A handbook is provided to assist in the implementation of market segmentation strategies to increase transit ridership. Market segmentation is the identification of groups of people--or market segments--that have similarities in characteristics or needs who are likely to exhibit similar purchase behavior and/or responses to changes in the marketing mix. This handbook provides an overview of market segmentation--what it is and why it is relevant to public transit agencies. It serves as an introduction for managers to the basic concepts and approaches of market segmentation and provides steps and procedures for marketers or market researchers who have the responsibility for implementing a market segmentation program. The handbook places special emphasis on issues that must be addressed when using market segmentation, procedures and terminology that one may encounter in connection with segmentation, problems likely to arise in implementing segmentation studies, ways to encourage the use of market segmentation at transit agencies, and methods to translate segmentation findings into strategy. Private and public sector examples of market segmentation analyses are used extensively throughout the handbook to illustrate concepts presented. In addition, the handbook provides the results of market segmentation analyses performed as part of this project at three demonstration transit agencies: Boise Urban Stages, the Milwaukee County Transit System, and the Washington Metropolitan Area Transit Authority. As a result of these demonstrations, key market segments are identified and reported in the handbook.

Public transit exists in a competitive environment where many potential customers have choices ranging from driving alone to telecommuting. For a variety of reasons, transit ridership has generally been declining. In the face of declining ridership trends nationwide as well as in many localities, transit managers are challenging their organizations to find the most effective methods of maintaining and increasing ridership. New methods are being developed in an environment of limited budget resources.

Delivery of new or improved transit service is critical to taking advantage of new market opportunities. Market research can be used effectively by managers to scan and evaluate opportunities that exist for increasing ridership, particularly by establishing a base of knowledge on local customers. One market research tool--frequently used effectively in the private sector--is market segmentation. Transit services often are designed and operated effectively with little or no consideration of the market segments to be served. However, there is an increased awareness that all current and potential transit users are not the same, and that satisfying their needs, preferences, and motivations requires a better understanding of who they are. Thus, transit system managers are learning that analysis of market segments can lead to an even higher degree of success while making the service design and promotion more cost efficient. Market segmentation provides the transit manager with a better understanding of the customer, and it can promote a better balance between the operational and promotional functions of the transit agency.

Research was undertaken by the Northwest Research Group, Inc. to develop guidelines for transit managers to effectively use market segmentation in developing strategies to increase ridership. To achieve the project objectives, the researchers conducted an extensive literature review of market segmentation strategies; identified and documented 15 case study examples of organizations--in both the private and public sectors---that have successfully employed market segmentation methods and strategies; and conducted significant market segmentation analyses at three demonstration transit agencies. At each of the three transit agency demonstration sites, 1,000 telephone interviews (taking 35-40 minutes each) were conducted to identify characteristics lending themselves to potential market segmentation analyses. The results of these analyses have been incorporated into the handbook.

The handbook has been published as TCRP Report No. 36, "A Handbook: Using Market Segmentation to Increase Transit Ridership." An unpublished companion report, Using Market Segmentation to Increase Transit Ridership--Final Report, summarizes the various tasks undertaken during the project and describes in detail the case studies and the analyses performed at the three demonstration transit agencies. This unpublished report is available on request from the TCRP.

TCRP Report 36 is also available in portable document format (PDF). Double-click on the files below to access the report. (A free copy of Adobe Acrobat reader is available at https://www.adobe.com.) Note: Because of the large size of these files, it may take some time to download. We regret the inconvenience.

Part A - Front Matter; Overview; Chapter 1: Market Segmentation; Chapter 2: Segmenting Transit Markets

Part B - Chapter 3: Using Planning and Research to Segment Markets; Chapter 4: Translating Segmentation Findings into Strategy; Chapter 5: Enhancing the Value of Market Segmentation; and Appendix