Strategic Market Planning for

Public Transit Systems

Submitted by G. Tomas M. Hult, Ph.D.

The Importance of Developing a Marketing Plan

A strategic market plan is an outline of the methods and resources required to achieve a public
transit organization’s goals within a specific target market. It takes into account not only
marketing, but also all functional aspects of a business that must be coordinated (i.e., finance,
research and development, human resources, and marketing). The process of strategic market
planning yields a marketing strategy that is the framework for a marketing plan. This component
of the homepage focuses on the general elements involved in a public transit organization’s
marketing plan.

A marketing plan is a written document that specifies the public transit organization’s resources,
objectives, marketing strategy, and implementation and control efforts planned for use in
marketing its operations. The marketing plan describes the organization’s current position or
situation, establishes marketing goals or objectives for the transit system, and specifies how the
organization will attempt to achieve these objectives. As such, a strategic market plan is not the
same as a marketing plan; it is a plan of all aspects of an organization’s strategy in the public
transit marketplace. A marketing plan deals primarily with implementing the market strategy as it
relates to target markets and the marketing mix.

Figure 1 shows the components of strategic market planning. The process is based on the
establishment of the public transit organization’s overall goals while staying within the bounds of
the organization’s opportunities and resources. When the organization has determined its overall
goals and identified its resources, it can then assess its opportunities and develop an overall
corporate strategy. Marketing objectives must be designed so that their achievement will
contribute to the corporate strategy and so that they can be accomplished through efficient use of
the organization’s resources.

Establishing a Mission and Goals

The goals of any public transit organization should be derived from its mission. Most successful
public transit systems put their missions in writing in the form of a mission statement, which is a
long-term view, or vision, of what the organization wants to become. A mission statement
highlights the distinctive competencies of the particular public transit organizations vis-a-vis its
competitors. Several reasons exist for the public transit organization to compose a mission
statement, including:

• A mission statement gives the public transit organization a clear purpose and direction, which
should help the organization to stay focused on its reasons to be in business.

• A mission statement describes the unique focus of the public transit organization that helps to
differentiate it from similar competing organizations.

• A mission statement keeps the public transit organization focused on customer needs rather
than its own abilities, leading to an external as opposed to internal focus of operations.

• A mission statement provides specific direction and guidelines to top managers for selecting
from among alternative courses of action, helping to decide which business opportunities to
pursue (e.g., higher frequency of customer pick-up or implementing a service for the elderly).

• A mission statement provides guidance to all employees and managers of a public transit
organization, subsequently functioning as the “glue” that holds the organization together.

Organizational Opportunities and Resources

Once the public transit organization has established its mission and goals, it must then take stock
of its opportunities as well as the resources it has available to take advantage of those
opportunities. There are three major considerations in assessing opportunities and resources in
the public transit marketplace, including: environmental scanning, evaluating market
opportunities, and understanding the organization’s capabilities and resources.

• Environmental scanning refers to the process of collecting information about forces in the
public transit system’s marketing environment. Companies can derive substantial benefits from
establishing an "environmental scanning (or monitoring) unit" within the strategic planning
group or including line management in teams of committees to conduct environmental
analysis. This is important because results of forecasting research show that even simple
quantitative forecasting techniques outperform the unstructured intuitive assessments of
experts.

• Market opportunities refer to the right combination of circumstances and timing that permit an
organization to take action toward reaching a target market. For example, in Uppsala, Sweden
the local public transit company identified a target market niche about five years ago that
focused specifically on the needs of the elderly. In this case, the combination of higher gasoline
prices coupled with the larger number of elderly wanting to be mobile in the local community
led to specialized public buses for retired people. While only two "elderly" routes were
established initially, resulting in longer travel times for the passengers since the buses had to
serve a larger area of the community, the new public transit offering was a success. The elderly
got a public transit system targeted at their needs that included buses customized to have easy
on and off access, and the company increased their market share since most of these customers
previously had used taxis to get around.

• Capabilities and resources A public transit organization’s capabilities relate to distinctive

competencies that it has developed to do something well and efficiently. Some organizations
use their competencies to create a competitive advantage over their rivals. A competitive
advantage is created when a company matches its distinctive competencies to the opportunities
it has discovered in the market.

Developing Corporate Strategies

Corporate strategy determines the means for utilizing resources in the areas of finance, research
and development, human resources, marketing, and production to reach the organization’s goals.
A corporate strategy determines not only the scope of the business but also its resource
deployment, competitive advantages, and overall coordination of all the functional areas. Two
questions have to be addressed in the process of establishing a corporate strategy:

• What is our business?

• What should our business be?

To elaborate further, the term corporate in this context does not only apply to large scale public
transit "corporations" but is used by all organizations from the smallest (e.g., Tallahassee) to the
largest public transit systems in major metropolitan cities (e.g., New York, Chicago, and Los
Angeles). While the basic answers to the two corporate strategy questions may be "to provide the
community with convenient and affordable public transit alternatives," each of these public
transit systems target a certain clientele. Therefore, a thorough analysis of the reason why a
specific public transit organization is in business is necessary to achieve corporate and/or
community goals.

Developing a Marketing Strategy

The next phase in the strategic market planning is the development of a marketing strategy. A
marketing strategy for a public transit organization is typically designed around two components:
(1) the selection of a target market and (2) the creation of a marketing mix that will satisfy the
needs of the selected target market. A marketing strategy is a detailed explanation of how the
public transit organization will achieve its marketing objectives. A thorough understanding of the
consumers and their needs is the first step in developing a proper marketing strategy. After that,
the organization can use its own strengths or distinctive competencies to fill those needs better
than the competitors.

A target market is an aggregate of people who have needs for a specific public transit offering
and who have the ability, willingness, and authority to purchase such offerings. Selecting the
appropriate target market may be the most important decision a public transit organization has to
make in the planning process. For example, being in a large city such as New York may result in
the main target market being middle to upper class income people working in the down town
area. On the other hand, in Tallahassee, Florida, a much smaller town with less traffic than New
York, the primary target market may be lower to middle income people travelling throughout the
city. While these brief examples do not necessarily reflect actual target markets, the illustrations
highlight the necessity of establishing the appropriate target market based on the specific public
transit setting.

The selection of a target market serves as the basis for the creation of the marketing mix to
satisfy the needs of that market. The elements of the marketing mix - product, distribution,
promotion, and price - are referred to as the marketing mix variables because each can be varied
or changed to accommodate the needs of the target market. An important point here is that the
term mix describes the decisions that must be made because each element of the marketing mix
must be precisely matched not only to each other, but also to the needs of the target market as
perceived by the public transit organization. The four marketing mix variables are defined in the
following paragraphs.

• A product is a good, service or idea. In the case of the public transit system, the product is a
combination of all three in that the “public transit offering” received by the customers includes
(1) the physical element of the bus (product), (2) the application of human efforts that provide
intangible benefits to the customers (service), and (3) the image of the public transit offering
received by the customers (idea).

• The distribution component of the marketing mix refers to the availability of the public transit
system when the customers need it and in the form they want it. In other words, the customers
do not want to wait to long for the bus to show up at their stop. In addition, they want to feel
safe on the bus (i.e., driving safety and general safety relating to serving areas).
• Promotion refers to communication between the public transit organization and its customers
that facilitate satisfying exchange relationships. Oftentimes, this means that customers must be
convinced that public transit is a good alternative to driving their own car or commuting with a
friend or colleague.

• The price refers to the value (usually monetary) exchanged for the products in a marketing
exchange. Obviously, the most common form of value for a public transit system is money, and
the product received is the use of the public transit system to get to a specific location. More
importantly, however, is the way in which price is used in the marketing mix (i.e., a high price
leads to the expectation of a higher quality public transit system while a more modest price
may simply place the focus on getting from point A to point B).

Creating the Marketing Plan

The final stage of the strategic market planning process is marketing planning, or the systematic
process of assessing market opportunities and resources, determining marketing objectives,
defining marketing strategies, and establishing guidelines for implementation and control of the
public transit organization’s marketing program. The outcome of this process is a formal, written
document that outlines and explains all the activities necessary to implement specific marketing
strategies. The marketing planning cycle is illustrated in Figure 2.
Marketing plans vary with respect to the time period involved. Generally, short-range plans are
for one year or less and moderate-range plans for two to five years. Both types of plans are
usually quite detailed. Long-range plans cover periods of more than five years, perhaps up to
fifteen years, and are usually not as specific. For most public transit systems, it is beneficial to
form strategic marketing plans covering short-range, moderate-range, and long-range operations
of the organization.

Developing clear, well-written marketing plans, though time-consuming, are important. The
time-based marketing plans are used internally among employees for communication purposes. It
covers the assignment of responsibilities, tasks, and schedules for implementation purposes. It
also presents objectives and specifies how resources are to be allocated in order to achieve these
objectives. Finally, it helps marketing managers to monitor and evaluate the performance of a
specific marketing strategy implemented by the public transit system. The following components
are included in a basic marketing plan.

Executive Summary
The executive summary is a synopsis of the entire marketing plan (often only one or two pages
in length). The summary includes an introduction, an explanation of the major aspects of the
marketing plan, and a statement about the costs of implementing the plan. As such, the executive
summary provides an overview of the plan (as opposed to detailed information) to highlight key
issues pertaining to their roles in the planning and implementation process. The executive
summary is an important component of the marketing plan because it is often shared with people
outside the organization. For example, the executive summary may be useful to the public transit
organization’s funding agents when it becomes involved in the financial aspects of the marketing
plan. In addition, suppliers and investors may be given access to the executive summary if they
play key roles in implementing the plan.

Environmental Analysis
The environmental analysis provides information about the public transit organization’s current
situation with respect to the marketing environment, the target market, and the organization’s
current objectives and performance. The first issue in the environmental analysis is an
assessment of the environmental forces in the marketplace. Both internal and external forces are
at play and should be considered. The internal forces that relate to the operations of the public
transit organization include the organization’s current political environment, the availability and
deployment of human resources, the age and capacity of equipment or technology (e.g., public
transit vehicles), and the availability of financial resources. The organization must also assess the
external forces affecting its operations. These forces include:

• Competitive forces refer to transit organizations that are marketing offerings that are similar to
or can be substituted for a particular public transit organization’s offerings in the same
geographic area.
• Economic forces refer to general economic conditions that affect the public transit marketplace
(i.e., the overall state of the economy), but also to the buying power and willingness on the part
of the customers to spend resources on public transit offerings.
• Political, legal, and regulatory forces of the marketing environment are closely interrelated.
Legislation is enacted, legal decisions are interpreted by courts, and regulatory agencies are
 created and operated, for the most part, by elected or appointed officials. As such, legislation
and regulations (or the lack thereof) reflect the current political outlook and, therefore, have the
potential to influence marketing decisions and strategies of public transit organizations.
• Technological forces refer to the application of knowledge and tools to solve public transit
problems and perform tasks more efficiently. A public transit organization has to
institutionalize a procedure for anticipating the effects of new products and processes on the
organization’s public transit offerings.
• Sociocultural forces are the influences in society and its culture(s) that bring about changes in
attitudes, beliefs, norms, customs, and lifestyles. Profoundly affecting how people live, these
forces help determine what, where, how, and when people use public transit systems. For
example, the use of public transit systems as a means of transportation in many European
countries and larger U.S. cities is accepted at all income levels in society, while in many
smaller U.S. cities the use of "public transportation" is considered an indicator of being poor.

Strengths and Weaknesses

This section of the marketing plan introduces the SWOT (Strengths, Weaknesses, Opportunities,
and Threats) analysis into the document. The analysis of the strengths and weaknesses focuses on
internal factors that give the public transit organization certain advantages and disadvantages in
meeting the needs of its target markets. These factors are derived from the environmental
analysis. In addition, strengths and weaknesses should be analyzed relative to the market needs
and competition to allow the organization to determine what it does well and what it needs to
improve.

• Strengths refer to competitive advantages or distinctive competencies that give the public
transit organization an advantage in meeting the needs of its target market.
• Weaknesses refer to any limitation that a public transit organization might face in marketing
strategy development or implementation. Weaknesses should also be examined from the
customers perspective since the customers often identify weaknesses not readily identifiable to
the organization.

Opportunities and Threats

The second section of the SWOT analysis (i.e., strengths, weaknesses, opportunities, and threats)
examines the opportunities and threats that exist in the public transit marketing environment. It
focuses on factors that are external to the organization. While both opportunities and threats exist
independently of the organization, they can affect the organization’s operations significantly. An
easy way to differentiate a strength or weakness from an opportunity or threat is to ask the
question:

• Would this issue exist if the public transit organization did not exist?

If the answer is yes, then the issue should be considered external to the organization. The
externally-focused opportunities and threats are derived from the environmental analysis. Similar
to the strengths and weaknesses, opportunities and threats should be analyzed relative to the
public transit market needs and capabilities of competitors.
• Opportunities refer to favorable conditions in the environment that could produce rewards for
the public transit organization if acted upon properly.
• Threats refer to conditions or barriers that may prevent the public transit organization from
reaching its objectives.

Marketing Objectives
This section of the document describes the marketing objectives that underlie the public transit
organization’s marketing plan.

• A marketing objective states what is to be accomplished in the broad scope of the operations of
the public transit organization through marketing activities.

The marketing objective(s) should be based on a careful study of the SWOT analysis and should
contain objectives related to matching strengths to opportunities and/or the conversion of
weaknesses or threats. Marketing objectives for a public transit organization can be stated in
terms of product introduction, product improvement or innovation, sales volume, profitability,
market share, pricing, distribution, advertising, or employee training activities.

Marketing Strategies
Marketing strategies are a means to achieve the marketing objectives outlined earlier, but also a
means for the public transit organization to achieve a competitive advantage vis-a-vis the
competition and perhaps identify a sustainable competitive advantage (i.e., a competitive
advantage that cannot be copied by the competition).

• Marketing strategy refers to how the public transit organization will manage its relationships
with customers so that it gains an advantage over the competition. In more detailed terms,
however, this means that the public transit organization has to develop and maintain both a
target market and an appropriate marketing mix (i.e., product, distribution, promotion, and
price) to satisfy the needs of this target market.

Target markets are developed by segmenting the existing and potential public transit market via
the use of a series of:

• Demographics variables (e.g., age, gender, race, ethnicity, income, education, occupation,
family size, family life cycle, and social class).
• Geographic variables (e.g., region, urban/suburban/rural, city size, county size, state size,
market density, and climate).
• Psychographic variables (e.g., personality attributes, motives, and lifestyles).
• Behavioristic variables (e.g., usage frequency, benefit expectation, brand loyalty, and price
sensitivity).

Figure 3 illustrates the typical market segmentation process. The target markets are then
maintained by consistently providing the customers with public transit offerings that satisfy their
needs and that meet their expectations. This is done via the use of the marketing mix variables
(i.e., product, distribution, promotion, and price). The marketing mix variables were defined
earlier in this document, but it may be beneficial to re-iterate this discussion here, followed by a
more detailed discussion of the components of each marketing mix variable (see Figure 4).

• A product is a good, service or idea. In the case of the public transit system, the product is a
combination of all three in that the “public transit offering” received by the customers includes
(1) the physical element of the bus (product), (2) the application of human efforts that provide
intangible benefits to the customers (service), and (3) the image of the public transit offering
received by the customers (idea). Five elements of the public transit offering should be
examined:
• Product life cycles refers to the progression of the public transit offering through four
stages: introduction stage (the initial stage of the public transit offering - its first appearance
in the marketplace - when sales are zero and the profits are negative), growth stage (the
stage of the public transit offering when sales rise rapidly and profits reach a peak and then
start to decline), maturity stage (the stage of the public transit offering when the sales curve
peaks and starts to decline as profits continue to decline), and decline stage (the stage of the
public transit offering when sales fall rapidly, signaling the time for the organization to
revise its offerings to the customers).
• Product differentiation refers to the process of creating and designing public transit
offerings so that consumers perceive them as different from the competing offerings.
Important elements of differentiation are: the overall quality of the public transit offering,
the design and features of the public transit offering, and the support services of the public
transit offering.
• Public transit offering positioning and repositioning refer to the decision and activities that
create and maintain a certain concept of the public transit organization’s offering in
customers’ minds.
• Organizing to manage public transit offerings based on the traditional functional form of
organization - in which managers specialize in business functions such as advertising,
sales, and distribution - often does not fit a public transit organization’s needs. As such, the
public transit organization has to find an organizational approach that can accomplish the
tasks necessary to develop and manage its offerings.
• The unique characteristics of public transit offerings involve several elements that are quite
different than other products and need to be specifically addressed in the marketing plan.
These are: intangibility (being unperceivable by the senses), inseparability of production
and consumption (being produced and consumed at the same time), perishability (cannot be
stored for future use), heterogeneity (variation in quality may be more apparent than in
other products), client-based relationships (interactions that result in satisfied customers
who repeatedly use the public transit system over time), and customer contact (interaction
between provider and customer needed to deliver the public transit offering).
• The distribution component of the marketing mix refers to the availability of the public transit
system when the customers need it and in the form they want it vary. In other words, the
customers do not want to wait for the bus to show up at their stop. In addition, they want to feel
safe on the bus (e.g., driving safety and general safety related to serving areas).
• Intensity of market coverage refers to the broad availability of the public transit system
when, where, and in the form the customers want it (e.g., number of covered routes and
frequency of pick-ups).
 • Relationships with other public transit organizations to offer an integrated and possible
larger cover area that is possible by one organization (i.e., similar to many of the airline
partnerships throughout the world).
• Promotion refers to communication between the public transit organization and its customers
to facilitate satisfying exchange relationships. Oftentimes, this means that the customers have
to be convinced that public transit is a good alternative to driving their own car or commuting
with a friend or colleague. Within the promotional mix, four elements can be used to
communicate with the customers.
• Advertising is a paid nonpersonal communication about the public transit organization and
its offerings that is transmitted to a target audience through a mass medium such as
television, radio, newspapers, magazines, direct mail, public transit vehicles, or outdoor
displays.
• Public relations is free nonpersonal communication activities used to create and maintain
favorable relations between a public transit organization and its publics.
• Personal selling is a personal, paid communication that informs customers and persuades
them to use the organization’s public transit system (this form of promotion is used
sparingly by public transit organizations).
• Sales promotion is an activity and/or material meant to induce the consumers to use the
organization’s public transit system (rebates, buy a one-way ticket and get a free return).
• The price refers to the value (usually monetary) exchanged for the products in a marketing
exchange. Obviously, the most common form of value for a public transit system is money, and
the product received is the use of the public transit system to get to a specific location. More
importantly, however, is the way in which price is used in the marketing mix (i.e., a high price
leads to the expectation of a higher quality public transit system while a more modest price
may simply place the focus on getting from point A to point B).
• Factors affecting pricing decisions include organizational and marketing objectives, pricing
objectives, costs, other marketing mix variables, organizational partners’ expectations,
customers’ perceptions, competition, and legal and regulatory issues.
• Pricing involves (1) development of pricing policies, (2) assessment of target market’s
evaluation of price, (3) determination of demand, (4) analysis of demand, cost, and profit
relationships, (5) evaluation of competitors’ prices, (6) selection of a pricing policy, (7)
selection of a pricing method, and (8) determination of a specific price.

Marketing Implementation
Marketing implementation is the "how?" of marketing strategy. This process has several
components, all of which must be integrated if the implementation is to succeed.

• Marketing implementation is the process of putting marketing strategies into action.

Components that are important in implementation include: (1) marketing structure, (2)
marketing strategy, (3) leadership, (4) human resources, (5) organizational resources, and (6)
organizational systems. These components function as determinants of the shared goals of the
public transit organization. To properly address these components, three areas of marketing
implementation need to be assessed in this stage of the marketing plan:
• Marketing organization refers to the structure and relationships of a marketing unit,
including lines of authority and responsibility that connect and coordinate individuals,
strongly affect marketing activities. A marketing-oriented organization concentrates on
 discovering what the public transit customers want and providing it in such a way that it
achieves its objectives. This type of an organization focuses on customer analysis,
competitor analysis, and the integration of the organization’s resources to provide customer
value and satisfaction, as well as long-term profits.
• Activities and responsibilities are planned and organized by marketing managers who
provide purpose, direction, and structure for marketing activities. Understanding the issues
associated with marketing implementation, as well as selecting an overall approach, sets
the stage for the implementation of specific marketing activities. The bottom line is that the
collective efforts of individual people within the organization are ultimately responsible for
implementing the public transit organization’s marketing strategy.
• An implementation timetable is a necessity for the effective implementation of selected
marketing activities. Successful marketing implementation requires that employees know
the specific activities for which they are responsible and the timetable for completing each
activity. Establishing an implementation timetable involves several steps: (1) identifying
activities to be performed, (2) determining the time required to complete each activity, (3)
separating the activities that must be performed in sequence from those that can be
performed simultaneously, (4), organizing the activities in the proper order, and (5)
assigning the responsibility for completing each activity to one or more employees, teams,
or managers.

Evaluation and Control

To achieve marketing as well as general organizational objectives, marketing managers must
effectively control marketing efforts. The marketing control process consists of establishing
performance standards, evaluating actual performance by comparing it with established
standards, and reducing the differences between desired and actual performance (Figure 5).
In following the marketing control process, performance standards, financial controls, and
monitoring procedures (audits) have to be established.

• Performance standards refer to the effectiveness of the public transit organization in meeting its
stated objectives. The objectives should be stated in the marketing plan in terms of profits,
sales, costs, or communication standards. The use of sales figures to evaluate a public transit
organization’s current performance (e.g., revenue generated via public transit ticket sales) is a
common way of evaluating performance standards.
• Financial controls are often established via a marketing cost analysis that breaks down and
classifies costs to determine which costs are associated with specific marketing activities.
• Monitoring procedures (audits) involve the systematic examination of the public transit
organization’s marketing objectives, strategies, organization, and performance.
References

The following represents a list of references used to compose the document on "Strategic Market
Planning for Public Transit Systems: The Importance of Developing a Marketing Plan."
Although our goal is to provide a comprehensive yet manageable document that covers all
aspects of strategic market planning based on established knowledge in marketing and
management, we realize that some of this knowledge may be copyrighted. While we have not
intentionally used such material to present this report, please inform us of potential copyright
issues and we will correct and revise the document as necessary.

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G. Tomas M. Hult, Ph.D.

Director & Assistant Professor
International Business
College of Business
Florida State University
Tallahassee, FL 32306-1110
Phone (850) 644-7859
Fax (850) 644-4098
E-mail: thult@cob.fsu.edu