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OCR for page 125
[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.
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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
OCR for page 126
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
OCR for page 127
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
OCR for page 128
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
OCR for page 129
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
OCR for page 130
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
OCR for page 131
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
OCR for page 132
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
OCR for page 133
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
OCR for page 134
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 - ~
OCR for page 135
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 ~OW£R TOTAL
COMPE~S~lON COSTS.
In'
Beck
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OCR for page 136
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
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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
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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.
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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
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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
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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.
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Representative terms from entire chapter:
voucher program
