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iDTGVMax: What is the hidden agenda of the French railways?

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The French railways company (SNCF : Société Nationale des Chemins de Fer) made the news this week when it announced the launch for an unlimited offer with its iDTGV. For 59.99€ per month, travelers would be allowed to take online booked high-velocity trains (called iDTGV) as many times as they’d like. This offer is called IDTGVMax and can be discovered on the dedicated website at IDTGVMax.com

This unlimited offer was however limited in size and reserved to 10000 people only and some restrictions do apply as you can read below

The SCNF claims to launch this offer to compete with carpooling, a very cheap solution of the young generation. And in fact, this unlimited offer has some restrictions. Yes, you can travel as many times as you want but : 1) you need to subscribe for at least 12 months and 2) there is only a number of destinations available (mainly in Southern France).

Do they really want to compete with carsharing ? Well, I think they have something else in mind.

What the SNCF really wants to kill is …

Do you remember some 30 years ago when there was no high-velocity train (actually 34 years ago, since the first one was launched in 1981) ? I you wanted to go from Paris to Lyon, there was only one possibility : the plane (and at that time it was expensive). High-velocity trains slowly replaced planes on short distances. There is for instance –almost- no more plane flying between Paris and Brussels. The Thalys just killed that competition.

But the picture is different for long distances. The plane, despite its price, is still quicker than the train when it comes to go from Paris to Marseille for instance. In my opinion, what the SNCF wants is not –only- to attract backpackers keen on carsharing. They want to prepare the market to eventually get more traffic on long routes. Believe it or not, those long route are also the ones which are the least profitable (actually routes to the Atlantic, South and Southwestern have all missed their profitability targets according to a a report from the French authority for public finance)

Making high-velocity trains profitable again

Nobody should be fooled by this strategy. The operating margin of iDTGV is on the one hand more profitable than normal trains (because you must book your tickets online and by no other means) and there is some space left (approximately 15%). The revenues generated from IDTGVMax will therefore go almost completely on the bottom line.

This unlimited offer aims also at setting new habits. The more you’ll use the train for long distance, the less likely you’ll be to use the plane for the same destinations. Because eventually you’ll see that the actual needed for a one-way journey from say, Paris to Marseille, is not that different between train and plane. What people don’t realize is that they are idle times in the process of taking the planes and they are not always taken into account when making the choice between plane and train.

Conclusion

Very clever plan from SNCF but don’t be fooled. Official goals may not be the same as the ones pursued in actuality.

Picture : Till Krech via Flickr
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Author: Pierre-Nicolas Schwab

Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)

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