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The state of the railways has almost reached the point of becoming a national preoccupation. Certainly, the government is preoccupied with how to force train operators to improve their acts, while the providers live in daily fear of a media all too eager to spread passenger 'horror stories from hell'. Take the unfortunate journey made by 100 rail users last year, when a string of errors meant it took nearly nine hours to travel from Southampton to Waterloo - a journey that normally takes 70 minutes.

The surprise is that amidst all this, passenger journeys continue to rise. Last year passenger kilometres travelled increased by three per cent to 40 billion. The downside is that according to the Strategic Rail Authority (SRA), only 77 per cent of all train journeys arrive on time, way short of its goal of 81 per cent from April 2003, a target which last month rose to 83 per cent.

For rail company GNER, which runs between London, Peterborough, York, and into Scotland, statistics like this are a regular event. Its own punctuality is 74 per cent - not the highest, but by no means the lowest. But as the operator of one of the most important south-north commuter lines, a key metric it has long been proud of is service. While it may not always be dead on-time, GNER has, for the eighth time in a row, achieved the SRA's highest passenger satisfaction rating over long distances.

Loyalty scheme pioneer

It has been this history of promoting a good overall journey that has sculpted the way GNER has focused its direct marketing. In 1995 it launched one of the UK's first loyalty programmes called Excel, in which points (one for every £10 spent), could be exchanged for a variety of rewards.

But by 2003, GNER was forced to admit this wasn't demonstrably altering customer behaviour (ie encouraging more travel). The time had come for change - the time had come, in fact, for 'GNER Time', the club focusing on the 'time' customers spend travelling, aimed specifically at business people.

Led by Moray Shutt, business marketing manager at GNER, and Chris Whitson, planning director at DM agency Clark McKay & Walpole (CMW), the brief was to create a more substantial relationship that would definitely increase the level of spend travellers would make with GNER.

"Although there are fewer of them, business customers represent 50 per cent of our revenue," says Shutt. "One problem with Excel was that it was originally open to anyone. It began at a Silver level, with Gold added in 1999 for heavy points earners, and Blue in 2002. But there was a lack of aspiration about the scheme. Consumers didn't know what they needed to do to move between tiers and crucially, the vouchers, which included discounts for shops such as WH Smith, took people away from the GNER brand rather than enhancing it."

The new idea was to present 'time' to people as their most precious commodity with GNER and reward them with GNER-related products.

"This was based on CMW/GNER research, which showed that people were lukewarm about third-party offers from Excel," says Shutt.

"Most business travellers didn't need them," she adds. "What they were looking for were GNER offers, such as being able to collect points for personal trips with their families. This could be seen as a benefit, as 44 per cent of first-class business travel is booked by companies at no cost to the passengers. Time was a way of giving them a tangible reward that they didn't directly pay for and to experience GNER outside of a work capacity."

Shutt's other concern was that in the absence of any demotion, Excel wasn't rewarding loyalty. Imposing a minimum entry level - spending at least £1,200 over three consecutive months to qualify for a year's membership - was a major change in direction. It sounds a lot, but the figure was arrived at by looking at the average spend of some of the best Excel members.

"We're very conscious that some won't make the cut, and yes, it will penalise those who, say, spend £1,100 in three months, and more throughout the rest of the year," adds Whitson. "But we had to set some sort of limit."

The timeline for the changeover began last year, culminating last month, and dealt with GNER's database of 24,000 Excel members. The first stage came in July 2003, which comprised a mailer encouraging people to use up their existing Excel points; at this stage there was no mention of Time. The database had already been pruned down to 17,000; about 6,000 names were earmarked as especially high value, but all 17,000 received the mailer.

The second was the postcard mailer, again sent to the whole 17,000, encouraging people to send in all their used tickets (which is how points calculations are made) by the end of September. The third, in September, was the first occasion Time was mentioned. Here, there was more than one variation of the mailer. All Gold members were told they were automatically upgraded to Time, while the top tranche among these were told about additional benefits not offered to the rest.

But it was to the 6,000 Blue and Silver Excel members where the segmentation was different: they actually had to apply for Time. Applications began in September so people could build up their three months' worth of travel receipts ready for when Time launched in April.

Whitson says: "For these lower-tier people, we fully expected that some might not make the required spending level. But because they were previous Excel members, we decided that we'd give them a year's grace before they are properly demoted."

Attracting applications

In terms of response, data is still flying in as the scheme has only been live for one month. However, at the time of writing, response was already high. "We've sent more than 8,000 welcome packs," says Shutt.

"Six thousand have gone automatically to the Gold Excel members, which means 2,000 of the 6,000 that had to apply have done so."

It's a remarkable figure given most of these will not have had much recent contact with GNER under Excel.

The mailings have been purely retention-based, but a parallel project is already looking at GNER's entire database of season ticket holders, online bookers and young person's railcard holders, which could fit into Time. This divides passengers into seven different segments - three for business travellers and four for leisure.

"We know there are many business travellers not in Excel that could be potentials for Time," says Shutt. "We know of those who travel standard class, but would like to be in first class. These are potential Time people."

Another project is identifying large businesses that have two or more offices located along the GNER route, and are therefore likely to travel up and down the line. "We very much aim to get more bespoke business with corporate customers who we can then drive to the Time scheme," says Shutt.

"We've already surprised ourselves by discovering that 12,000 businesses line the route that have at least two sites."

Eventually, the GNER team wants to reach the point where online bookers won't need to keep their travel receipts because the IT booking system will automatically tot up their spending and issue their rewards directly.

But it's a slowly-slowly approach of doing one thing at a time well that it's most keen to do.

After all, these are the trains we're talking about.