Enhancing revenues of Indian railways through commercial advertising

Abstract

This study explores the means to increase revenues from CommercialAdvertising on the Indian Railways (IR). The current earnings fromCommercial Advertising on the IR are Rs. 41 Crores (i.e. Rs 410 Million)against a target of Rs. 100 Crores (i.e. Rs 1 Billion). The study attempts tounderstand why Transit Advertising revenue is a meager 42 pct. of the target.Advertising on IR is generally considered as a peripheral activity. It isperceived to be of little relevance on the Indian Railways, as in percentageterms it represents less than a quarter percent of the total Revenues. Poorstate of finances on the IR however implies that every Rupee counts. ThePassenger- Railways interface has been mapped out in detail starting fromthe intention to buy a ticket and ending with the departure of the passengerfrom the railway station on termination of journey. The opportunities forAdvertising are primarily an outcome of this interface. At each stage of thePassenger-Railway interface an opportunity has been identified, that couldbe used fruitfully for Commercial Advertising. An endeavor has been madeto quote an example from a different Railway or a different Organizationthat exploits such opportunity. The focus is primarily on the conventionalmedias' that the Railways offer for Advertising- hoarding, glow signs,posters etc. Information and Communications Technology (ICT) has thrownup a whole range of new options. The scope of profitably using thesetechnologies has been studied.This study is based largely on secondary data gathered primarily fromRailways. In-depth interviews have been conducted with leading advertisingagencies to understand their perceptions of the issue and to find out whatthey desire from the Railways if they are to buy up the AdvertisingOpportunities on the IR and contribute to Railway revenues. A comparisonof commercial advertising earnings of three (high earning) Divisions of theIndian Railways- Bombay Division, WR; Jaipur Division, WR/NWR; and Bangalore Division SR/SWR has been made to highlight the best practicesin this area. A structural flaw exists in organizing this business on the IR. Ithas traditionally decentralized the entire business of CommercialAdvertising. This implies that if a particular company (desires to launch aIV'product nationally and thus) wants to buy up Advertising opportunities (onthe railway stations) in the four metros and in the so-called mini metros itcannot do so through a single tender. This particular company would have toapply for numerous tenders on different Divisions of different ZonalRailways. This is probably the reason that none of the 10 big advertising companies in India own a significant amount of Space on the IR. It is clear that the organization of the business needs to be restructured. The studyrecommends that The IR segment their advertising opportunities similar totheir Catering Opportunities into Major Units and Others. Pantry Car Contracts and Food Plazas are awarded centrally while Divisions allot individual stalls. The study throws up a scheme of segmentation for theAdvertising business based on scale. A study has been made, based largelyon secondary sources, of how Transit Advertising business is conducted inthe US. Their methods have certain portions that are relevant to Indian Railways. A primary difference is in the manner in which their contracts areframed. Their contracts have an in built incentive for the Contractor toexpand the area under display and thereby maximize revenues for himself aswell as for the organization. The advertising potential is hence exploited tothe maximum extent. Our contracts on the IR are traditionally restrictive innature in the sense that they circumscribe the area and media that can beused for display, thus the potential cannot be exploited to the maximum.Contract clauses containing these and other points that can be profitablyborrowed by IR have been highlighted in the study. The decision making process in the award of contracts has also been examined in detail and improvements suggested. A list of recommendations has been drafted toaugment revenues in this area. The assumptions and conditions under which these recommendations will work have been clearly spelt out. The studyexplores the sanctity of the figure of Rs. 1 billion as the target. An estimateof the potential earnings has been arrived at 0.8 billion. The assumptionsmade to arrive at this figure have been clearly spelt out.