ~ :~ O . ! ' ~-, ~. ~ ~ ~ ~ ~ 1991 1992 1993 1994 1995 1996 Year A single $20 voucher was initially offered, but when the cap rose to $60 in ~ 993 a $30 Commuter Check was added. In 1996, when the cap rose to $65, a $35 Commuter Check was begun. The program was particularly successful in shifting early enrollees from $20 to $30 Commuter Checks. Table 6-} shows April 1997 sales by denomination. Table 6-~: April 1997 commuter Shack Sales | ~i~i ~NoSdd | DolarValu0 | $20 Commuter Checks _~ $30 Commuter Checks 8941 $26S,230 $3 5 Commuter Checks 3 3 ~ 5 $ 1 1 6,025 Total 1S,137 $501,875 AverageDerlomination `~: -: ~ :~; ~$27.67 P - ~

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V~Pro ran eats . A notable marketing element of the Bay Area program has been its use of television sponsorship. In 1991, when the program began, the Bay Area was still recovering from the 1989 earthquake, and transportation was a top local issue. The broadly-oriented "Beat the Back-Up" program was also in place, which in September of each year sought to maximize use of transit, carpooling, and flextime to reduce congestion. A local television station (CBS' KPIX) was one of many "Beat the Back-Up" sponsors, and only modest effort was needed to establish KPIX as a sponsor of Commuter Check. In exchange for placement of the KPIX logo on all Commuter Check marketing materials, KP]X provided television spots and, perhaps most valuable, a news story that introduced the program. From the start, the program gained effective endorsement, and, as many small and a few large employers quickly enrolled, Commuter Check was off to a solid start. television sponsorship is especially helpful in marketing transit vouchers because television spots are expensive, and more than "just a little" television advertising is needed to advance a voucher program. That is, the idea needs to not only be introduced, but also re-marketed. The involvement of other participating employers must also be conveyed in these later efforts, reflecting the "competitive and defensive" nature of employers (i.e., that few will lead but many can be made to follow). As in other industries, there appears to be a threshold below which television advertising does little. Along with the endorsement value provided by a media sponsor, being able to exceed this threshold seems to be a major benefit of sponsorship. The television sponsorship idea worked so well with the roll-out of the Bay Area program that it was used again when the program materials were revised in ~ 993-1994 (that time in conjunction with ABC's KGO-TV), and again when the materials were updated in 1995 (that time with Fox's KTVU). In 1997, a similar agreement was again reached with KGO. Beyond television, the primary marketing methods used in the Bay Area have been rider-driven techniques, including posters in buses and trains, ads in bus schedules, distributions in transit stations, electronic signs, and similar methods. Incentives have also been used to prompt driver hand-out efforts, for example, by Golden Gate Transit. A number of TMA's have also promoted Commuter Check through mailings and transportation days. A 1994 study that surveyed employees receiving Commuter Check had notable results. When riders were asked "Were you involved in recommending Commuter Check to your employer?," only about one in seven respondents said they were, and these respondents generally were the pre-existing regular transit riders (as opposed to former non-users or light transit users). This reflects the fact that existing regular users are immediate beneficiaries of fare subsidies, and confirmed the efficiency of the "rider-based" marketing strategy used in the Bay Area. It was concluded from this research that radio ads that primarily reach auto drivers - even though this is the ultimate "target market" for the program - would be unlikely to be an effective marketing technique. Consequently, paid radio spots have not been used in the Bay Area. Overall, the research proved A SMART WAY To "~E OFF RUSES TAX. FREE ^7 ~OWR TOTAL COMPE~S~lON COSTS. In' Beck , a, A. . lo. . Passer

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Van Case Sly what may be obvious: existing riders are better advocates for the program than are non-riders. In supplemental comments on the survey card, many of the respondents noted that they effectively lobbied their employer to enroll by using employee petitions, e-mai] notes, memos, and suggestion box forms. Also, relatively more BART (regional rail) users lobbied their employers than did Muni (San Francisco local transit) users. This trend was repeated for the Santa Clara, Caltran, AC Transit, and other suburban-oriented operators. Also notable was the finding that the longer-distance commuters were more likely to have recommended the program to their employers than were those people living closer to work. Among the interesting Bay Area survey findings was the lack of any correlation between the Commuter Check value received and the amount of induced transit usage. In fact, even when broken out by city vs. suburban employment, it was shown that no more new transit trips were taken by those receiving $30 Commuter Checks vs. the $20 vouchers. As most of the riders who increased their use of transit formerly were infrequent or non-users, and continue to ride less than every day, it appeared that a $20 subsidy would mean free transit for most of the newly induced users and that a $30 subsidy provided more free rides than most of the new users actually took. It was concluded that the fact that fares are discounted may have more impact than the [eve] of the discount. This has led ongoing Bay Area marketing to emphasize $20, $30, and $35 monthly subsidies as opposed to the "filth" benefit levels of $60 before 1996 and $65 since. A very recent Bay Area marketing approach has taken a different tact, however. A marketing brochure was developed to stress the financial benefit provided to employers when a tax-free transit voucher is partly substituted for a salary increase. Although it is too early to measure the total impact of this new brochure, initial indications are that it is very effective. Milwaukee Milwaukee County Transit System's (EVICTS) Commuter Check program began in 1991. As MCTS has had only weekly passes and no monthlies, low denomination Commuter Checks were needed; $7 Commuter Checks were used at the outset, and $9 Commuter Checks were marketed in late 1994 after two fare increases raised the price of weekly passes. Using low denomination vouchers presented participating employers with a choice of subsidizing at different levels (i.e., $7, $14, $21, or $28 a month for employers using $7 units). This also presented added complications, including more vouchers to be distributed, how often to distribute them (weekly vs. monthly), and what level of subsidy to offer. The concept of a new "standard" benefit, akin to free parking Pagers

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Van ease So and as can result when just one or two voucher levels are used, also could not be achieved. This is consistent with the experience in Philadelphia- limited market pick-up resulted when seven denominations were used, but when reduced to just three denominations, sales improved. Perhaps partly for these reasons, MCTS's voucher experience has been less successful than was first expected. In 1990, before implementing its voucher program, MCTS staff carefully assessed the level of interest among major employers in Milwaukee for a voucher subsidy program, and received very positive response. The program also received reasonable acceptance by smaller employers. However, and perhaps surprisingly, the impending application of the federally mandated Clean Air Act ECO requirements that emerged in 1992 seemed to have discouraged implementation of the program. Employers waited for years for formal compliance procedures, and the long time-frame for final program implementation deadlines (November 1996, as specified in the 1992 Clean Air Act Amendments) also yielded further delay in having the program seriously considered. With the emerging resistance to the ECO program that followed the ~ 994 Republican sweep of Congress, and the ultimate removal of the ECO requirement in ~ 996, it seems clear that the ECO initiative significantly postponed the advance of employer subsidies in Milwaukee. Unfortunately, the Commuter Check program was perceived as related to the ECO requirement. MCTS used active marketing efforts aimed directly at employers in the initial years and via rider-driven methods subsequently, but the average level of monthly sales remained at about $20,000 in 1995-1996. Enrollment included some large and many smaller employers, but was less overall than initially expected. While smaller than hoped, Milwaukee's Commuter Check program has had significant successes and notable impacts. A 1996 MCTS press release cites expanded enrollment in Commuter Check as one key to MCTS' increase in ridership in 1995, despite fare increases in mid-1995 and another the previous year. MCTS also tracked the impacts of Commuter Check at three major employers, each with different subsidy levels. At one employer (a downtown bank) that subsidizes just $7 a month, MCTS reports that ridership grew by ~ 6 percent. At a medium-sized law firm that subsidizes $14 a month, ridership grew by 26 percent. At a major utility, where the parking price rose from $20 to $40 a month at the same time that transit fare subsidies of $21 a month began, transit use rose ~ ~ percent. The experience at the utility may be most notable, as the simultaneous increase in parking fees meant the implementation of Commuter Check had no net cost to the employer, despite the dramatic increase in transit use. MCTS's sales activities have always sought to "tie the key issues together" for the larger employers. In terms of marketing, this has meant preventing the support of transit service as a solution to such problems as employee turnover, recruitment, and parking. MCTS staff stressed that it is critical to answer the "What's in it for me?" question that employers pose when considering fare subsidies, especially since the "tax-free to employees" and "tax-deductible to P8gB 6-13

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Vo - ~anCa$eS~ - employers" benefits were inadequate to sell tI,e program in the Milwaukee setting. This is a notable observation, and one that can be compared to the experiences in larger cities like New York and to smaller cities (see below). As a sales tool, the role of tax benefits seems to apply most in large cities, while parking and employment issues are most important in smaller settings. Little new marketing for Milwaukee's Commuter Check program was conducted after 1994, and in late 1995, based on further consultation with major employers, MCTS decided to supplement its Commuter Check program with a new pass option, the Commuter Value Pass. Since April 1997, these new monthly passes have been sold through employers, but only if the employer provides a minimum $20 subsidy to match MCTS's built-in pass discount. It also requires a minimum order size and is thus targeted at medium- and larger-sized employers. These passes will not be available to the general public. MCTS was prompted to create this new pass by employers, who expressed a desire for a greater perceived discount than that offered by the voucher program. Seattle The Seattle Commuter Bonus program began in ~ 995. One unique feature of SeattIe's program is that employer-based trip reduction requirements are still in force. The requirement that employers implement programs creates a natural market, but it also imposes a need for comprehensiveness. This context has led King County Metro (formerly Seattle Metro) to maximize overall flexibility by offering an array of transit promotion services and alternatives to employers. SeattIe's voucher program was established as an extension of its successful employer pass plan, which involves over 50,000 employer-based pass sales every month, with significant subsidies generally provided. The Commuter Bonus voucher program is just one of these extensions, and was designed to promote transit to relatively infrequent transit riders who did not need passes. Commuters working at smaller employers also were targeted. In April ~ 997, Commuter Bonus had 78 enrolled employers, and a record sales level of $106,000. The program projects sales to reach $900,000 for all of 1997. There are no set denominations for Commuter Bonus vouchers; Metro offers any denomination desired by the employer. Developing a voucher program that could reward carpoolers, bikers, alla walkers was also a priority for Seattle, particularly given the relatively high use of carpooling in Seattle and its sponsorship by Metro. To address the needs of this secondary market, Metro unveiled Commuter Bonus Plus in late 1995. These vouchers are sold to employers and are redeemable for goods and services that support alternative commute modes (for example, vanpoo! car care, gas and car washes, and bike accessories and shoes). Commuter Bonus Plus is said to work in areas without transit as well as to "round out" subsidy programs for employers in areas well served by transit. From October ~ 995 through April ~ 997, 76 employers purchased over $303,000 in Commuter Bonus Plus vouchers. Pagers

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v~mea~s~ Another extension is tile Metro FIexPass program, a variant on the EcoPass concept (sharply discounted annual passes sold to employers for use by all of their employees) first pioneered in Denver. As of April ~ 997, Metro's FlexPass program serves 29 employers and 2S,000 employees (over 16,000 are at Microsoft). Metro offers two additional benefits to its participating employers, the ''Home Free Guarantee" (guaranteed ride home) and the Vanpoo} FIexpass programs. When asked to pinpoint the unique feature of their efforts, the Seattle staff identified the array of options and integrated packaging they developed for their various services. Unlike the New York, Philadelphia, and San Francisco programs, no fees are applied for voucher sales in Seattle. Smaller cities Due in part to voucher programs' appeal to smaller programs, a number of voucher programs have been implemented in smaller cities with single transit operators, including Norfolk, Buffalo, and Louisville. These programs began in 1992 (Norfolk and Buffalo) and 1994 (Louisville), and while they have been continued, they are not considered successful. Each normally sells less than 100 vouchers a month to a few dozen employers at most. Yet, each of these cities had basically only one major marketing thrust (at the outset), which is especially inappropriate given the "few lead but some will follow" nature of the process of establishing a new fringe benefit. It also has been observed that the low-cost rider-driven marketing method is basically unsuccessful in small cities, perhaps due to the low income status. the bus-using employees, and their relative inability to effectively lobby an employer for a new benefit. Another view is that where the transit modal split is low, getting employers to adopt the transit benefit is especially hard, simply because fewer employees ask for it. Conversely, transit subsidies have penetrated the intense transit market in New York best. This also suggests what has been seen elsewhere: that employers are keenly sensitive to equity among employees and are relatively unlikely to adopt benefits that impact relatively few employees. The perception of employer-provided parking as an employee benefit may also be less valid in smaller cities. Finally, as noted above, since the appeal of the tax-free attribute may be minimal, the strongest motivation for promoting transit in a smaller setting is likely to be site-specific parking or recruitment problems. In Norfolk, for the program's first year and when grant funds were available, $2 vouchers were sold for just $10. In addition to the subsidy, the grant funds allowed the transit agency marketing representative to focus attention on the program. The discounts and marketing/sales focus generated significant enrollment. It was a pleasant surprise as there had been no expectation that any participation would result in Norfolk's smaller-city setting. Yet, even during the discount period, sales were a few hundred a month on average. This experience P - ~

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V~8mBBlBS~y suggests that temporary discounts on transit fares may not be a highly effective way to sell the program; few employers are likely to adopt a benefit (seen as a commitment to employees) to gain a temporary discount. As employer fare subsidies provide a fong-term/continuing return to a transit agency, permanent discounts in place of a short-term discount on transit vouchers may make more sense. The Norfolk experience also showed that a skilled salesperson can be effective in marketing the program (virtually all of the enrollments were a result of the salesperson's efforts); this suggests that this may be the key too! for smaller cities. This is again consistent with the observation in Milwaukee regarding the need to sell the program as a solution to specific employer problems (parking, turnover, recruitment) which by their nature, vary from employer to employer. A notable marketing action used in Buffalo was a mailing of the program's primary brochure to all larger employers in Buffalo with a letter of endorsement from then New York State Governor Cuomo. A similar mailing was done in Louisville with a letter frown Mayor Abramson. These efforts had only modest results. Buffalo also discovered that ads in employee benefits sections of business newspapers yielded so few calls that the ads were never repeated. An ad in the Buffalo Chamber of Commerce newspaper (which was actually implemented for political reasons) generated one call. Response to these ads - perhaps the most direct transit to business advertising vehicle - has been very disappointing in larger cities as well, including New York and Philadelphia. Establishing a voucher program in small cities seems very hard, and it may not offer significant short-term benefits over the conventional employer pass plan. While a pass program - which has the added benefit of accomplishing on-site sales - may have even less overall appeal, it does not require the substantial up- front development efforts that a voucher program entails. Yet, rather than suggest what size community justifies the development of a voucher program, the more determining factor may be the ability of a locality to focus its marketing on a single program for a sustained period of time. Certainly for smaller cities, it has become clear that developing a transit voucher program requires a longer-term, substantial commitment to voucher marketing, as satisfactory results cannot be assured in the short term. - = As the history of transit voucher programs has shown, the program has wide applicability in the transit field. The findings from this review suggest the following for the transit industry: Transit vouchers seem to work best in larger communities with multiple operators. New York City's TransiCheck program was the first key success Pagers

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tram Case Sib in a large metropolitan area with a number of different service providers; San Francisco, Los Angeles, and Seattle followed soon after. Although the program was originally designed to meet a need for a simple transit subsidy mechanism in a multi-operator environment, it also has been adopted in communities dominated by single operators. Its main appeal in such areas is with smaller employers, although larger employers will adopt a program when they have parking or employment issues. Rider-driven marketing techniques have also been effective in larger communities, where riders/employees are able to advocate for the voucher program. Direct marketing techniques, including direct mad! and telemarketing, have been successful in targeting small businesses. Business databases have proven useful for targeting business segments with the greatest potential to use voucher programs. With increases to the tax subsidy benefit, some larger communities have found it worthwhile to conduct sales force marketing. The cost of this type of larger (and more expensive) marketing effort is offset by the ability to appeal to employers of various sizes, not just larger employers. P - ~0

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