Sam Sherwood-Hale spoke to Dax Cross, CEO of Revenue Analytics – the pioneers of pricing and revenue management – about the company’s upcoming software launch…
What is the new software you’ll be announcing?
At World Rail Fest in December, Revenue Analytics will officially unveil a breakthrough new Revenue Management System for the passenger rail industry – FareVantage™.
Why do rail companies need this software?
First, the pricing and revenue management work that rail companies do is really tough. Also, the decisions are extremely complex. There are several different fares that can be offered on any given train or journey. With so many trains each day, and multiple stops and lots of journeys within that train, getting your pricing and fare structure for all of those journeys to a point that maximises revenue is a difficult challenge.
For example, let’s say you have a journey from Kings Cross to Leeds and then five small stops in between on that cross-country trip. You want to allocate enough tickets to maximise revenue on that high value journey from Kings Cross to Leeds without making the smaller, lower value trips in between prohibitively expensive.
What’s more, they are facing a unique challenge. Rail companies need to maximise revenue but, as a public service, growing ridership and providing a great customer experience is critically important. As you raise prices, you’re potentially reducing your overall demand if fewer people ride trains. You don’t want to push prices too high as you would lose riders and miss your objectives as a public service. But, put prices too low and you would sell out the most popular trains, potentially overcrowd them and frustrate customers who can’t get on the train they want to use.
You’ve got to strike the right balance. And pricing and revenue management is the key lever to doing that.
Why not just keep using the same tools they use today?
Train Operating Companies (TOCs) have to manage thousands or maybe millions of journeys a day. Many companies are managing all of this with a spreadsheet or homegrown tools, which don’t have the ability to do the sophisticated analytics work needed to produce optimal fares and are way too manual and time-consuming.
And, unfortunately, out-of-the-box systems that were developed many years ago were based on airline revenue management systems and just feel clunky and limited. Our software, FareVantage™, is the only Revenue Management System powered by advanced analytics and built specifically for modern train operators. With state-of-the-art automation and intelligence, FareVantage™ gives revenue management teams the ability to work faster and smarter and see big improvements across the board—in ridership, revenue, team efficiency, and customer experience.
Why did you choose this time to enter the UK market?
This is early for us in UK rail, but we specialise in pricing and revenue management across different industries globally. We have already partnered with a UK rail company who we met at a revenue management conference. They were dissatisfied with the revenue management system they were using at the time, so we shared what we had done in other industries and how it might apply to rail. We ended up being invited to submit a bid to provide a next generation revenue management solution to them and then won the contract.
Once we won the deal, we started digging into the market and saw the opportunity for us and the overall drive towards innovation in the rail industry across the UK and continental Europe. So, when we look to the market, the current options available to operators aren’t meeting their needs. They’re still doing things manually, setting fares and allocations across hundreds of trains and literally millions of origin and destination combinations.
What are some of the other benefits of using this software?
Another benefit is handling of overcrowding on trains. You could have standing room only trains, but that is unpleasant for passengers. While you would prefer to sell almost all your capacity, you still need to allow for walk up demand. You use your fares to balance this. An overcrowded train sold out at a low-price also results in low revenue. There are lots of journeys which are provided as a public service, so that makes it even more important for an operator to recoup costs from high demand routes.
How does this blend of artificial and human intelligence manifest itself?
We see this blend manifest in two different ways. One way is an understanding that technology needs to fit your business, not the other way around. You can come up with a great algorithm but if you don’t understand the business, it might not be a fit. Without humans involved, you might not realise the data is bad, and feeding bad data into an algorithm will only result in bad recommendations. We want to bake human intelligence into the technology during system configuration. People want to pretend that you can plug in whatever data and a system will work, but you must train the model to get it to work appropriately. Then you must inform users as to where the model has sound recommendations, and where it needs help.
For example, our software tells the end user where confidence in the forecast is high and where it is low, so the user can provide input where the confidence is low.
It is like a driving app that scans traffic and gives users the fastest route according to the data available. If it is too close to call, it will give the user three options, but leaves it to them to choose the one they like based on their own information or preference. In the early days, there can be a lack of trust in the data and a human needed to review every single decision. But through usage, you begin to trust the algorithm to run on autopilot and then direct humans to where they can add value, freeing up time to think strategically.
So, this would lead to a skills change for employees currently in these positions?
It’s a big win for employees in these positions. There are a lot of manual tasks, like data compilation, that they are currently required to do to produce a simple forecast and set up fares. The automation of the tedious work combined with the confidence in the recommendations allows them the time to focus on high-level strategic tasks.
What can our readers expect from Rail Fest this month?
We will be officially unveiling the new product at Rail Fest with demonstrations at stand #5 in the exhibit area. I will be also be speaking in a session titled ‘Beyond the buzz: Demand True Intelligence to Drive Revenue Growth’. It is our first time attending, so we are really looking forward to the experience and connecting with rail operators from all over the world.