Bridj: Bridging the gap between public transit and Uber
Bridj aims to provide a higher-quality work commute for a lower cost than Uber.
Talk to anyone who commutes from Coolidge Corner to Kendall via the T and you’ll hear the same complaints: slow route, packed trains, and delays. Alternatives like Uber come at a much higher cost.
Enter Bridj: a “pop-up” bus service aimed at providing better service than public transportation at a lower price point than Uber. Its business model centers around creating affordable, convenient, and efficient transportation. For $3-$5/ride, customers can reserve a seat on a 14-passenger coach bus equipped with Wifi1. Bridj takes a data-driven approach to selecting and optimizing routes, most of which target neighborhoods not conveniently connected by the T2.
More than 10,000 Bostonians volunteered for Bridj’s beta test in May 20143. Bridj has since added routes in Boston and recently expanded to D.C. The CEO estimates that Bridj sells ~70% of its tickets4.
Key to this early success is Bridj’s operating model, which leverages smart people, mobile technology, and a unique planning process to convince customers to pay more for a higher-quality commute. The following sections describe the operating model and links to the business model in more detail.
Using technology to add convenience and collect data.
Customers purchase tickets through the Bridj app, which allows users to enter their start/end locations and see applicable routes. The app also integrates walking directions to the pick-up location and a GPS-tracked location of the vehicle5. This provides customers with a convenient, time-efficient way of booking a trip.
Every time a person enters a start/end location, Bridj gets another data point for a desired route. The next section describes how this relates to the business model.
Finally, Bridj’s vans have Wifi, a level of service not provided by competitors like Uber1.
Employing a data-driven approach to route selection.
When Bridj selects a new neighborhood for expansion, it uses 15-19 data streams, including the mobile app, the census, and social media6. Bridj uses this data to find high-demand routes, predict route speed, and pinpoint central pick-up/drop-off locations6.
Bridj also adjusts its route and pick-up/drop-off locations using this data, allowing routes to adapt to fluctuations in demand and short-term bottlenecks like roadwork. Users can only purchase tickets up to a week in advance, suggesting that Bridj revisits its routes with similar frequency.
These processes allow Bridj to target routes that have high potential demand, which is critical to maintaining the carpooling effect that keeps Bridj cheap6. It also allows Bridj to select routes that are up to 50% faster than public transit, thus bolstering the efficiency portion of its value proposition7.
Leveraging a team of experts in traffic analytics and public transportation.
Thinking about the big data tradespace presented in class, much of Bridj’s data analytics fall into the prescriptive area; Bridj uses data analytics to optimize routes under uncertainty. Bridj has focused on hiring talent in this area, specifically “people whose life thesis is making transportation more effective.” 7 This talent is responsible for finding high-demand routes that keep Bridj prices low and creating efficient routes.
A unique aspect of the Bridj team is its expertise in Boston and D.C. transportation. Bridj’s CTO is the former Director of Research and Analytics for the MBTA and one advisor was the Director of the D.C. Department of Transportation3,8. Tense relationships with local government have shut down potential competitors in other cities6. Bridj’s team has deep insight into the goals/methods of public transportation authorities and can anticipate actions that would upset local officials. This may be Bridj’s biggest leg-up on potential competition.
Bridj has carved out a unique position and shown much promise in its infancy. It leverages its human capital, technology, and processes to generate enough demand to keep prices low and to provide efficient alternatives to public transportation.
Looking into the future, Bridj has mitigated the effects of potential new entrants by quickly hiring talent in traffic analysis and public transportation. That said, does ticket price need to increase to be profitable? Can Bridj retain customers if prices go up? As a lifelong WMATA/MBTA customer and operations research geek, I’m rooting for them.
Student comments on Bridj: Bridging the gap between public transit and Uber
Bridj sounds like a really unique company and a definite value-added proposition. I agree with you that some of their main benefits come from the technology resources they use as well as the data analysts and team members working behind the scenes. How do you think their other resources, i.e. cars/vans, play into their model? I would assume most of the business comes during high traffic hours, but what can they do with the vehicles during down times to maximize the efficiency of their resources? Additionally, how could they leverage network effects or current users’ networks to expand their customer base? They may be able to even offer companies discounts if locals pool together and commute to the same office or building each day.
Thank you for taking the time to share your feedback. IMHO, the way vans play into their business model really depends on whether they buy or rent the vans. From what I’ve read, it appears that they are currently renting the vans so that they can scale (or scale back) quickly. I too would be curious to see what they would do during off-peak hours if they purchased vehicles. This would pose a problem for the distinctive look of Bridj’s vans, but it would be interesting to see if they could share vehicles with a local university since universities seem to need shuttles during common class times (10AM-2PM) and for “safe-ride” times (7PM-3AM).
At $6 a ride, it is triple the cost of taking an MBTA bus and not that much lower than a cab or Uber. That said, with huge capital expenses (a Mercedes Sprinter does not come cheap – and don’t forget about the upkeep: for a rental car company the costs associated to the vehicle are typically about 50% of all operating costs), and becoming an early supporter of the $15 minimum wage for all employees (http://globenewswire.com/news-release/2015/11/11/786300/10156047/en/Bridj-becomes-first-startup-to-mandate-15-minimum-wage.html) Bridj has some hefty operational costs to hurdle. Because of these expenses, customer adoption and high utilization are critical to get Bridj profitable. The price point sitting tightly between existing public transportation and upscale options like Uber and Lyft squeeze the interested market size smaller, making high utilization a big challenge that I’d be very worried about.
The sectors make it look like they are targeting young, high earning individuals for work. People who live in the residential Allston / Brighton / Brookline and going to work at a tech company (in Kendall) or some other business in Back Bay / Financial District. The Back Bay sector may get some traffic on weekends, but very little. The issue I see here is that when you’re going to work, you’re on a deadline and need to be at your destination at a very specific time. With flexible bus routes and seemingly no visibility into other passengers or your ETA from one person’s experience (http://www.citylab.com/commute/2014/07/what-i-learned-riding-one-of-those-new-private-city-buses/375312/) prior to getting on the bus, as a rider I’d be worried about getting on board. If they are targeting these urban commuters, these further narrows their addressable customer set, and leaves the mid-day times underutilized.
In the short term, Bridj will need some strong funding to fill the financial gaps. They’re off to a good start with $4M+, but considering many alternative transportation companies like Zipcar have struggled with profitability for years, they’ll need to keep wooing investors for a while. Speaking of those big alternative transportation guys, Uber launched UberHop this week in Seattle, which is basically the same product as Bridj but without the sector limitations (http://qz.com/569652/ubers-newest-service-works-just-like-a-bus/). This will put a lot of pressure on Bridj to prove their business and operating models are solid and grow quickly.
Thanks for the feedback. I definitely agree that the profitability of this business model remains to be proven. Here were some rough calculations that I ran but was not able to include in the original post because of the 750 word limit:
-Average Revenue / Trip = 14 Seats * (7 Seats Sold / 10 Seats) * ($4 / Seat Sold) = $39.20 / trip.
-Gas Cost / Trip = 7 miles roundtrip / (19 miles / gallon for Mercedes Sprinter) * ($2.49 / gallon diesel in Boston as of December 6) = $0.92 / trip
-Average Driver Cost / Trip = $18.95 / hour * 1 hour / trip = $18.95 / trip. Labor rate came from the Bureau of Labor Statistics.
That only leaves $19.33 / trip to cover cost of vehicles, employee salaries, overhead costs, etc. So, as you mention, scalability is key. Finding a way to keep vehicle costs down is also key (I think they are renting vehicles right now, but at what price?).
I am optimistic that they could increase revenues. Using Uber Boston’s pricing model and Google Map’s driving distance/time between Coolidge Corner and Kendall Square, it would cost roughly $10.92 to take an Uber between these locations–without surge pricing, which would likely occur during rush hour. Given this cost, WiFi on the busses, and the fact that Bridj qualifies for the IRS’s pre-tax mass transit deduction, I think they might be able to raise prices past the current $3-$5 price point and still attract customers. In Boston, though, I really think that the area for growth is along the 128 corridor. There are a lot of technology companies in this area that are not easily connected to public transit. In DC, they may have an easier time justifying higher prices since peak fares on the Metro can reach $5.90.
I’m really interested to see how this company plays out. I think that the operations model delivers the customer value proposition pretty well but, as you pointed out, may not support a profitable business model unless they have a very creative way to control costs and achieve critical mass.
Well articulated, Jess! I feel that getting users to input start/end points of the journey probably started off as booking mechanism, but over time, they added the layer of analytics to use historical information as a predictor of future demand. I have never used this service but I can see how this capability (operating model choice, in the context of TOM!) adds to convenience from the customer’s perspective. Simultaneously, it helps increase utilization enabling the company to keep ticket prices low and stay affordable.
On a side note, I wonder if city mass transit buses review customer demand to alter routes / launch new routes. If yes, how often?
As a former Boston commuter, and one that despises the T, I really enjoyed learning about this option! It’s an interesting model and reminds me of Uber pool. The recurring theme is that when we maximize utilization either through the pairing of riders (Uber) or selling more tickets (Bridj) by focusing on higher concentration routes, we’re able to create value that drives down the cost to consumers while simultaneously increasing profitability for operators. It’s interesting because when we think about utilization rates for fixed assets, we’re usually looking at a manufacturing operation and attempting to spread the cost of machinery across more “widgets”. In this parallel case, we’re spreading the fixed cost of the vehicle across increasing volumes of people.
I also love the idea that in this case the operating model continuously refines itself to optimally align with the business model. That is, the on-going use of data from user demand and other streams leads to improvement in route optimization and therefore lends itself to creating additional value that can be captured through increased ticket sales.