Come on Ride the Train

I noted on Twitter this morning that the 6:30AM train to Penn Station was less crowded than it used to be. As it turns out, this may not be the economic indicator I thought it was. 

The New York Times reported over the weekend that:

More people rode the nation’s public buses, subways and commuter trains last year than in any year since 1956, when the federal government created the Interstate highway system…Americans took nearly 10.7 billion rides on public transportation in 2008, a 4 percent increase over the previous year, according to the report, by the American Public Transportation Association, a nonprofit organization that represents transit systems….Ridership surged after gasoline prices hit $4 a gallon last summer and held steady in the fall after gas prices fell, the report found….

“You would normally have expected with lower gas prices, a declining economy and rapidly growing unemployment that transit ridership would have been down,” said William W. Millar, the transportation association’s president. “It appears that many of those people, once they tried public transit, found that it suited their needs.”

While ridership may be up, what I observed may not be an indicator of increased unemployment but of the cutback in hours that seems to impacting many workers.  When working fewer hours, people may be able to start their day a bit later.

I keep looking for tangible evidence of the social changes the recession might bring (other than the obvious).  There has been some discussion about how recessions can lead people to simplify and re-focus on their communities but I’m not sure if that can be quantified yet.

Ladies Night and the Penny Gap

Lots has been written about the ethe “freemium” pricing model, particularly as it relates to web services companies. Essentially, it is a penetration pricing play where the vendors attempts to get widespread adoption at a low price ($0) and upsell some form of premium service to generate profits.

Most recently, Knowledge@Wharton has this article. Its no surprise that “free” impact on has a significant on demand:

Indeed, the appeal of “free” has been shown to be so extraordinary that it bends the demand curve. “The demand you get at a price of zero is many times higher than the demand you get at a very low price,” says Kartik Hosanagar, a Wharton professor of operations and information management who studies pricing and technology. “Suddenly demand shoots up in a nonlinear fashion.” Josh Kopelman, a venture investor and entrepreneur who founded Half.com, has written about what he dubbed “the penny gap.” Even charging one cent for something dramatically lessens the demand [generated at] zero cents.

This article has a very way to address this penny gap (which is described in more detail here):

Then there are two-sided markets, which derive revenue from two sets of customers. In those, “whichever side is more price inelastic [less sensitive to price changes], that’s the side you want to charge more [for],” says Zhang. In the case of “Ladies’ Nights,” he says, establishments may increase overall revenue by letting women in for free to attract more males — who are price inelastic in that their desire to be there will not be greatly affected by entrance price.

In addition to “ladies night” the other example given is Adobe which gives away the Reader for viewing PDFs but charges for software to create them. Not too many businesses have solutions that lend themselves to this type of pricing but its an interesting approach if you do.