We all have a Megabus story – bus broke down, driver reached maximum working hours half way through the journey and left you stranded at a rest stop (ahem…this happened to me over Thanksgiving) and whats with the elusive $1 fare that’s plastered all over their busses as if it were commonplace.
Contrary to what I thought I would find, Megabus business and operations strategies are actually quite aligned. Megabus prides itself on its value proposition: providing safe, convenient, low cost, daily express bus service in the US and Canada. A subsidiary of Stagecoach Group in the UK, Megabus US is operated in by Coach USA and part of a rapidly growing portfolio that includes a UK rail business and bus lines across the UK, and Europe. This decentralized operating model across a diversified portfolio of transportation alternatives has enabled them to capitalize on the significant growth in the intercity bus market. They are creating value for customers (30% of whom are college students) by adding routes that are currently underserved by conventional bus lines, offering comfortable buses with wifi, recharging outlets, wheelchair-accessible service, convenient stop locations, frequent travel times. Megabus extracts value through a an online booking system and dynamic pricing model that increases closer to the day of travel, they cut costs by avoiding cost of waiting rooms doing curbside boarding on public streets, parking lots, college campuses.
Operational strategy – Tangible and intangible investments:
Strategic planning of routes to ensure maximum utilization. Verdict: #megadeal
Megabus has transitioned from a pure hub and spoke model (in the Midwest) to incorporate a point to point model (East and West Coasts) – by making additional stops along a single journey they are able to cut the costs of having additional hubs.
Scope – rapid expansion through partnerships and organic growth. Verdict: #megadeal
Capitalizing on the liberalization of the French coach industry by the french government, in Sep 2015 Megabus announced it is doubling its work force in France investing $2.7 million Euros in fleet of 10 buses, 75 employees to reach a total of 27 domestic routes. In 2009, they purchased two Chinatown bus companies, which enabled them to meet demand for increased routes as they expanded throughout US. This explains why theres a mix of start of the art double-decker coaches and old livery coaches.
Investment in Human Capital and safety. Verdict: #megadeal
Staff go through intense training and background checks before they hit the road. Drivers are only allowed 10 hours of drive time daily and must comply with off duty and night driving policies. Buses are tracked in real time and coordinates/footage from on board cameras are monitored in central support center in Paramus, NJ. This is positive news compared to the bad safety reputation of players such as Fung Wah, which was shutdown after the Federal Motor Carrier Safety Administration crackdown in 2013.
Quality and user experience. Verdict: #mega head-ache
You know you have a customer service quality problem on your hands when you are a top contender on pissedconsumer.com with only 3 resolved issues and over $130k worth of claims. Megabus is lacking in process controls that would enable them to provide a more streamlined customer service experience.
Megabus has achieved strategic alignment in key areas across its business and operational model – this has certainly fueled their growth. I wish I could say the poor customer service is something they should watch out for, but I fear it wont make a dent in their business. People will still ride Megabus. I know I will!