Transit Systems Find Creative Ways to Generate Revenue

Posted on January 8, 2013 by Nicole Schlosser

Page 3 of 3

The Chicago Transit Authority’s partnership with Groupon best aligned with riders coming into the city for festivals and weekend activities.
The Chicago Transit Authority’s partnership with Groupon best aligned with riders coming into the city for festivals and weekend activities.
Daily deal promotion
While looking into different revenue opportunities to diversify its non-farebox revenue last year, CTA decided to make some of its passes available through Groupon, the popular deal-of-the-day website.

With Groupon’s estimated 36.9 million active customers and nearly 900,000 daily page views, CTA spotted an opportunity to advertise to a national and international audience.

CTA partnered with Groupon to offer discounted 3-Day passes to riders, marking the first-ever partnership between the Chicago-based daily deal site and a U.S. transit agency to sell fare media, according to CTA. The ongoing discount started at the end of June.

Groupon pre-purchased 250,000 3-Day passes and paid CTA $1.8 million upfront. Each pass is sold for $7.53 wholesale and offered to Groupon members for $9 instead of $14, the current price of a 3-Day pass. The offer has a limit of four per person. Groupon will own the cards it purchases until they are sold and is responsible for selling the passes.

The deal was a win-win for the agency, bringing it an immediate influx of capital and hundreds of thousands of potential new riders over the summer.
Additionally, the discounted rate will encourage more people to use the 3-Day pass, which offers a better value than the pay-as-you-go option. The CTA Groupon also cultivates new riders and eventually captures permanent local customers, expanding the ridership base.

Groupon is selling the passes on its Chicago, Indianapolis, Milwaukee and Detroit websites, as well as travel discount sites. The deal-of-the day service also reaches out-of-towners through the company’s “Getaways” section, which offers deals on hotels and travel.

CTA’s 3-Day passes are heavily used by tourists and this deal will help further expand that market, particularly for festivals and weekend activities, such as the Air and Water Show, or Lollapalooza, that draw large numbers of out-of-town visitors.

“We felt [the deal] best aligned with out-of-town visitors coming to town for summer vacation or the holiday season,” Eric Reese, GM, business development, CTA, says. “If you’re coming in for a three-day weekend, you’ll have an easy way to get around the system.”

Groupon can mail the fare cards to customers so they can get them before they even arrive in Chicago, making it easier for them to use CTA trains and buses.

“[It’s] a great way to get to a different customer base than we normally have an opportunity to [reach],” Reese says.

The contract allows Groupon and CTA to offer the passes for the same price within the next 12 months.

CTA is watching the results of the partnership and will re-evaluate whether it makes sense to do again after all the passes are sold.

Customers and tourists have received the deal very positively, Reese says.

“In general, it has helped CTA overcome the hurdle of getting out-of-town guests on the system more easily, because they don’t have to figure out how to buy a pass,” he explains. “There’s one option for them, they know where to get it and it’s easy to purchase. It’s already in their pocket when they arrive at the station.”

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