Marketing Policy
1. GENERAL
1.1 Background to the policy
This is a formal policy document governing the interaction between the Southern African Railways on the marketing of rail services.
1.2 Objectives of policy
The marketing policy sets out:
• A common understanding and agreement on underlying marketing principles;
• Ways in which marketing process should take place in order to ensure increased rail market share, competitiveness and long term viability by providing one-stop, cost effective, seamless, predictable service to users of International goods transport throughout all the railways of the SARA region and beyond.
1.3 Scope
This policy applies to the market of all international rail service, for goods and passengers traffic, consigned on more than one railway in the Southern African region and the adjacent one metre gauge rail network.
1.4 General policy, specific implement implementation
This policy is to be used: -
• To review and align the marketing/commercial aspects of Business Agreements negotiated specifically between the railways.
• To implement improved marketing processes within corridors.
2. REVENUE SHARING PRINCIPLES (APPLICABLE PER CORRIDOR ONLY)
Railways could determine railage deemed appropriate or market related on traffic destined to or traversing their railway lines. In the event where quoted rates given at the prerogative of the railways were not acceptable to customers and/or in terms of the agreement between the railways involved, the following alternatives could apply: -
2.1 Equity in allocating railage income
2.1.1 Definition
A non-differentiated through rate, from origin to destination, shared pro-rata between the railways effecting the service, based on agreed work performance factors, after taking into consideration relevant compensation for railways executing terminal services.
2.1.2 Application
Railage income is shared between railways, allocating 2.5% each to the origin and destination railways, and 95% between all the participating railways based on their respective net ton-kilometres for the traffic conveyed.
Problems and issues noted with regard to the application of the equity principle are appended as Annexure A to this document.
2.1.3 Background to principle
In order to ensure that traffic is considered by rail, it is imperative that railage should be either market related, considering world market prices, or competitive taking into account competition from alternative modes of transport.
2.1.4 Force of this principle
This principle where applied should override the use of the Official Tariff Books.
2.1.5 Rates increases
For existing business allocated on the basis of the equity principle, when increases are agreed with customers, allocation of the revised railage income is maintained on the basis of the equity principle. No one railway may increase its share unilaterally.
2.2 Haulage
In order to support the objective of increased rail market share, a railway may be compensated on a fixed basis for the hauling of traffic on behalf of another railway or authorized agent. In such event railage collected from the customer, from origin to destination, is retained by the originating railway.
2.2.1 Application
Fixed compensation to a railway for services rendered would be subject to mutual agreement between the relevant railways.
2.3 Wheelage
Contributing to a seamless, predictable service, and addressing the needs of customers, trains of the originating railway may be consigned via or to the lines of another railway, utilizing the rolling stock of such originating railway. The intermediate or destination railway is compensated on a fixed basis an access fee and relevant services rendered. Railage collected from the customer, from origin to destination, is retained by the originating railway.
2.3.1 Application
Wheelage to a railway for services rendered would be subject to mutual agreement between the railways involved.
3. ROUTING OF INTERNATIONAL TRAFFIC (APPLICABLE PER CORRIDOR ONLY)
In order to address the needs of customers and the interests of railways, unless otherwise agreed to by the railways involved, international traffic would be quoted and routed based on the shortest geographical rail route from origin to destination, subject to customer preference, route efficiency, cost, safety, and any governmental or inter-railway agreements that may be in force. Implementation of the principle would have to be on a corridor-by-corridor basis in view of varying prevailing circumstances in the different corridors.
4. RATES QUOTATIONS
4.1 Time Frame
Requests for rate quotations on new business must be given to the requesting railway by all the affected railways within 48 hours from receiving the enquiry. Enquiries and responses can be by phone, fax, e-mail or other medium. In exceptional circumstances, should extensive negotiations with a customer be required, the time frame for such a quotation would be effected in accordance with the agreement of the customer concerned.
4.2 Consultations
In order to support responses to the customer for new business within the time frame, consultation between the railways is encouraged.
4.3 No part quotations
Serving the interest of all railways, a railway should not quote on part of the journey, which can be totally completed by rail. Where the customer could transship the traffic at an earlier or later point so as to avoid using the rail services for another carrier, the railway receiving the enquiry provides a quote for the complete journey by the rail. Exceptional circumstances would be agreed upon between the railways.
4.4 Rail consultation and other logistics providers
Where a request for a part quotation is received from a rail consultant or other logistics provider, and in extreme circumstances one has to be provided, the quotation is never lower than is offered to the designated railway.
5. ONE STOP SERVICE (ONE RATE, ONE INVOICE, ONE PAYMENT. IE. COLLECTION OF EACH OTHER’S REVENUE)
One railway is designated to be the point of contact with the customer, normally the first railway receiving the enquiry from the customer. There is one contract between the designated railway and the customer, covering the services of all participating railways, including the collection of revenue. Each corridor would have to agree on which member could best perform this function, together with guidelines and mechanisms to control default on remittances to the other railways. The designated railway issues one consignment note and invoice for the complete through railage income, and collects all the income on behalf of all railways. The split of income between the railways is not shown to the customer.
6. CUSTOMER CARE FEEDBACK AND INFORMATION
Customer care reports are prepared after specific visits and summarised at least once every quarter by the customer-contact railway, and also provided promptly to other railways participating in the corridor. Feedback from the customer on rate quotations would be provided by the other railways.
7. VISITS TO CUSTOMERS IN OTHER COUNTRIES
Visits to customers in other countries by any staff from another railway should be well coordinated with the local railway. Normally booth the designated and the visiting railway see the customer, unless otherwise agreed. Each such visit, if not accompanied by the designated railway, is reported on by the visitor to the customer-contact railway.
8. STRATEGIC ALLIANCES
To be able the provision of extended services, e.g. freight logistics solutions, railways may enter into strategic alliances with other service providers.
9. JOINT PROMOTIONS
Joint promotions (e.g. stands at trade fairs and exhibitions) should be attended where possible by all participating railways. If a railway does not attend, it can supply promotional materials relevant to the event taking place.
10. MARKET RESEARCH AND INTELLIGENCE
Railways rely heavily on accurate information to develop specific marketing strategies. Sufficient resources shall be dedicated by each railway to gather market information in support of marketing efforts. Such information shall be extended to other railways.
Trade fairs and other opportunities to gather market intelligence should be monitored by the local railway and advised to other railways.
11. TRAINING IN MARKETING
In order to support their mutual objectives, the railways shall establish uniform and consistent curriculum for training staff in the marketing of their services.
12. CLIENT PAIRING
Marketing efforts in each railway specifically focuses on opportunities for back-loading in order to achieve more competitive rates through increased asset utilisation.
13. EQUIPMENT HIRE
Application of equipment hire would be done in accordance with and in support of the objective of this policy.
14. PRACTICAL IMPLEMTATION
14.1 Implementation of this policy
Each railway implements and maintains up-to-date its processes and systems in support of the policy objectives. All other railway agreements should be in conformity with this policy.
14.2 Effectiveness and performance measures
Corridor Management Group coordinators shall include in their analyses of corridor performance, measures being undertaken to ensure effective implementation of the Marketing Policy (e.g. relevant back-loading percentages, effects on market competitiveness, speed of responses to customers, traffic gained/lost and reasons etc.) to determine whether the objectives of the policy are being achieved.
15. MARKETING POLICY MAINTENANCE
15.1 Revision of this policy
This policy will be revised annually or as and when necessary. The foregoing notwithstanding, any railway may propose amendments. Supporting motivation should accompany the request to be considered appropriately by SARA and its relevant committees.
ANNEX A
1. EQUITY APPLICATION
In applying an equity principle, alternative modus operandi could be considered as follows:
1.1 Determine a market related rate for the throughout distance, irrespective of cost structures of different Railways. The market related rate is afforded to Railways in accordance with the marketing policy i.e. after considering compensation to Railways doing Terminal services, the balance is afforded on the basis of a Railway’s work performance (example net ton km).
1.2 Equity rate for the total distance is market related, but a standard minimum charge, regarded as a “best practice rate ” for the region should at least be honored in the quotation by a Railway of railage for a throughout journey.
1.3 Equity rate is market related, but considering that railways may have different cost structures, any railway not agreeable to the Equity rate on this basis may submit annually its minimum rate per commodity per corridor, in order to facilitate quotation by a railway of railage from origin to destination. However , in order to ensure that this is done in a consistent manner , a standard model is used to determine:
(a) the appropriate costs: and
(b) the quantum of such costs in each Railway which would serve as that Railway’s “minimum rate per commodity per corridor” and which could then be used for the purpose of quotation for a throughout journey.
2. THE EQUITY PRINCIPLE : FACTORS TO BE CONSIDERED
2.1 Cost differentiation
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Impact of distance (longer distance implies relative lower operating cost)
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Topography (necessitating different train composition)
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Corridors
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Fleet differentiation
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Inflation rate in different countries (not necessarily off-set by weakening exchange rates)
*
Capacity utilisation (excess vs shortage )
2.2 Subsidies being received from Government for services rendered
2.3 Statutory requirements and national policy
2.4 Privatisation
2.5 Mutual trust
2.6 Marketing capacity/capability of all Railways
