Marketing Principles and Concepts-Northern Rail Market

These days the amount of journeys, specifically work journeys, between industrial cities and suburbs have risen in England. According to recent statistics of transport which was published by department for transport (2007) the number of passenger journeys which travelled by National Rail Network has approached to 1,164m. These statistics shows how important this market is.

In this essay there is a focus on the market of Northern Rails Co. which operates at northwest of England with approximately 15m passenger (Northern Rails, 2007), and it challenges its market activities. The essay analyses the company’s market approach using marketing concepts and models to challenge the market.

In the western countries, and specifically in Europe, living is based on service economics (Palmer, A. 2005) and also the quality of the services has a valuable position. Additionally, companies who work in the service sector evaluate the service quality from time to time. For this evaluation, many questions have been designed by companies to find their functional quality, which is related to their service offering to their costumers and technical quality which is about the supports of the companies after sailing the services to their consumers (Cavana, 2003).

In this essay as mentioned before, the writer would like to challenge the service quality of Northern Rail Co which is one of the biggest transport companies in UK, during the year 2006/07 they serviced approximately 76.3 million passenger journey (ATOC, 2007). In 2004 a joint venture company between Serco Group Plc (an English company) and Nedrailways (a Holland company) won the franchise contract for eight and three quarter years (Northern Rail, 2007).

The corporate strategy of this company is base on a good quality services, in other words they would like to deliver a high quality service, punctual and friendly environment inside their train and also at stations (Northern Rail, 2007). However, according to research, the customers were not completely satisfied (BBC, 2007). This affects customers because dissatisfaction, encourage people to think of using their own car and this effect would increase air pollution, petrol consumption and many other factors.

On the one hand, there are many comments from daily train users about unpunctuality of trains, and on the other hand, the statistic shows high improvement from 88% to 89.3% which is the highest during latest 7 years (ORR, 2007). Punctuality in this sector of service is a the main aspects (Northern Rail, 2007) because it could easily affect the customers, links to 4ps (Jobber, D., 2007) and also overhead cost but sometimes the companies would like to neglect these weaknesses, this perspective comes from the monopoly power in many fields and specifically in the service segment which we are looking at. This affects the customer because daily users which use the public transport to go to their work, they approach late and this affect their work reputation, and if we want to see this aspect wider, for companies starting late means losing money which is not acceptable.

In the next section we look at the Northern Rail Company by using SWOT analysis, which is base on the strength, weakness, opportunities and threats (Weihrich, 1982).

Strength:

Northern Rail Co. is covering a large area with about 519 stations (20% of all UK stations) (Northern Rail, 2007) in other words more people can use Public transport system. Moreover, many daily passengers prefer to travel by train because of traffic in rush hours (at morning and after working hours). Travel by train could save more time and people instead of staying in traffic prefer to use their time better during their regular daily journeys. There are many facilities in trains for passengers for example daily free newspaper in Northern Rail Train encourage people to read daily news and see millions of advertisements. Moreover it is possible for managers to work on their projects during their journeys (using their own laptops). To put it more simply passenger can be relax “when you can speed past traffic at 125mph” (Virgin, 2007). Some researches claim using the Public transport to work can affect employees at their work by reducing the stress (MacLennan, 2003). Convenient passengers in train means happy employees at work, and according to the research the productivity would significantly increased.

The variety of discounts with different Rail cards for example Student Rail card, senior rail card, monthly rail card, family Rail card- links to Porter’s generic strategies (differentiation)( Jobber, 2007) to encourage customers to use Northern Rail services (Northern Rail 2007). Additionally, for customer satisfaction, which is an important aspect to reach companies’ goal (Darlymple, 1995), they offer new kinds of ticket and services. This links to Ansoff’s growth matrix (Market penetration and expansion) (Backer, 1996), for instance, the “Day Ranger Ticket” is the latest type of ticket which gives freedom to passenger to travel with this company in a day to visit near 1001 places in north of England and just hop up and off (Northern Rail, 2007). This affects the customer positively because they could travel cheaper by using the offers

Weakness:

Price is always a weakness in customers’ view; satisfying customer expectation is the hardest part of service companies because you should always provide the same thing what they expect (Darlymple, D. 1995). In this circumstances the price of this company comparing with other public transports is higher, however competitor of this company, Virgin Train has same price with Northern Rail. An example for this is the price of ticket between Manchester and Preston (Dual ticket); it is £11.10(Virgin Train, Northern Rail Co, 2007). Comparing this concept with Porter’s Five Forces Model (Jobber, D., 2007), automatically we should neglect the threat of competitors in this field and show the monopolisation of these two companies. However, after the privatization in 1980s, the government decided to increase the competition to protect service users from exploitation (Palmer, 2005), but in this case it would be unintelligible, two competitors with same service and price. This affects the customer because there is no better choice for them; in short there is no competitive market for the customers.

Above all the quality of the service is very important. Groonroos (2007, P73) claims “the quality of the particular product or service is what ever the customer perceives it to be”. We could split the quality to four main aspects in this case: Fast, convenient, frequent and last point is cheap. To look at this another way, it means by comparing with other public transport how reliable it is. These aspects should measure and compare with other transport segment.

There are many instruments to measure the customers’ perceive, one of these instruments is SERVQUAL and it is based on five aspects:

1. Tangibles: material, facilities, equipment and also the employees could influence the service quality. In this part the company’s facility is not match with world wide standard or comparing with other European countries. The age of trains is between 7 and 24(Northern Rail, 2007) more than this the maintenance is not sufficient. This affects the customer because convenient service is not provided by company.

2. Reliability: a service with out any mistakes. It is very hard to judge in this section because number of cancellation which we will read them in other parts shows about their reliability. however according to chart one the company claims their reliability is more than 99% (their bench mark)

3. Responsiveness: Respond to customers’ request. In the area according to British culture, their employees are very helpful and kind. And there are many facilities for disable people and the station the staffs help elder people too. Irresponsibly might affect the customers.

4. Assurance: give confidence to the customer about the service.

5. Empathy: understand the customer problems. These to last section is related to the employees and because of this, they can proud on their human resource to show the respect of company to their customers.

These are main aspects in SERVQUAL to measure the customer perceive of the quality (Groonroos, 2007). But in our case as mentioned before, there are many faults about each item, for example about equipment many passengers should stand during their journey at rush hours because the company does not provide more trains (Morning and evening). However, the market, links to the Boston Box is at Cash cow section (Vriesjr, 1999), they provide same service every day with out any improvement or modification and the customers use them without any objection.

Another weakness in this firm is about their human resource; nowadays unions all around the world have significant power to control the firm, as we can see recent strikes in Germany or France (BBC, 2007). This company has 4500 employees (Northern Rail, 2007) which easily could impact on the daily services if they decide to achieve their requests, to put it simply and links to Porter’s Five Forces model (Jobber, 2007) and SWOT model (Cannon, 1996) they are very staff dependent. Also this affect the customers because, daily service would be suffered by the employees if they take strikes.

Opportunities:

There are many opportunities in this market to enhance the quality of the services to attract more people to use the public transport, but it needs more investment. In this company they invested £18m to offer better quality so far (Northern Rail, 2007). Moreover, the government invested £4,456m in Rail segment between 2005and 2006 (Department of Transport, 2007). Using new technologies links to PEST analysis (Palmer, 2005) make new chances to improve the quality by buying new wagons and train their human resources.

These days the environment is being concerned by governments, for this matter they invest more in green transport for example by using more improved fuel such as bio fuel (Daily Telegraph, 2007). Northern Rail has 280 diesel and electric train (2007) and by using the government found, they could modify their fuel type to reduce the amount of CO2, this also links to PEST analysis about the environment factor(Palmer, 2005).

There is another issue to encourage more people to use this company, they could offer cheaper price rather than their competitors but these two companies have same benefit and opportunity in the market and they have shared the market (neglect the substitutes at Porter’s Model).

Threat:

In Four week period ending 13 October 2007 around 350 cancellations occurred due to accident and engineering problem (Northern Rail, 2007). Cancellation has two sides, one side in related to customers’ perceive and other side is about financial loss. However they decide to use alternatives, for instance using coaches in some lines but they would automatically lose their customers during the time (customer dissatisfaction).

Unions as mentioned before might be an internal and silent threat for the company, if the company does not concern about human resource requests, they might take strike which could affect the company and circumstances after the strike affects This affects the customer because the customers.

Another possibility in this section according to GE matrix (Jobber, 2007) is their competitor, if the solo competitor, Virgin Train decides to reduce the price, they would loss many customers. Because the virgin facilities are better than this company and if they reduce the price the customer would use their services.

Terrorist alert is a new issue in UK, the government has decided to control luggage at stations (BBC, 2007) which could influence on train punctuality and also the service quality, this aspects could link to PEST analysis , the politic issues(Palmer, 2005).

Taxes link to PEST analysis (Palmer, 2005) is a threat, if the government decide to increase taxes, the ticket price would be increase. However, this could affect all services, but if the train ticket influenced more by tax, the customers prefer to use cheaper price and might chose another public transport or using their own cars.

There are many perspectives in SWOT analysis (Cannon, 1996) which is related to PEST analysis(Palmer, 2005), moreover there are many concepts in SWOT analysis(Cannon, 1996) which still exist and we just addressed them in this essay and the present writer recommends to expand the SWOT analysis (Cannon, 1996)for this company.

PEST Analysis:

Till now we have covered some PEST aspect (Jobber, 2007) in the SWOT model (Cannon, 1996) and we have more perspectives about the PEST model.

Political:

As stated before, after several terrorist attack in UK, security control is concerned by the government (BBC, 2007) and more security controlling might cause some delays, cancellation for trains and due to those factors they probably loss some customers and some financial effect. And the effects mentioned before.

Economic:

There are many economic factors which could influence the company. The most recent factor is oil price enhancement and also the diesel price (BBC, 2007). This company has 280 train and most of them work with diesel (Northern Rail, 2007).this is a major effect from economic factor and direct effect on ticket price.

Additionally inflation level is a strong aspect, however the inflation rate in UK is about %2.1 (Bank Of England, 2007) but it might impact the company’s Revenue.

Social:

Consumers’ attitude and their opinions very important concepts in a service organisation, satisfied customers have more positive opinion about company, and the company does not need to seek for new customers. To put it more simply, in the relationship between customers and company, we have “customer loyalty ladder” which divided to five sections (from bottom to top): Prospect- customer - Client- Supporter- Advocate. According to this ladder loyalty of customers increase from bottom to top, this loyalty links to social part of PEST analysis (Palmer, 2005).

Technological:

Changing the train fuel system, from electricity or diesel to bio fuel is a new technology which Virgin Train has started to use for CO2 reduction in environment (Railway Technology, 2007) which the Northern Rail should use someday. It is not a direct effect for the customers but it could help the environment to be safe and healthy.

To conclude all these aspects which we have seen, acceptable services are provided by this company but not with high quality, and also due to the partnership with Virgin Company, they never threat from each other and this might be kind of monopolisation in the market, and without any competition they would exist at cash cow sector with no improvement. But a good strategy for this company should be providing better facilities to enhance the quality of their services, which shows their respect to the customers, and also help to improve the perspectives of the public transport for people.

Bibliography

Books:

· Baker, M.J. (1996) Marketing an introductory Text. London: Macmillan Business.

· Blythe, J. (2005) Essential of Marketing, 3^rd Ed. Essex: Pearson Education.

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Journals:

· Cavana R.Y., Corbett, L.M. (2003) “Developing zones of tolerance for managing passenger rail service quality”, Emerald insight. Available at:www.emeraldinsight.com/0265-671X.htm (Accessed: 14 Nov.2007)

· Daily Telegraph (2007) “Green Transport” Department of Transport.

· McLennan, P., Bennetts, M. (2003) “the journey to work: a descriptive UK case study”, Emerald insight. . Available at:www.emeraldinsight.com/0263-2772.htm (Accessed: 14 Nov.2007)

· Weihrich, H. (1982) “The TOWS matrix: a tool for situational analysis”, Journal of Long Range Planning, Vol. 15 No. 2.

Websites:

· Association of Train Operating Companies (2007), Available at: www.atoc-comms.org (Accessed: 16 Nov.2007)

· Bank of England (2007) available at: www.bankofengland.co.uk/ (19 Nov. 2007)

· BBC (2007) available at: www.BBC.co.uk (Accessed: 16 Nov.2007)

· Department for the transport (2007) available at: www.dft.gov.uk/(Accessed 16 Nov. 2007)

· Nedrailways Co. (2007) available at: www.nedrailways.com/ (Accessed 16 Nov. 2007)

· Northern Rail co. (2007) available at: www.northernrail.org/(Accessed 16 Nov. 2007)

· Office of Rail Regulation (2007) available at: www.rail-reg.gov.uk/ (Accessed 16 Nov. 2007)

· Railway Technology Plc. (2007) www.railway-technology.com (Accessed 19 Nov. 2007)

· Serco Plc. (2007) available at: www.serco.com (Accessed 16 Nov. 2007)