How Montreal transport skirted privacy laws

The STM Merci application was released to 20,000 beta testers in May 2013 and around 1000 offers have been made available to these early adopters. It will now be promoted to all 2.5 million users in the hope that 100,000 residents will be using it by 2014.

STM introduced push notifications within the Merci app one month ago and is starting to calculate the results. 

The transport agency started conservatively - it will not send more than one notification to any given customer within 36 hours.

Of the 20,000 beta testers, 17,900 have kept using the app within the first week - which is far higher than average. 

One in two users gave STM "the full monty" — filling out all preference data to drive better deals. Around one in three refused to give any preference information at all. 

Customers are logging in at an average of six sessions a week.

The average open rate is around four percent — and the conversion rate of that four percent is 27 percent. The top 25 percent of offers attracted open rates of over 40 percent.

"Achieving double-digit conversion for the best offers is an excellent result - but the spread suggests there is room for learning,” Pluche said. “The learning curve for marketers is extremely steep. We didn't know which offer would work best - understanding the why is helping CMOs [chief marketing officers] write the book about real-time interaction with consumers at the point of decision.”

Under the co-development deal, STM pays SAP a license fee based on 'results' - the number of active users and the actions they take (redeeming an offer or marking an offer as a 'favourite', for example). STM in turn gets additional revenue from the Quebec Government the more 'rides' it calculates on its system.

At present, retail partners can make offers on 'Merci' free of charge. But this is likely to change if the project hits scale. "We are looking at recouping the investment by asking partners to pay to be in the program on a click-through basis,” Bourbonniére said.

The 'Merci' app at this stage remains available only on iOS, and the STM expects it won't be until mid-late 2014 that it's available on Android devices.

Further, the app requires strong 3G or Wi-Fi capability and the STM Metro system currently offers none when trams move underground. Local carriers have committed to rolling out 3G in these areas.

Finally, the app has never been 'audited' by any authority - only cleared by the STM's lawyers, who assumedly have sound knowledge of Quebec privacy legislation.

"What we've learned is that there is a myth around customer privacy concerns," Pluche said. 

"Paranoia about privacy gets lifted when you do two things — when you have trust in the brand, which riders have in STM; and when you have relevance, in which a customer is given value instantly in return for sharing their information."