L.I.M.

E FINALS: THE INDIAN RAILWAYS

Reshbha Munjal Siddhant N Wangdi Chetan Gadia Faculty of Management Studies (FMS), Delhi

AGENDA
(I) REPOSITIONING OF BRAND IMAGE
PASSENGER SERVICES
Overview Approach to the Branding Problem Customer Speak and Perception 360 Consumer Experience Appraisal Identification of Factors affecting Customer Perception Re-Branding: Customer Outrage & Customer Delight Model

FREIGHT SERVICES

Overview & Vision 2020 Approach to the Branding Problem Segmentation using Business Areas and Commodities Identification of Priority Areas Re-Branding: Core Factors and Delight Factors

(II) MONETIZATION OF BRAND 'INDIAN RAILWAYS'

Recommendations for Passenger Business Recommendations for Freight Business

PASSENGER BUSINESS

Overview of Passenger Business

Identifying the User of IR Passenger Trains (Non-Suburban Travel)
THE OPPORTUNIST COMFORT SEEKER VALUE SEEKER ENDS SEEKER Generally Upper Class Travelers Prefers Flights over Railways Travels AC 1/2 Tier & Executive Class Middle Class Families Travelers Travels in Sleeper Class Wants comfort but does not want to pay Generally Middle Class Travelers Travels in AC 3 Tier / Chair Car Values Comfortable Travel even at a price Lower Class Travelers Values cheapest means of travel No preferences; No frills

Approximation of each size of User Bases (using Fare/KM)

Type of User The Opportunist Comfort Seeker Value Seeker Ends Seeker Class of Compartment First Class I Executive Class I AC 2 Tier AC 3 Tier I AC Chair Sleeper Class Mail I Mail I Ord. Reserved Ord. UR I Sleeper Class Ord. Fare/KM > Re 1 0.50p - Re 1 0.30p -0.50p < 0.30 p % 10% 30% 26% 34%
26% 34% 10% 30%

The Opportunist Comfort Seeker Value Seeker Ends Seeker

Brand IR shaped by perceptions of the COMFORT SEEKER & VALUE SEEKER

The perceptions percolate down the User Base Also: Sub-Urban Travel mix of all 4 user types Target Group (TG) of Re-Branding Exercise: Comfort Seeker & Value Seeker

Approach to the Re-Branding Process

EXISTING STATE
What is the IR Brand Reality? Brand Associations Probes of TGs Mind 360 Consumer Experience Appraisal Consumer Outrage & Delight Model Identify Consumer Outrage Factors Consumer Delight Factors Motivation Research

DESIRED STATE
Altered and Improved Perceptions New Powerful Brand END RESULT - ve Attitudes + ve Attitudes Consumer Dissatisfaction Consumer Satisfaction Market Share Loss Market Share Gain

How does the TG see Brand IR?

I feel the railway is very economical Railways stations are very dirty Travelling at railways are at times very inconvenient The trains are late usually I dont like to travel by railways, but I have no option! The railway staff are very brash and unhelpful

Indian Railways perceived as an UNDESIRABLE service CONSUMER PERCEPTIONS

Unreliable (13%) Affordable (17%)

EXISTING STATE

Chaotic (11%)

Unhygienic (23%)

Jobs to be Done (JTBD): Identify factors shaping these perceptions Process: Step-wise service encounter appraisal Categorizing the Moment of Truths (MOTs) Prioritizing the changes category-wise
UNDESIRABLE ? DESIRABLE ?

Unfriendly (8%)

Inconvenient (20%)

INDIAN RAILWAYS

INDIAN RAILWAYS

360 Consumer Experience Appraisal

BOOKING THE TICKET AT THE RAILWAY STATION

Unavailability of Tickets Long Queues Travel Agents Practices IRCTC Speed and Customizability

ZMOT

FMOT

Hassles by Porters/Taxi/ Auto Drivers Over crowded Stations Dirty/Unhygienic Conditions Lack of Passenger Amenities

TMOT Condition of Train Train unnecessary stops/delays Overcrowded trains Safety of personal belongings/luggage INSIDE THE TRAIN

SMOT Dirty Platforms Lack of seating arrangement Passengers lying down Commotion at entry/exit of trains AT THE RAILWAY PLATFORM

Categorization of Encounters: FACTORS shaping TG Perception

FACILITIES SECURITY HYGIENE PUNCTUALITY RELIABILITY STAFF

The Re-Branding Process (Part I)

Categorization of Encounters: FACTORS shaping TG Perception FACILITIES SECURITY HYGIENE PUNCTUALITY RELIABILITY STAFF

CONSUMER OUTRAGE & DELIGHT MODEL

CONSUMER OUTRAGE: OUTRAGE occurs when consumer does not get satisfactory level of service as is expected i.e. when BASIC FACTORS are not met

CONSUMER DELIGHT: DELIGHT occurs when consumer receives a service that satisfies but is also unexpected i.e. when DISCRIMATORY FACTORS are met

CONSUMER EXPECTATIONS FRAMEWORK

EFFECIENCY PUNCTUALITY

The Re-Branding Process (Part II)

D.S.L

DISCRIMINATORY FACTORS

Shift due to Cultural Adjustment: Due to the culture there has been adjustment in the consumers mind not to anticipate these benefits BASIC FACTORS Consumer Expected Factors: The minimum factors that are expected by the consumer from the IR which leads to dissatisfaction if not fulfilled Impact VS Implementable Framework

EFFECIENCY FACILITIES STAFF

PUNCTUALITY SECURITY HYGIENE

M.A.S

D.S.L: Desired Service Level M.A.S: Minimum Acceptable Service

EFFECIENY PUNCTUAL

HYGIENE STAFF

FACILITIES

IMPACT

SECURITY

Factors determining Impact Potential: Volume Visibility Word-of-mouth Potential Factors determining Ability to Implement: Receptiveness to change Labor Undertaken for initiative Cost Incurred for the change Time taken for the initiative

IMPLEMENTABLE

PHASE I: NEGATING CUSTOMER OUTRAGE

The Re-Branding Process (Part III)

PERCEPTION CLEAN SECURE FRIENDLY COMFORTABLE
Unhygienic Unfriendly Chaotic Inconvenient Unreliable Affordable
COMFORTABLE SECURE

Remove the Negative MOTS associated with the BASIC FACTORS Wholly IR Driven Change High Impact & High Implementable
FACTOR HYGIENE SECURITY STAFF FACILITIES

FRIENDLY

CLEAN

PHASE II: INCREASING CUSTOMER DELIGHT

In Consumers mind, Basic Factors of Phase 1 is now taken for granted Focus on improving MOT for EFFECIENCY & RELIABILITY More Capital Intensive: Driven by PPP Enhanced Brand Image in Phase 1 makes IR more attractive to Private Investors PPP => VISION 2020 Super Fast Trains On board facilities World class Railway Stations
COMFORTABLE SECURE FAST MODERN

FRIENDLY

CLEAN

INNOVATIVE

SUCCESSFUL

AT PRESENT
Unreliable Affordable

Chaotic

INDIAN RAILWAYS

Unhygienic

IR Driven Transformation PHASE 1: Short Term

Unfriendly

Inconvenient

COMFORTABLE

SECURE

INDIAN RAILWAYS

IR + PPP Driven Transformation PHASE 2: Long Term

FRIENDLY

CLEAN

SPEEDY

MODERN

INDIAN RAILWAYS

TRANSFORMATION OF BRAND INDIAN RAILWAYS

INNOVATIVE

SUCCESSFUL

FREIGHT BUSINESS FREIGHT BUSINESS

Overview of Freight Business

Demand Projection for IR Freight (Million Tonnes)
1107 1207 1314 1438 1573 1723 1890 935 1016

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

2018-19

2019-20

Total Coal POL

Cement EXIM Container

Domestic Iron Ore RMSP except Iron ore

Balance other goods Iron ore for export

Foodgrains Domestic container

Fertilizers

Railways requirement for transportation is expected to grow at CAGR of 9.25% While coal will constitute a majority , key growth areas are Containers (16%), Cement (14%), & Iron Ore (12.5%) VISION 2020 Segregation of freight and passenger corridors Construction of dedicated freight corridors Improving the speed of transit Cost-efficiencies in bulk transport Meeting the needs of customers in service delivery, logistics services, transit time and tariff

HEAVIER FASTER SOLUTIONS PROVIDER LONGER

Framework used for Freight Business

SEGMENTATION THE FREIGHT BUSINESS Commodities Carried Tonnage Average KMs Exhaustive list of 18 segments 8 Segments identified under which railway currently operates Further grouping of segments Segment Attractiveness Customer Intent Rate/TKM Segment Attractiveness for IR Distance Price Volume Social obligations Consistency Customer Intent to use IR Rates Availability Reliability Social obligations Loading time & Delivery Prioritize most important segments Need for better services Demand for multimodal services in some segments Capacity and load augmentation in certain areas

Classification into 3 priority areas Zonal Analysis for each priority area Short Term Strategy Full Capacity Utilization Get the bugs out Quick gain solutions Package redesign Long Term Strategy Recommendations in commodity mix carried Capacity Augmentation

Segmentation of Business Areas*

Segment Tonnes Carried Average Kms Small Small Small Small Small Small Medium Medium Medium Medium Medium Medium Large Large Large Large Large Large Short Short Short Long Long Long Short Short Short Long Long Long Short Short Short Long Long Long Rate Low Medium High Low Medium High Low Medium High Low Medium High Low Medium High Low Medium High

Tonne carried/year Seg S Carrying more than 40000 tonnes annually, averaging >500 Kms, charging more than 100 paise Seg A Carrying less than 10000 tonnes annually, averaging <500 Kms, charging less than 80 paise

A B D E
F G H I J K L M Y O P Q R S

40000+

10000-40000

Seg. S

<10000

Seg. A

Average Distance Travelled Rate

Railway operates in only 8 of the 18 possible segments as it is not currently feasible to operate in the other segments
*Source: Annual Statistical Report (2008-09)

Segments in which IR operates Segments in which IR doesnt operate

Segmentation: Business Areas* Graph: Priority Segments For Indian Railways

S M P R

FREIGHT MARKETING Current Structure

Single Marketing Vertical No segment specific approach
K

*Source: Annual Statistical Report (2008-09), Earnings in million Rs

Segment Attractiveness
Segment P R S F K M D E Customer Intent 5 6.2 5.8 5.4 7 4.6 5 6.2

F E

Proposed Structure
2 Marketing Verticals for segments X & Y Focused Marketing Approach Go-to-market plan for specific segments

Customer Intent
Business Attractiveness 7.4 7.4 9 4.6 4.6 7.8 4.6 3.8 Earnings Size 55701 296158 72405 5643 57347 40850 210 7029 Z Y X Priority Commodities Coal Iron & Steel, Iron Ore to Steel Plants, Iron Ore to Domestic Users Coal: Thermal Power, Coal to Other users, Cement, Fertilizers, Other Commodities Pig Iron and Finished Steel:Plants, Iron Ore to Exports Pig Iron and Finished Steel: Other areas Food Grains, EXIM Containers Raw Material For Steel Plants, Mineral Oil Domestic Containers Coal to Washeries

Segment-Wise: Key Value Drivers

PRIORITY AREA 1*
Features
Iron Ore to Exports 1. Railway essentially a door to door service provider: Less competition 2. Some capacity still moves by roads since rail capacity of Paradip and Morumogao a bottle neck For Coal to Thermal Power and other users: 1. Major driver of volume 2. High rates charged 3.Explicit focus on logistics attributes not necessary For Cement & Fertilizers: 1. Stiff competition by Road 3. Growth in business comparable to IIP (Industrial Index) and growth in agri business 1.Logistics solutions not necessary as is essentially a door to door service provider 2.Extremely high rates charged 3.Demand in off peak season an issue

Segment

Commodity
Pig Iron and Finished Steel:Plants, Iron Ore to Exports

Key Value Drivers

Value Drivers 1. Door to door sidings 2. Special purpose wagons (pig iron , iron ore) 3. Automation and EOL (Engine on Load) 4. Coastal shipping in an inter-modal perspective (RoRo) 5. Improved hinterland connectivity to ports For Coal to Thermal Power and other users: 1. Mechanized Loading/Unloading 2. 24 Hours Loading/unloading 3. Siding at both origin & destination 4. Electrification of siding 5. Good Sheds and Terminals Value Driver (Cement and Fertilizers) 1. Terminals 2. Availability of wagons 3. Timely Delivery 4. Reliability 5. Multi Modal transport a key success factor 1. Mechanized Loading/Unloading 2. 24 Hours Loading/unloading 3. Siding at both origin & destination 4. Electrification of siding 5. Good Sheds and Terminal

Coal: Thermal Power, Coal to Other users, Cement, Fertilizers, Other Commodities

Coal: Iron & Steel, Iron Ore to Steel Plants, Iron Ore to Domestic Users

PRIORITY AREA 2* Segment Commodity

Raw Material For Steel Plants, Mineral Oil

Features
1.Stiff competition from pipe line (oil) and road (oil and raw material) 2.Raw material for steel plants is a very small segment (9018 millions) 3.Opportunity for short haul travels like Merry Go Round in the near future Food grains 1. Maximum order received from FCI (relies on a lot of commissions to the middlemen) 2. Volume game EXIM Containers 2. Hi value items also carried through containers 1. 30 percent of traffic is expectedly moving hinterland by rail and the remaining moves by road, mostly to nearby Container Freight Stations (CFS) Currently a very small segment due to distance and rate issues

Key value drivers

1.Dynamic pricing policy 2. Terminals 2. Availability of wagons/tankers 3. Timely Delivery 4. Reliability

Food Grains, EXIM Containers

Value Drivers 1. Terminals 2. Availability of wagons 3. Timely Delivery 4. Reliability 5. Volume per shipment and customer interface is a key (appropriate go to market strategy)

Pig Iron and Finished Steel: Other areas

Values Drivers: 1.Short haul services a key but not so desirous 2.Timely delivery 3.Reliability

PRIORITY AREA 3*
E
Domestic Containers Value based, Extreme competition from the unorganized market Segment not suggested for vision 2020

*Marketing Strategies for freight segment, G Raghuram & Rachna Gangawar, July 2007 & various internet sources

The Re-Branding Process

Quick Gains Protect Your Forte! Efficiency C O R E
Induction of 25 tonne axle load 24 hours loading and unloading 100% capacity utilization All time availability of wagons Special wagons add up to the core offering Door to door sidings Engine on Load Good sheds and terminals

Availability

S H O R T T E R M L O N G T E R M

Convenience

Changing Mix: Towards Hi Value Items D E L I G H T Fast

Increase in speed to over 100 Km/h Dedicated corridors for nonstop transfer of goods Multi Modal Transport facility Roll on Roll off services Double stacking freight trains Broader base of rolling stock Food parks/ Logistic parks etc

End To End

Innovative

Recommendations: PASSENGER SERVICES

REVENUE ENHANCEMENT MODEL Revenue = Price * Usage * Customer Base

Price
Rounding off ticket fares No Need of change Hassle-free Quicker transaction: Shorter QueuesIncreasing cancellation charges in online booking Reduce tendency of overbooking Eliminate hoarding of tickets by travel agents Mobile Ticketless Travel for Unreserved Segment Prospect of increase in revenue collected due to large customer base Short Term( 2012 14)
Rounding off fares Increasing Cancellation charges

Usage
New Offerings: Monthly Pass PPP with Telecom Company with social responsibility campaign to buy tickets Family Pass Scheme Encouraging multiple passes bought by family

Customer Type Tourism Medical Schools

Tourism: Using Railway Guest Houses as Tourist Resorts Choice to chose package option(Standard/Deluxe/Luxury) Introduce more luxury trains(lifestyle travel)

FROM COST CENTERS TO PROFIT CENTERS Railway Hospitals: Multi Specialty Hospitals made in PPP with Medicity/ Max on existing railway land Special packages for medical tourists Schools: Up gradation of Railway Schools

Medium Term( 2014 -16)

Mobile Ticketless Travel Increase Capacity and Frequency

Long Term( 2016 -20)

Lifestyle travel( leisure) Medical Tourism

(A) Rounding off Ticket Price

Key Recommendations in Pricing

Rounding Off (Rs Crores)
98.5 105.5 113.1 121.3 130.0 139.3

Total Revenue Potential: 1110 Cr.

Targeting only reserved tickets in classes First Class I Executive Class I AC 2 Tier AC 3 Tier I AC Chair Car Sleeper Class Mail I Mail I Ord. Reserved Rounding off in the range of Rs. 1 to Rs. 6 per ticket Total revenue potential of ~1110 Crores (10 Years)

69.6

74.6

79.9

85.7

91.8

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(B) Cancellation fine (Ability to Pay Principle) Total Revenue Potential: 120 Cr.
Current system charges fixed amount till 24 hours before the train leaves (Between Rs 60 to Rs 70) Proposed system would charge cancellation fee as a percentage of fare per Km Cancellation of super premium long distance tickets to cost the most and cancellation of economy short distance tickets to cost the least Total revenue potential of ~120 Crores (10 Years) Cancellation as % of Fare/Km (Rs Crores)
10.4 11.2 12.0 12.9 13.8 14.8

7.4

7.9

8.5

9.1

9.7

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

TICKETLESS TRAVEL: Current collections just the tip of an iceberg! Total Revenue Potential: 8012 Cr.
I dont need to buy a ticket Long Queues

Key Recommendations in Usage

Have never been checked
200 C 150 A S 100 E 50 S 0 15 15.5 16 16.5 CHECKS 17 17.5 18

Need for Initiative

Restlessness and Frustration Tendency to jump the queue Travel without Tickets Large Base: 18 million daily unreserved passengers

Tie-Up with Telecom Companies

Commission to telecom operator High Volumes daily Simple technique- convenient to use: Ticket SMS received on sending a code to the operator The ticket amount would be deducted from prepaid balance

Ticketless Travel On a Rise!

399.4 261.5 Cr

Social Responsibility Campaign IR Current Strategy :

Checking by TTs : Usage of Negative Motivation ( instill fear) to ensure person does not default Ineffective for large volume

Mobile Tickets & Social Campaign Potential Revenues (Rs. Crores)

755 850 957 1077 1212 1365

Proposed Strategy:
Social campaign highlighting necessity about buying a ticket Use of mediums Radio (AIR) On ground activation Eg: Pulse Polio Campaign

530

596

671

2012 2013 2014 2015 2016 2017 2018 2019 2020

Recommendations: FREIGHT SERVICES

Capacity Utilization: Zonal Analysis For Each Segment*

Segment S R R R P P K Commodity
Pig Iron and Finished Steel to Plants Coal to Thermal Power Fertilizers Cement Coal to Iron & Steel Iron Ore Food Grains
ER N N Y N N Y N ECoR Y Y Y Y Y N Y

Zones (Running under capacity)

NR Y Y Y Y Y Y N NFR Y Y N Y Y Y N SR Y Y N Y Y Y Y SCR Y Y Y N Y N Y SER N N Y Y N Y Y

SWR N Y N Y Y N Y

WCR Y Y N N Y Y Y

N Indicates underutilized capacity Y Indicates full capacity Shortages to be in the range of 18% in Southern Railway to 44% Central Railway Reasons Solutions

Services like Roll on Roll Off and multi modal solutions still not developed Mal practices like payment of commission by FCI to move food grains through truckers

Freight incentive schemes not enough to pull piece meal traffic

*CAG report on railway operations (Chapter1)

Go-to-Market strategy to capture piece meal traffic (Pro actively approaching customers in this segment Tie ups with select logistics companies to provide complete solutions. Single customer interface point for the same. Direct procurement of grains under the Kisan Vision scheme (possibility of a railway procurement mandi, hence cutting the middle man out of the process

Long Term: Domestic and EXIM Business (Containerization & RoRo)

Changing Modal Mix
11%
1% 1% 2.15% 4.44% 2.31% 0.01%

34%

Railway loosing its share to roads rapidly Efficiency achieved if roads handle short hauls and rail long hauls Railways allowed running of private and public container trains on its network in 2006 There are a lot of policy & reliability related issues

46% 61%

89% 65% 53% 30.08%

1950-51 Railways

1978-79 Roadways Coastal

1986-87 Airlines Pipelines

2007-08 Inland

Entry Costs

Allow prices to be regulated by market forces

Service

Pricing by IR

Issues

Levels

Adopt RORO to complement containerization (Konkan Railways) Allow PPP in RORO as it would not be a core business for IR

Terminals

Maintenance

Allow sharing of trains/mutual agreements between private parties

Opportunity to Backward & Forward Integrate in Food Grains Business

CURRENT MODEL OF PROCUREMENT & TRANSPORTATION
FCI (At or above MSP) Farmer Kachcha Arhat/Middle Man/ Trader MANDI (Non APMC governed States) Transport Tender Rail+Road
Railways have a majority stake with the FCI food grains Limitations: Huge commissions paid by truckers to win tenders Rationalized prices Unstable/Seasonal business

PROPOSED MODEL: RAILWAY MANDI

Rail
FCI (At or above MSP)
Can be an add on to Kisan Vision 2020 Benefits: Effective utilization of the railway land Majority in fertilizer transport can help farmers IR could become an effective source of distribution of food grains Price rationalization only in case of FCI procures

Farmer
Railway Mandi (Using rural land)

Meeting place for Middle Men/Traders Normal Mandi for non APMC states

Total Incremental Revenue potential

Incremental Revenue: Brand Monetization (Rs Cr)
26665 18824 14637 5318
2014

INCREMENTAL REVENUE POTENTIAL

35787

INR 1,24,543 CRORES

Freight to contribute 79% of the incremental revenue A modest 2% per annum increase in passenger fare and 2.5% per annum increase in freight

7950

11036

1245
2012

3081
2013

2015

2016

2017

2018

2019

2020

Freight INCREMENTAL REVENUE POTENTIAL

Passenger

Quantum increase in freight traffic expected post 2017 when DFCs get ready!
1760.1

INR 10,090 CRORES

Incremental Revenue: Other recommendation (Rs. Cr)

1386.3 1239.4 822.8 944.3 1092.2

1559.2

Mobile ticketless travel and social campaign to contribute 79% of total incremental revenue Cost savings and additional incremental revenue from private partnerships in railway schools, hospitals & guest houses Railway Mandi and Airspace malls to generate revenue at a later stage
606.5

678.5

2012

Ticketless travel Schools Upgradation Airspace Mall (Metro Cities)

2013

2014

2015

Cancellation charges Guest House Upgradation

2016

2017

2018

Hospital Upgradation Railway Mandi

2019

2020

SUMMARY
PASSENGER BUSINESS
EXISTING STAGE Affordable, Unhygienic, Unfriendly, Unreliable TG Identification: Value Seeker and Comfort Seeker RE-BRANDING PROCESS Identification of Factors shaping perception of TG Model: Customer Outrage & Delight Phase 1: Negating Customer Outrage Factors Phase 2: Focus on Customer Delight Factors

FREIGHT BUSINESS
EXISTING STAGE Inconvenient, Inefficient, Unavailable, Limited services Business concentrated in select group of Commodities RE-BRANDING PROCESS Identification of Segments for Freight Fare VS Tonnage VS Distance Segmentation Prioritization: IR Attractiveness & Customer Intent Core VS Delight Factors based on Key Value Drivers

REPOSITIONING OF BRAND IMAGE

DESIRED STAGE DESIRED STAGE Short Term Elements: Efficient, Available & Efficient Brand Image Transformation: Clean, Smart, Innovative Long Term Elements: Fast, End to End and Innovative Attractive to PPP: Brand monetization for Vision 2020 MONETIZATION of brand INDIAN RAILWAYS Revenue Enhancement Model Focusing on identified under utilized zones GTM Strategy to capture piece meal traffic Rounding off Figures End to End Solutions with logistic comp. tie-up Cancellation fee as a percentage of Fare/Km Containerization and RoRo Mobile Ticketing for Unreserved Passengers Food Grain Business: Forward &Backward Integration Social Campaign for Ticketless Travel LAND MONETIZATION OPPORTUNITIES From Cost to Profit Centers in Railway Hospitals, Schools & Guest Houses through PPP Railway Mandi & Agri-Retail Opportunities Independent warehouses: Support multimodal transport

THANK YOU

APPENDIX

Demand Forecasting for Passenger Business (2020) Demand Forecasting for Freight and Product Mix (2020) Segmentation Analysis for Freight Business Key Value Drivers Explained Zonal Analysis Passenger & Freight: Potential Revenue Projections for every Recommendation