Virgin trains has announced an automatic payback scheme for delayed passengers. This is unique for a number of reasons, but the most interesting one is as a closure experience for users. In one initiative they have created a healthy Closure experience, changed the transaction model, and disrupted an industry.
As I have pointed out in previous posts, the Closure experience of any service is closely tied to the transaction model - how you pay for it will influence how you end it.
There are 5 basic transaction models in the service industry:
1. Payment after delivery
2. Payment before delivery
3. Scheduled payment
4. Synchronous payment
5. Continuous observation
The transport industry, apart from taxis, operates a Payment before delivery model. The nature of this model means the customer is in a subservient position. They gave up their money before the service began. If the service doesn’t go as planned, the only option up till now has been to fill in forms and apply for compensation in vouchers from the transport company; which seems like entrapment on a few levels.
The model also means that there is little open dialogue between the customer and provider at the close of the service which is unlike the discussions at the end of meal, at the end of a haircut, or a taxi ride (Payment after delivery) where there is an opportunity for feedback and potential of tips. This model results in these industries often excelling in service - making the customer feel good, because they have listening and learning built into the transaction. If the service provider excels at their service then they might get extra.
The transport industry doesn’t listen to its customers in the same way. It has little incentive to because the transaction has already taken place. The Automatic Payback scheme has changed this. People now will get their money back automatically if things don’t go as planned. No more filling in forms to get some vouchers. Its all done for the customer in the background. It builds trust.
The next step should be to extend this to all digital tickets and for any customer that pays with a card. However, this will require significant investment in digital ticketing systems. Oyster has such a system, and is capable of issuing automatic refunds for disrupted services, but hasn’t introduced it.
Well done Virgin Trains. A long way to go, but at least you have left the station.