Ticket Pricing Strategy

[graham11]

Just a question to answer my curiosity if I may be allowed.

Is it normal, and why would it be that a ticket from A to C going via B be cheaper than one from B to C?

Seems a strange state of affairs.

Bit like finding that the cost of a two course meal in a restaurant would be less than that of the same two courses with the addition of a third course.

Can anyone help my ignorance.

Graham

 

[najaB]

Just a question to answer my curiosity if I may be allowed .

Is it normal ,and why would it be that a ticket from A to C going via B be cheaper than one from B to C.

Seems a stange state of affairs .

I'm going to ask the mods to move your question and my reply to a new thread to avoid taking this thread off-topic.

The railway is run as a business, which means that TOCs will try to maximise their return on investment, and so engage in market-based pricing.

In order to see how this works, you need to consider that passengers don't buy tickets from A-B-C-D-E-F but rather A-F, or C-E, etc. In other words, while the train may travel sequentially from A-Z, passengers make (for the most part) point to point journeys. So ticket prices are set based on station pairs rather than distance travelled.

It is generally the case that some station pairs generate more journeys than others, so where Advance tickets are concerned it makes sense for the TOC to price them differently. They price the less popular station pairs cheaper (to encourage travel) and discount the more popular station pairs less (since there's no need to stimulate demand).

Peculiarities of geography may mean that the popular city pairs may be closer together than the less popular ones. An example that comes up from time to time on the forum is London to Preston versus London to Lancaster. Tickets between the former pair are usually quite a bit more expensive than tickets between the latter, despite Lancaster being 50(?) miles further north than Preston. But it's all down to the fact that many more people want to travel London-Preston than London-Lancaster.

 

[ComUtoR]

Bit like finding that the cost of a two course meal in a restaurant would be less than that of the same two courses with the addition of a third course.

If you booked the restaurant a few weeks in advance, pre paid and pre ordered your entire meal, drinks, seat, time and pre agreed a tip. You would get price A. They may even throw in a free desert.

If you turned up at a busy time and demanded a seat and just ordered a starter and a main. They would probably charge you full price.

Advanced tickets tend to be discounted. That comes with some strict caveats.

 

[yorkie]

Just a question to answer my curiosity if I may be allowed.

Is it normal, and why would it be that a ticket from A to C going via B be cheaper than one from B to C?

This happens often. There are too many reasons to mention them all! But the main reason is to maximise revenue.

Seems a strange state of affairs.

Bit like finding that the cost of a two course meal in a restaurant would be less than that of the same two courses with the addition of a third course.

Restaurant analogies are problematical, I don't think you can use the analogy as a contrast if the products are different (e.g. Advance vs walk-up) and if you are not penalised if you pay for more and actually 'consume' less.

Where the railway shoots itself in the foot is when passengers are denied the right to start or finish short without paying extra; whether or not restaurant analogies are accurate or not is debatable but it is a fact that many customers will - understandably in my opinion - feel aggrieved at being threatened with an excess fare for 'consuming' less of something than they paid for.

Fortunately the general principle applied by the rail industry is that starting/finishing short is allowed unless specifically advertised that it isn't permitted, and even if it isn't, the general policy is to allow people to do so without charge, and if there is a charge payable it is the difference between the fare paid and the cheapest fare that would have allowed the journey that was actually made.

So, in practice, hardly anyone is ever actually charged more for travelling a shorter distance than they paid for. But when they are, the media are almost certain to be interested, which usually seems to lead to the charge being cancelled at that point.

 

[Tetchytyke]

Is it normal, and why would it be that a ticket from A to C going via B be cheaper than one from B to C?

Simply? Because they can.

The complex explanation is that you'll often see advance tickets for some journeys but not for others.

An example is London Midland. They are competing with Virgin Trains and Chiltern Railways on the London-Birmingham route, so you can get singles from as little as £6. Closer into London they don't have any competition, and so a single from Hemel Hempstead to London is £13.90.

But they're not the same type of single ticket. The £6 single from Birmingham is heavily restricted: booked train only, no refunds. The £13.90 single from Hemel Hempstead is, on the other hand, valid on any train all day long. The fully unrestricted ticket from Birmingham isn't £6, it is £88.

So at first glance it looks like you can travel on the same train at London Euston and pay £6 if you get off in Birmingham or £13.90 if you get off in Hemel Hempstead. But it's not comparing like with like.

 

[deltic]

Just a question to answer my curiosity if I may be allowed.

Is it normal, and why would it be that a ticket from A to C going via B be cheaper than one from B to C?

Seems a strange state of affairs.

Bit like finding that the cost of a two course meal in a restaurant would be less than that of the same two courses with the addition of a third course.

Can anyone help my ignorance.

Graham

Fairly common in the airline industry and to a less extent with coaches, as other have said its about maximising revenue. Uber are looking at following a similar model where the price you will pay will depend on the destination and not the distance/time.

 

[Deerfold]

If you booked the restaurant a few weeks in advance, pre paid and pre ordered your entire meal, drinks, seat, time and pre agreed a tip. You would get price A. They may even throw in a free desert.

I'd hope you'd get plenty of drinks or that'd be very dry.

 

[LNW-GW Joint]

Fairly common in the airline industry and to a less extent with coaches, as other have said its about maximising revenue. Uber are looking at following a similar model where the price you will pay will depend on the destination and not the distance/time.

The airlines (and ferries) set their fares for revenue and competition.
It can be cheaper to fly London-Los Angeles than London-New York, or at least nothing like proportional to the greater mileage.
They are protecting the New York market, the great revenue-generator.

Even the ferry companies got wise the people buying less-than-half-price cheap day trips and just throwing away the return half.
Because airlines and ferries only have personal bookings, they can always bill you for abusing the rules.
The railway isn't (yet) at that level of sophistication, but it's going in that direction.

 

[Gareth Marston]

Perhaps we should say it's assumed it maximises revenue as there's nothing different to compare with we don't really know.

 

[najaB]

Perhaps we should say it's assumed it maximises revenue as there's nothing different to compare with we don't really know.

It definitely brings in more revenue than strict distance-based pricing would.

 

[edwin_m]

It's called "market segementation" which is basically trying to work out what each type of customer will be prepared to pay and making sure they pay that amount.

One example on the airlines before the advent of "no frills" was that it was often cheaper to buy a return ticket that included a Saturday away. The airline assumed people buying these were leisure travellers who wouldn't pay a higher fare. They made it difficult for business travellers to try use them by doing things like cancelling the return half if the passenger didn't show up for the outward journey. Once upon a time I managed to get a free Sunday in Iceland and an extra night in the hotel with car hire, all paid for by the difference in the fare going out on the Saturday instead of the Sunday for a Monday meeting. Having said that our travel agent managed to lose the hire booking and one of the hotel nights, but that's another story...

 

[MichaelAMW]

For rail travel, if not for restaurants, there is simply very little relationship between how far you travel and how much you pay. It's therefore wrong to think about having an "amount" of rail travel, whatever seems logical to (I suspect) most of us. The fact that the price can vary by a factor of 10 between the *same* two places, depending on times and restrictions, should lead one to realise that distance is a pretty weak influence on price when comparing different journeys.

 

[Kite159]

It just isn't with historic fares, even with new stations you can have fare oddities where it is cheaper to buy to station C compared to station B (where B is before C) on the line for the same off-peak day return ticke

 

[Hadders]

I think it's good that we still have fares regulation in place on some fares. I know it's not perfect but at least it keeps prices in check to an extent. Who knows what sort of increases we'd see without it.

I believe many TOCs want to move to Advance tickets only so they can increase prices (they'll call it yield management). This will increase fares and reduce flexibility for passengers. The walk up railway should be protected.

 

[Gareth Marston]

It definitely brings in more revenue than strict distance-based pricing would.

Both Seasons and what were BR Saver fares have been regulated for 20 years and comprise just over half of all fares. These have been frozen in aspic apart from what % Govt choose to increase them by. The rational as to why Town A to City B was different to Town X to City B has long been lost in the midst of time and whether it was set "right" in the mid 90's we know not. 20 years of price increases have also distorted fares so many are now noticeably higher than the original "what the market will bear" tweaks and some perhaps lower. On some flows we now may be too high and pricing off.

The TOC's have generally kept other fare increases roughly in line with regulated fare ones apart from the notorious Anytime fare increases. The constantly tweaked AP fares are less than 4% of all tickets. The system is far from perfect as a revenue maximising tool. Let alone the fairness aspect!

 

[yorkie]

For rail travel, if not for restaurants, there is simply very little relationship between how far you travel and how much you pay.....

That really isn't true! OK we don't have exact distance based pricing, but in general if you travel further the price goes up, at least if the fare is set by the same train company along the same line of route. And many companies consider it to be an "anomaly" if it's cheaper to go further; I've seen the likes of TPE asking for staff to report these "anomalies" to the pricing team.

 

[cuccir]

Another factor is the number of tickets. There are 2560 stations in the UK (according to Wikipedia), plus a myriad of other destinations (airports, metro stations, London travelcards, etc) to which you can buy tickets. Most stations allow you to buy tickets to most of these destinations, although there are also some stations that can't have tickets purchased between each other. We could round all this out at approximately 2600 destinations which have fares to each other, which gives us 6.76 million fares.

But of course there are different ticket types - Singles, Returns, Advances, Anytimes, Off-Peaks, day tickets, routed tickets TOC only, etc. Many Advance fares will have multiple 'tiers' to allow different prices at different times. So we have to multiply that 6.76 million by a an average number of fares per station. This might give us an answer of between about 60-120 million depending on the average we select.

Then we have Railcard discounted tickets, rangers, rovers, etc: if we included these seperately, we'd easily be in the order of hundreds of millions of fares in the UK.

Given that, it's hardly surprising that there as well as deliberate pricing strategies to maximize revenue, there are anomalies in the system!

 

[Wallsendmag]

Don't ask why but I recently had to sort through over 6000 origin/destination locations.


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[Joe Paxton]

...
Given that, it's hardly surprising that there as well as deliberate pricing strategies to maximize revenue, there are anomalies in the system!

The other obvious point is that fares are set by multiple companies which may have very differing priorities, which in turn can change over time.

 

[Joe Paxton]

Don't ask why but I recently had to sort through over 6000 origin/destination locations.

Any exotic ones that particularly stuck in your mind?

 

[cjp]

Don't ask why but I recently had to sort through over 6000 origin/destination locations.


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What did you do with the rest of your day!

 

[Wallsendmag]

An awful lot of bus links which didn't appear to be bus links at first glance. It was amazing how there was no common naming convention especially for stations in Northern Ireland.


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[Wallsendmag]

What did you do with the rest of your day!

Strangely enough I was staying in an Ibis near Blackfriars so had plenty of spare time.


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