Cloud-based analytics keeps Montreal's buses full and ridership growing

Public transportation systems give headaches to city planners fighting rising costs and an often unforgiving public. But municipal bus and rail systems also provide a critical revenue stream to local governments that must be maintained — and even raised when possible — just like any commercial organization. 

The city of Montreal has turned to a combination of business analytics and cloud computing to tend to this precarious balance. Using statistical smarts and service flexibility has enabled the city to track the habits of individual riders and offer them incentives to use the system even more. 

“Most of these organizations are running extra lean,” said Shawn McCarthy an IDC Government Insights research director. “They will put most of their IT solutions in the cloud, including business analytics, hosted databases and storage.’’ 

In following this path, the Société de transport de Montréal (STM) is tapping hosted data analytics software and services from SAP to build loyalty among its regular riders through a new precision marketing program.  

STM is the largest transport authority in Quebec, with 228 bus lines and 68 metro stations carrying 1.4 million people per day. The agency has revenues of $1.3 billion a year, half gathered from riders and the other half from government agencies.

“Sixty-five percent of the people going downtown everyday use public transit in Montreal, so it is very, very popular here,’’ said Pierre Bourbonniere, director of marketing with STM. “We have 2.5 million customers who have an OPUS card, a smart card in which you can charge single fares, 10 tickets or monthly fares. We also have monthly pass penetration of 80 percent.’’

Bourbonniere said STM has increased its ridership 15 percent in the last three years because it has streamlined its bus routes, added new metro stations and improved transit service overall. Now the agency wants to focus its marketing efforts on retaining current riders as well as continuing to acquire new riders.

STM discovered that 13 percent of its riders leave the OPUS system every year due to job changes, relocations or car purchases. Even though the OPUS system recruits another 13 percent of new riders each year, STM is hoping to reduce the departures of its regular customers with the new customer loyalty program. 

“If we can just keep 2 percent to 4 percent of our riders each year, that would help us generate more ridership,’’ Bourbonniere said, adding that it will also help STM reach its goals of reducing traffic congestion in Montreal and related carbon emissions. “We want to reward our customers, we want to recognize them and we want to increase their use of public transit — not only for work or for school. We want them to use the system at night and on the weekends.’’

With SAP’s help, STM created a personalized email marketing campaign for 20,000 public transit users. The pilot project ran from May through October 2013, and it was available as an Apple iPhone application.  

Dubbed “Merci,’’ STM’s customer loyalty program involves sending participants personalized information in a geolocalized fashion and in real time. The messages participants receive include subway or bus delay information, potential savings from monthly or yearly passes and offers from 340 retail and 1,000 event partners such as taxi companies, restaurants, shops and entertainment venues.

“Our customers are doing 2.2 trips per day with us. They have mobile phones and smartphones. They are a captive audience that we can make offers to and inform about services,’’ Bourbonniere said. “We’re trying to provide information about the right product to the right person at the right time.’’

Merci users get one offer per day, including special offers based on where they live and work and the frequency with which they use the public transit system.

“Merci is a loyalty program based on providing instant recognition to our customers and commercial offers,’’ Bourbonniere said. “If they travel on public transit or change certain behaviors, we offer them rebates or free ticket offers. We provide them service-related information, but we also reward them for using public transit.’’ 

Bourbonniere said STM didn’t receive any complaints about privacy during the Merci pilot program. That’s because the cloud-based data analytics system uses two separate databases — the OPUS data and the personalized customer data — that are only combined when a participant responds to an offer. 

“Any information we gather that is not mission critical, we are not allowed to collect it or keep it. The nonmission critical data is stored somewhere in the cloud,’’ he  said. “All of this information comes together in a fraction of a second like an atom smasher when a customer says that he does want this offer, like free opera tickets. The information comes together for a fraction of a second to deliver information to the right individual, then it separates again into different databases.’’ 

STM was pleased with the results of the Merci pilot program: 24 percent of participants increased their use of public transit during the six-month pilot program, 57 percent visited new destinations on public transit and 45 percent took a friend on a public transit outing. 

STM plans to release Android and BlackBerry versions of the Merci application in the first quarter of 2014, with hopes of growing the number of participants to 100,000 in 2014. 

Merci is providing STM with an increase in ridership as well as additional revenue, given that the agency gets paid by industry partners based on the click-through rate of commercial offers. 

“Merci means more revenue for us. We will get more passenger revenue based on increased ridership, but also nonfare revenues because the partners are paying to be in the app. They pay to send notifications to our customers based on the click-through rates,’’ Bourbonniere explained. 

STM spent around $250,000 with SAP on the Merci pilot program in 2013, and the agency is now looking for a vendor to manage the program in the future. The agency expects to earn a few million dollars in additional revenue from Merci in 2014.

“There are a lot of indirect benefits of Merci, too,’’ Bourbonniere said. “In addition to the nonfare revenue and the fare revenue, it created an environment where people see us as a very dynamic organization. It generated additional reasons for people to stay in public transit. It created a lot of intangibles that can’t be measured because the users really liked it.’’