Yesterday I had a chance to check out one of the new bike sharing stations here in Savannah. The one pictured below is on Ellis Square. It’s one of 2 stations the system will start with initially.

bike share ellis square 300x224

I’ll start by saying right off that I have a bias: I love bike sharing. I think it’s one of the best ideas/services to hit cities in my lifetime, and I really want it to succeed in Savannah and in points all over this country. Put simply: the new bike sharing systems overcome two important obstacles to getting more people on bikes: the fear of bike theft and the need for maintenance. With a good bike share system, people just don’t have to worry about those two things, and that is really a great innovation.

From an urban design standpoint, bike share has the opportunity to benefit walkable places (or emerging walkable places) in enormous ways, since it gives a viable, quality option for those who don’t want to drive. What too many urban advocates fail to understand is the importance of biking to a walking place. In fact, I’d argue that it’s far more important than transit. A quality biking environment extends one walkable street or neighborhood into several. It eliminates the need for vehicles for most trips, which subsequently impacts parking and real estate and makes the walking environment even better. And, because walking engages us as human beings (we use our bodies and our senses), it’s a far more enjoyable experience than sitting on a  bus or a train. Transit can be and is important in other circumstances (such as longer-distance travel and cold weather) but for the basic everyday needs of people, biking is so much more important to the health of a walkable place.

Of course, most cities have a lot that needs to be done to make the streets better for biking, but that’s the subject of another day.

So, yes, I really like bike share. It’s a great idea and it works.

The problem is: it’s way too cheap.

The new system in Savannah will cost users only $60/year to use, which includes a free 30 minute ride with every use. $60/year is only $5/month. Since most bike rides in Savannah are well under 30 minutes, it’s doubtful any local would ever incur extra time charges. You’d really have to go on a long pleasure ride for that to be the case.

Sidebar: Since there’s only 2 stations at rollout, and one is at the bus station, it’s unlikely many locals will use it anyway. But as stations are added, this will change.

So – for $60/year anyone can ride a bike, park it safely and never have to maintain it. That’s a steal, especially since a very cheap new bike costs a few hundred bucks.. And, hey, I like a good deal as much as anyone, so I’m not complaining personally.

But I want bike share to succeed and expand rapidly. And, to do so, it simply needs to generate a lot of revenue. I delve quite a bit into the world of entrepreneurship and business, and a common mistake in the world of business start-ups is to charge too little for a product. Lord knows I’ve been guilty of this myself. We think, “hey, if we make it cheap than we can get people to use it and we can gradually raise prices to make money later on.” Only thing is, it rarely works that way. Most start-ups simply can’t generate enough volume and end up starving themselves of cash. Customers also see them as a low-end service or product and don’t value whatever is being sold. At that point, an investment and change of strategy will be needed or the business simply won’t make it.

Now it may seem strange that I’m writing of a bike share program as if it’s a business. After all, in Savannah it will be run by Chatham Area Transit, who runs the region’s buses. In other cities bike share is often a quasi-public operation as well (only one or 2 are private for-profit), and essentially operate as public transportation. Like public transportation, it’s assumed they’ll need both a capital and operating subsidy in order to provide a service to the citizens.

I simply think that model is flawed.

I’ve argued previously that bus systems need to look at totally different operations and funding models. While I wrote about fare-free transit, my push really has been that these systems should have a variable pricing model to appeal to a much wider range of customers. By doing so, they’ll not only attract more people but also generate far more revenue to the system. With bike share, the model is different, but the basic premise is similar. This is a valuable, convenient service and it should be priced accordingly. When a service is too cheap, people frankly don’t value it and don’t use it much. Even more worrisome, when it’s too cheap it will need to rely on additional government or corporate investment to survive.

I don’t want that to happen, and I think it’s a fundamental problem with too many bike share programs. This is not to pick on Savannah at all, since CAT is following a model that’s well-established by now in many other cities.

But the gist is this: if bike share has to rely on outside help to fund the service, it will always be at the whims of that outside help. So, if it needs local or state or federal government support, it will always be subject to politics. Those politics can be helpful or deadly, depending on who is in office. If it needs corporate support for stations, it will be at the mercy of those corporations.

Personally, I think the service is so good that it doesn’t need those kinds of partners. At even $120/year, a membership would be a bargain. That’s only $10/month for something many would use frequently as more stations are added. Heck, a bus pass often costs $30-40/month or more, ($60/month for CAT) and the bus can be a pretty lousy experience.

The great irony is that people who are advocates of bike share and public transit really do believe to their core that these are valuable, important services for people. And, they’re right – they are. Now, it’s time to price them accordingly. Products and services that are too affordable really can hurt your customers and your business. My dream: a bike share service that makes enough money and has such a viable business model that the sharks on Shark Tank are competing with each other to buy-in and expand it further. That simply won’t happen with today’s models that don’t generate enough ongoing revenue and rely on government and corporate grants for capital. It’s long-past time to give up some of our 20th century mentalities when it comes to transportation, funding and business models.

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2 Responses to Bike share is too cheap

  1. Scott says:

    Great points, Kevin. Being one of those on the “politics” side of the equation, we rarely read/hear cogent arguments re: sustainable business models. This seems like a good adjunct argument to Shoup’s “High Cost of Free Parking.”

    In such a temperate climate as Savannah’s, you’d think a higher fee structure could work due to more consistent “value” for each month. That is, a fluctuating fee structure (variable pricing, as you referenced) seems required here in KC where this month should be a steep discount compared to April or May. Curious to see if Savannah follows your prophecy of raising fees as more stations and users come online (I’m betting yes)…

  2. Kevin Klinkenberg says:

    Precisely, Scott. It’s that sort of dynamic pricing model that should be at play for all forms of transportation, IMO. So, when it’s winter and cold, the bus really should cost more. After all, it’s providing a valuable service. Instead of $1.50, why not charge $5? With a better pricing and revenue model, transportation providers can then tailor the service to work better for middle-class customers (like using on-demand technology for one), and find a way to provide price relief to those needing a subsidy. The alternative: “make it cheap for everyone” doesn’t drive enough revenue to provide a quality service. Classic business catch-22.

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