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Pricing a new service

The residential bicycle hangars BETA Project is the first to pass through the BETA scaling stage, which has a price attached to it, so it threw up some new question and challenges for us. We needed to think about how to price a new service, and one that was still "in beta" with multiple, (as yet) untested, assumptions still being used to make decisions. 

We discussed this a lot, and we decided on a cost of €100 per annum for a BikeBunker space. Below we explain why, and we'd be very interested in hearing your feedback on this idea in general, or in relation to this new service in particular. 

How does the cost of €100 per annum for a BikeBunker space compare to other cities?

  • In Brussels, they are €60 per bicycle space.
  • In Utrecht, they range from €64 to €80 per bicycle depending on how many others you share your hangar with.
  • In London, the per bicycle amount (converting from £) ranges from €27 in Waltham Forest, to €45 in Hackney, to €86 in Hammersmith & Fulham council.
  • In York in the UK, they are €97 per annum (£43.20 per 6 month period). 

When we surveyed people to ask what they felt would be acceptable, the feedback generally sat between €0 and €500 – but with a median figure of €60. Based on their explanations, it was also very clear that many people’s perceptions were being anchored by the €50 annual cost of a residential parking permit.

So why did we choose the initial price point of €100? Here’s 5 reasons:

1. A better, sustainable, service

  • Several London borough councils told us that they wished they’d priced their equivalent service much higher from the start, that funding issues were affecting the expansion of the service in their boroughs. That weighed very heavily in our minds.
    • For example it’s the reason that they usually require 6 applications (ie a full hangar) before they will consider placing a hangar somewhere. That won’t apply for BikeBunkers – we are aiming to trigger them more easily.
    • It’s also the reason that they’ve long waiting lists – and some of them have very long waiting lists. Having such a long waiting list is bad for both the citizen and the local authority.
    • It’s also the reason that many place the onus onto citizens to survey their neighbours in advance and obtain 51% of them to agree before even considering placing a bicycle hangar anywhere. Again, we will be looking to do it differently for BikeBunkers.
  • We would prefer to start at a higher price point if that enables us to more easily explore ways of providing an excellent service – for example keyless access to hangars or including a great bicycle theft insurance rate for all BikeBunker users (none is currently included).
  • This is a fledgling service (see point 5) still exploring the question of future funding. Like many infrastructure projects, it’s also one in which the vast majority of the costs (purchase, delivery, installation and allocation of the BikeBunkers) are upfront, with the income trickling in afterwards. A stronger sustainable funding source puts it in a stronger position when considering solutions such as match-funding, etc.

2. Better access rather than better value

  • For the early stages of this brand new service, we want to prioritise growth of the service over value of the service. We want as many people as possible having the option of getting a space in a BikeBunker, rather than a smaller number of people getting better value.
  • (This is also why we have capped the initial phase 1 at two bicycles per household, for example.)

3. Provide a subsidised service

  • The purpose of the BikeBunker service (as noted in the website footer) is to promote and encourage people to cycle, to support city-centre living, and to reduce bike theft. Naturally, we therefore want to subsidise the service in order to support those aims.
  • Current assumptions are €950 outgoings per year allowing for purchase, delivery, installation, administration, maintenance, repainting over graffiti tagging, sweeping out leaves and litter, covering the lost revenue of it as a car parking space, the odd lost key, public liability insurance, etc. That’s assuming a BikeBunker will need replacing every 8 years. Over the next few years, we’ll develop a much clearer idea of costs, and which presumably will drop when at a much larger scale.
  • Based on those numbers (which will need a couple of years until we’ve a clearer picture), an unsubsidised BikeBunkers space would be charged at €165 per year (including the assumption that each space will have a vacant month once every 2 years due to turnover). At €100, they’re being subsidised by 40%. If were to make the service €75 per annum, we’d subsidise by 55%, for €50 we’d subsidise by 70%, and obviously to offer a free service, we’d be subsidising by 100%.
  • (These are only direct costs, and direct subsidies, of course – there’s lots of external benefits to cycling, here’s one page discussing some of them.)

4. BikeBunkers versus residential parking permits

  • A residential parking permit costs €50 per annum for a house (that is also a subsidised rate), and people’s expectations of a BikeBunker space have been anchored by this. For example, if residential parking permits were to cost €400 per annum (as they do for older apartments which do not have onsite parking), €100 might seem like good value. Perhaps this is the correct price for the BikeBunker service.
  • Apart from being quite different services in terms of infrastructure and delivery, BikeBunker users also get a dedicated parking space – which isn’t the case for residential car parking.
  • It might seem odd that Dublin City Council is charging more for a clean, quiet, healthy, civil mode of transport, but this page is hopefully explaining the rationale for initiating this service at this price.

5. Perhaps most importantly - this service is still learning, is still “in beta”

  • Finally, this service being “in beta” makes it quite different to a mature service, and so we should adjust how we approach it.
  • For example, we actually don’t want huge levels of demand (but rather the early adopters and early majority) whilst we are trying to learn in the very early stages of delivering a new service – that just makes it more difficult to learn and adjust. (This is also part of the reason for restricting the initial eligibility criteria for the service.)
  • We will learn based on people’s actions. People subscribing to the service and (perhaps more importantly) renewing their subscription for a BikeBunker space will indicate whether they perceive the service to be good value.
  • Over time we will hope to learn more about pricing for multiple bicycle households, students, OAPs, families and other types of bicycle.
  • In many respects, Dublin City Council BETA is still a new approach for most people and they aren’t used to public services actively learning and changing…what they see on day 1, tends to be it. (“Prices never tend to drop, do they?!”)
  • This service currently likely has higher purchase, installation and shipping costs that will drop as the service scales and we procure at volume. Until we do so, we’re working off several estimates.
  • It’s always much easier to drop prices than to raise them. We didn’t want to back the service into a corner.
  • Finally…very possibly €100 is entirely the wrong price point. Perhaps it should be much lower, or perhaps (like the London borough councils), we’ll find that it should actually be higher. We’ll soon learn as the service develops in the real world.

We knew this was going to be a big discussion point, and we certainly discussed other prices, but decided to stick to what we felt was the best price at which to start off the service. Perhaps, though, we have this wrong. This is the first project through the BETA scaling stage which has a pricing aspect, and we want to learn more about questions such as this.

So what do you think? It would be great if you could let us know below, at beta@dublincity.ie, or to @DCCbeta on social media (if you add the #bikebunkers hashtag it will help others to follow the conversation also) and we will factor it into our discussions for the future.

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