Valuing Customer Experience – How KPIs can distort investment decisions by focusing on economic aspects obscuring secondary benefits

Abstract

The European Shift2Rail Initiative identified three high-level Key Performance Indicators (KPIs) “Life-Cycle-Costs”, “Punctuality” and “Capacity” to which Shift2Rail projects contribute in the three passenger use cases (high-speed, regional, and metro) and a mixed freight use case reflecting the overall railway transport system. The KPI methodology is carried out within the framework of the IMPACT projects and it supports investment decisions in railway innovation. However, investment decisions can only reach optimal resource allocation when the KPIs communicated to policymakers encompass the whole range of economic benefits generated by projects. The high-level KPIs which were primarily identified focused on the supply side (i.e. economic benefits for providers of mobility), omitting economic benefits associated with the demand side (i.e. improved customer experience when traveling by train). In the absence of KPIs associated with the demand side, the metrics would lead to distortions in investment decisions. A methodology integrating customer needs and customer behaviour has been developed within the framework of the IMPACT-2 project. The “Customer Experience Model” (initially presented at the 2019 WCRR in Tokyo) focuses on economic benefits associated with the demand-side of innovation projects, but does not take into account customer acquisition and increased modal share of train once these innovations have been deployed. The Customer Experience Model is based on multilevel weighting of data to bridge the gap between the availability of existing studies, and the need for a new methodology. This model feeds inputs for a modal shift calculation based on logit models whereby utility functions are set to include factors both known (e.g. travel time, travel cost, delay, customer experience factors, waiting time) and unknown. This paper highlights the importance of considering customer needs and to gain new perspectives when assessing investment decisions in innovative technologies for the railway system.