No room for slackers in today’s business models

IN PHILSTAR’S business section today columnist Babe Romualdez writes about the e-Pass tag system for payment in the South Luzon Expressway (SLEX). And all those who use this swear by its convenience, especially if you have to use that road daily like those of us who live down south.

SLEX e-Pass dedicated lanes -- photo from James Deakin

SLEX e-Pass dedicated lanes — photo from James Deakin

The thing with toll roads is that the bottleneck is always with the exit points where you have to pay. The e-Pass system allows a more efficient way of doing it, as Romualdez points out: the e-Pass does a lot in reducing traffic congestion along the expressway since the electronic transaction takes only 1.5 seconds – compared to the average 15 to 20 seconds that it takes for those paying cash, which can take even longer with the motorist hastily fumbling for money in his bag or wallet. The few seconds saved may seem insignificant but the fact is, they make a lot of difference considering the almost 200,000 vehicles plying the two sides of SLEX every single day in terms of time saved, not to mention fuel consumption.

 

As Romualdez further writes, the e-Pass operators are currently promoting its use, selling the electronic tag at a discounted price of P999 versus its regular price of P1,700, which he points out should be good in furthering the system’s and motorists convenience and efficiency. Romualdez however points out that there are those in the company that want to cut the promotion short.

“We are surprised that some impatient wet blankets in the company that runs the Skyway want to limit, if not discontinue, the e-Pass promo,” Romualdez laments. “That sounds like a ‘bad trip’ to most motorists should that ever happen. The e-Pass discount promo is a motorist-friendly campaign that could actually increase the number of road users in the long run.”

Indeed, in this age of modern technology, business models have radically changed so much so that what looks like an outright loss is actually an opportunity for bigger, stronger business.

There have been many examples where initial gadget or technology purchases are given at a loss because the real money making is in the consumables that come with it. Take for example the printer company Lexmark – originally an IBM company, I believe. Lexmark came out with a promotion where you can go to any computer store carrying their brands and exchange your old printer – useful, useless, totally wrecked – for a brand new Lexmark inkjet printer. FREE!

The catch: you have to buy their ink cartridges to make it work. The margins on the ink was so high Lexmark made back the costs of the printers given away and more.

It’s the same with the telecommunications companies. They practically give you the phone unit of your dreams so long as you commit to a corresponding monthly usage plan for at least two years. The cost of the phone is amortized with the plan, and they make a ton with your usage.

Even if the e-Pass tag unit is given away for free by the Skyway, the more users, the more money earned. And e-Pass usage will actually give them better margins. Remember, toll fees are regulated by government (specifically like the Toll Regulatory Board) which allows them a fixed percentage over their costs. Since the e-Pass is prepaid by the user (who has to load the tag with value for him to use it) the operator actually earns extra with the cost of money. This “float” also gives them added interest revenue – provided they have enough finance wizards on their payroll who can pull it off.

Lastly, e-Pass operators seem to be clueless up to this date on a key moneymaker in this age of technology: information. Having all those e-Pass holders gives them a highly valuable database that they can spin for more revenues. Again, if they’re smart and creative enough to even realize this. And the more users they have, the more data they can generate. And the more data they generate, the bigger bucks they can have.

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4 Responses to No room for slackers in today’s business models

  1. JP, I believe the true reason for the price cut is competition. Let’s just say that newer technology is about to displace the current E-Pass system.

    Pricing down the E-Pass gadget itself would get rid of their inventory and hopefully bring in more revenue before they are displaced.

    The new tech, by the way, will definitely be more afffordable.

  2. Pingback: Bring Back EPASS Now! Calling Edmundo Reyes, TRB | JPFenix Blog

  3. Pingback: EPASS Update: Edmundo Reyes, TRB clueless of SMC plans? | JPFenix Blog

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