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River Falls Shared Ride Taxi Service

AFES 492 Juliet Tomkins/Steve DeWald November 28, 2012

I.
II.

Table of Contents:
Executive Summary3

III.

Introduction3-4

IV.

Objectives.4

V.

Methodology..5

VI.

Results.5-7

VII.

Marketing Options.7-8

VIII.

Conclusion/Recommendation..8-10

IX.

Literature and Resources Referenced..10-11

X.

Appendices..11-13

II. Executive Summary: The City of River Falls Shared Ride Taxi Service provides taxi services to the entire community. The service is heavily subsidized. The subsidies are being received from the federal, state and local governments. These subsidies cover the majority of the services operating expenses. The City of River Falls is aiming to decrease or eliminate their local subsidy for the taxi service. In moving forward in our project, the value of evaluating cities with similar populations helped determine what best practices might be in financing the municipal taxi operations. While it is clear from the information collected, if the service wants to decrease their local subsidy the service should raise fares. The shared ride service should also increase their marketing tactics towards different target markets of the community for example students without vehicles living in on-campus housing at the University of Wisconsin River Falls. If both marketing tactics are mixed appropriately the River Falls Shared Ride Taxi Service will decrease their local subsidies and regain their strength as an asset to the River Falls Community.
III. Introduction:

The City of River Falls Taxi Service has been around since 1985 and the service is open to all residents of River Falls. The City of River Falls wants to decrease their federal, state and especially the local share from the residence of River Falls. A share is the amount of money they receive in grants from these governments often times to relieve financial stress from businesses. The annual ridership is approximately 25,000 rides per year. 17,000 of those rides are elderly and disabled and about 400 are children under the age of 12. The service is currently contracted out by the City of River Falls to a company called Top Hat. Top Hat serves the city of River Falls and many others across Wisconsin and Minnesota. The city contracts three vehicles to Top Hat and is potentially purchasing two more within the next couple years. The service is currently using subsidies from the state and federal government and part of the local subsidy from the City of River Falls to support the services expenses. These grants though, are just barely enough to stay solvent. The clientele of the Taxi Service is mainly the elderly population of the town and a small number of children. There are approximately 2500

students living on campus attending the university; and because of the high parking permit prices many of these students do not have vehicles on campus. Therefore, there is a potential market within the university. The current rate is a flat rate for each person who rides in the taxi. It is not charged on a per mile basis unless the ride is outside the 5 mile city limits. All of this information was given to me by the clients in the first meeting and also on the initial project proposal form. The Taxi Service is looking for a ridership analysis and a costs versus income analysis for different cities in Wisconsin of the similar demographics. After we come to a conclusion of our analysis then we must decide how we are going to achieve the increased profit margin through either increased ridership prices or through increased marketing efforts towards our target markets. Some ways to construct our marking plan is to do things such as raise prices of fairs, create contracts with elderly homes in the area, and increase sales promotions, flyers and advertisements and other methods.
IV. Objectives:

Survey five separate cities with similar demographics in Wisconsin that has taxi services. Our cities that we surveyed included Village of Plover, Viroqua, Reedsburg, Rhinelander, and Rice Lake.

Analyze the Shared Ride services of the five cities through the nine question survey our group gave to the other shared ride services. Construct marketing plan to explain the best ways to decrease the companys local subsidy in the City of River Falls through two different approaches. Conclude the project by presenting our findings at the River Falls City Council meeting. The findings will include our marketing plan options and some graphs explaining the information found in the survey.

5 V. Methodology:

We will be contacting these different cities through email and phone calls to receive the answers to the survey questions. These phone calls/emails were from five to ten minutes to harvest the information needed.

Reference USA and Demographics NOW were internet sources for some of the demographic information used. The information delivered from Reference USA will assist the other information that was obtained by the survey. For example population size versus ridership of the service.

Excel will contain all the survey information along with graphs explaining the results and conclusions to which we have come.

VI. Results Five Cities Chosen

Reedsburg, WI: Reedsburg cab service has been around for twenty years. The target market for the shared ride service is the entire city; but they are mainly focused getting the elderly to their destination. The company works around an everyday schedule. Cab service is open Monday through Thursday from 6 A.M. to 10 P.M., Friday and Saturday from 6 A.M. to 2:30 P.M. and Sunday from 8 A.M. to 10 P.M. The city travels at a maximum of fifteen miles outside the city but if requested early enough the taxi will travel as far as the customer would like to go. Every additional mile over the fifteen mile range cost $2.00 a person. The rates at which they charge for a single rider is $4.50 for an adult and $3.50 for ages 17 and under. The company drives two wheel chair assessable vans, and one Ford Queen Victoria. Rhinelander, WI: Rapid Cab is the taxi service in Rhinelander, WI that serves the whole city. They advertise by telephone ads and word of mouth. They charge a flat rate of $3.00 for senior citizens, and $4.00 adults/children. They are open twenty-four hours a day, seven days a week, including all holidays. The cabs travel up to sixteen miles out of the city range and charge an

additional $2.00 a mile after. The City of Rhinelander uses a Chevy Impala, Prius, and two handicap accessible vans. Viroqua, WI: Running Cab services began in Viroqua in 1992 and now has expanded their business to three other cities. They started their business with two cabs and five employees. They currently have five vans and serve to the public seven days per week, including holidays. They charge $1.75 for seniors who are (55+) or are disabled. Adults are charged $2.75 and students/children (17 and under) are charged $1.75. Riders will be charged an additional fee of $1.75 for every mile outside of city limits. The range for the city limits is twelve miles. Running Inc. also gives out coupon books that cost $10.00 and are coupons for free rides. They have a total of six coupons in the book. Rice Lake, WI: Rice Lake markets their service to the public by word of mouth and advertisements in the phonebook. Rice Lake is open to the public for whoever needs a ride, but does focus more on the people who dont have vehicles. The rates at which they charge their customers are $6.00 inside the city limits, and an additional $1.50 for every outside mile past the city limits. If there are more than one passengers the rates are still $6.00 for the first person and $3.00 for every additional passenger. Rice Lake also drives for weddings at a flat rate of $150 an hour. The cab service is open twenty four hours a day, seven days a week, and is open on holidays. The company has two vans that are handicap accessible and also own two cars. One special service that the taxi service provides is they work with the grocery stores to deliver groceries to customers. They also deliver flowers, tobacco products, alcohol and the rate at which they charge is $6.00 if in city limits. Village of Plover, WI: Plover is designated in a rural town outside of Stevens Point. Plover taxi is controlled by the city but has the right to travel to Stevens Point. The only thing the taxi service in Plover cant do is give taxi rides in the city limits of Stevens Point. In other words, the Village of Plo ver

cant give taxi rides from a Stevens Point location to another Stevens Point location. It can only be from Stevens Point to Plover or Plover to Stevens Point. This gives the taxi service in Stevens Point their capture market. The ways in which the Village of Plover markets their business is by advertising in the phonebook, and also in the Portage County Directory. The rates for a cab ride is $1.00 for disabled/60+, $2.00 for anyone over the age of 18, and $1.00 for anyone younger than 17 years. The fare at which the Village of Plover charges for additional outside miles is $1.00. The Village of Plovers range is to Stevens Point and the distance between the two cities is ten miles. The cost from Plover to Stevens Point would be $10 plus the additional regular cab ride fee. The company is also willing to drive there customer anywhere they choose but will have to pay the charge of $1.00 a mile. The Village of Plover is available from Monday-Friday from (6:30 A.M. to 6:00 P.M.), Saturday from (8 A.M. to 4 P.M.) They are closed on Sunday. Village of Plover cab drives wheel-chair assessable vans, and has a bus that can be used as long as it is reserved ahead of time.
VII. Marketing Options:

The marketing options we chose were to increase the taxi fare amount and also to market toward a different demographic. We selected these two options specifically because the City of River Falls needs a shared ride taxi service that will continue to help the community. There are many more options and these dont have to be standalone ideas. They can be mixed and combined with other marketing tactics as well. Option 1: Raise Fares Through our research, we have noticed that River Falls Taxi Service charges their fare prices too low. The cities that we have researched that have a local subsidy of $0 are charging their fares at a minimum of $3.00. The River Falls Taxi Service is charging seniors/disabled customers only $1.50 and adults 18-61 years of age $2.75. With low fare rates, meeting the local subsidy is nearly impossible and the local share will keep increasing at a constant rate. If the taxi service decides to increase prices the group suggests that prices gradually increase. If prices are too high we might lure out the customers that will find a different alternative of transportation. Getting down to the local subsidies of $0, the breakeven point will be reached

at $3.50 per customer. The breakeven point is calculated as the minimum amount of people per trip. Meaning, out of an estimate 26,441 trips in 2011 there is one customer riding in the taxi. This does not calculate if there is more than one rider, riding in the same vehicle. (See
Appendences Chart 4 or C-4 & Chart 5 or C-5)

Option 2: College Students There are approximately 2500 students living in on-campus housing (Dorms). Vehicle parking passes for students can run upwards of $300 or more a semester for a parking pass. Therefore, many students that do live in on-campus housing do not have vehicles. This gives the River Falls Taxi Service a great opportunity to be transporting the students to their preferred destination. Although, the taxi service brings students to the health clinic free of charge. Advertising in the University Center at the University of River Falls is an enormous attraction that students walk through everyday therefore the amount of views would be high and could potentially be would be very effective. Also posting flyers in the dorms with the services phone number on it would catch students attention. The students who live in the dorms would be more likely to be riding the services as well because of the high parking permit prices as stated above. This taxi service is currently mainly target market focused the elderly and disabled which is only seven percent of the entire community. Forty-four percent of the community is people from ages 20-44 which create an enormous potential for new market. Approaching the market though, must be unique in itself. This younger generation is constantly consumed with high amounts of stimulation at one time in any given place. Therefore, creating top-of-mind awareness will be an elusive task. None the less, the potential market is present and should be considered. (See Appendences Chart 1 or C-1)
VIII. Conclusion/Recommendations

Individual Conclusions: Rachel Miles: The project, in my perspective, was an immense learning experience. From learning about the legal issues of the University, to understanding how to effectively and efficiently

present a semesters worth of information in an eight minute power point. Overall though, I enjoyed working with my classmates and I am proud of our final product. Time was at the essence for this entire project. Some of the material we would be likely to produce greater results with a longer dead line. I feel if we had another two weeks we really could have made this project shine. I believe that the marketing options for the City of River Falls Shared Ride Service are ideal and should be implemented. I also would be curious to see what comes of the service after implementing. This project will make a great asset to my portfolio to show to future, potential employers. Travis Dehnel: In conclusion, with the project I feel I have learned a lot with understanding real world situations. Surveying other taxi services has given me great experience in generating communication skills that I would potentially need on my future job. This project has also been a great eye opener on how to manage time. The group set goals on when parts of the project had to be met in order to complete the project in a semesters worth of time. One group member could not have been able to finish in a semesters time alone, so knowing how to manage a complete project was stressful but very enjoyable. The project had setbacks where it made times difficult to complete certain tasks. Contacting the cities we surveyed was very frustrating on getting ahold of the managers who went out of their way to answer the questions we had for them. Overall I wish River Falls Taxi Service the best of luck in the future, and the marketing options that we presented to them. William Litzer: I think the project was useful in some ways. The project helped me to better understand real problems and gave me the experience in solving problems. The problems we faced used techniques from the knowledge and experience I have learned in my college career. I believe that the project that we got was helpful and useful for any of my career opportunities outside the University of Wisconsin-River Falls. I didnt like the legal issues we had with our survey. I believe the summary of the project had its up and downs. Most of our useful data came from surveys we gave to the taxi services we contacted. There were some stalling times

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when waiting to hear back from certain cities, as well such as waiting on the approval of our surveys from UWRF. In the end I believe we have met the purpose of the project and did very well. Recommendations: As a group we decided to recommend implementing both marketing options. Both of the options will produce a higher income to decrease the local share. The shared ride service is a great asset to the community of River Falls would be at a great loss if it were to be eliminated. The taxis are needed by members of the community that strictly rely on the services provided by the shared ride taxi. As stated in the marketing options above the income will increase substantially if implemented together correctly. We suggest: Price we suggest is $3.00. This amount is under the breakeven point and well under what the other cities were charging. This increase will substantially increase without luring the current customers away. If there is an increase in young adult/student ridership by fifteen present through selective advertisement (1308 rides per year) the ridership will increase to 27,749 rides. Forecast = 27,749(rides) x $3.00 = $83,247 Current local subsidy = $41,526 + Revenue of $47,264 = Approximately $88,000

IX. Literature and Resources Referenced

Reference USA Demographics NOW Julie Bergstrom, Financial Director of The City of River Falls Taxi Services o River Falls Shared Ride Taxi o Rhinelander Shared Ride Taxi Service o Reedsburgh Shared Ride Taxi o Rice Lake Shared Ride Taxi o Village Of Plover Shared Ride Taxi

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o Viroqua Shared Ride Taxi o West Bend Shared Ride Taxi Steve DeWald (Mentor)

X. Appendices C-1:

City of River Falls Age Distribution

29%

44%
Information found on Demographics NOW

(Above: Age distribution displayed in pie chart for the City of River Falls) C-2:

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(Prior Page C-2): Fare prices of the different age groups of all the cities received from the survey conducted) C-3:
Operating Expense $ 253,686.00 $ 575,842.00 $ 296,359.00 $ $ $ $ 228,156.00 188,653.00 791,716.00 463,089.00 Federal Share $ 103,211.00 $ 153,421.00 $ 92,679.00 $ $ $ $ 98,875.00 71,393.00 223,701.00 174,545.00 State Share $ 61,685.00 $ 153,421.00 $ 92,680.00 $ 49,427.00 $ 51,231.00 $ 223,701.00 $ 126,463.00 Local Share Revenue $41,526 $ 47,264.00 $0.00 $ 269,000.00 $0.00 $ 111,000.00 $53,366 $20,162 $0.00 $48,081 $ $ $ $ 26,488.00 45,867.00 344,314.00 114,000.00

River Falls *Rhinelander *Reedsburgh Rice Lake Plover *Westbend Viroqua

(Above: Table of the subsidies of each city we surveyed)

C-4:

Rides Over Local Share

Fare Price
$1.50 (current) $2.00 $2.50 $3.00 Eliminate Local Decrease Local Maintain Subsidy Subsidy by 2/3 Current Subsidy ($88,000) ($58,000) ($47,000) Local Subsidy Forecast $3.50

(Above: Local subsidy versus the number of rides needed to meet the quota)

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C-5: (Below: Break Even Analysis of number of rides and price) Profit-Volume-Cost Analysis Worksheet
Enter your inputs into the colored cells: Revenues Unit Sales Price $3.50 Low Unit Volume Tested 10,000 High Unit Volume Tested 50,000 Variable Costs Vary-with-Unit Costs Direct Labor Direct Material Factory Overhead Other Vary-with-Unit Costs Vary-with-Revenue Costs Sales Commissions Sales Tax Other Vary-with-Revenue Costs Fixed Costs(if want eliminate local subsidy) Vary-with-Profit Costs State Income Tax Federal Income Tax Other Vary-with-Profit Costs

$0.00 $0.37 $0.00

0.00% 0.00% 0.00%

88,000

0.00% 0.00% 0.00%

Break-Even Analysis Forecast

0 (10,403) 0 0 0 0 0 (10,403) 88,000 (88,000) ($0)

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