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Published: February 26, 2008

 
 

On Track for Growth

Amtrak also sought out leadership from the commercial sector and developed its existing talent with an eye toward becoming more market-facing. For in­stance, Amtrak’s board reached outside the railroad industry to tap Alex Kummant as president and CEO in 2006. Along with his prior railroad experience, Kummant was a veteran of Invensys Controls and Komatsu America Corporation, both manufacturing companies. Significantly, he was chief marketing officer at Komatsu America.

The value of Kummant’s marketing background was evident when, early in his tenure, he promoted Emmett Fremaux to vice president of marketing and product management, greatly expanding the scope of those functions within Amtrak. Fremaux had been the railroad’s vice president of customer relationships and revenue from 1996 until 2001; he had spent some time at the consulting firm Accenture, then returned to Amtrak in 2005. His promotion provided an executive-level mandate to align marketing efforts with product performance improvement to drive ridership and revenue growth.

Such moves have set the stage for Amtrak to engage in a period of genuine marketing innovation, supported by technology. It now collects data and tries to understand how passengers are affected by changes in pricing or scheduling, a huge step because it allows for a strategic approach to channel-based sales distribution. Although it is not yet as sophisticated as some leading airlines, Amtrak now encourages ticketing online at www.Amtrak.com, and passengers can also buy tickets or pick up prepurchased tickets at kiosks in train stations. In fact, nearly 50 percent of Amtrak’s $1.4 billion in annual ticket revenue comes in through the Web site, as compared with the high-cost call center or station agent channels. Passengers can check information about delays online, and “Julie,” Amtrak’s natural-language, full-service telephone-based automated booking agent, is also available to assist customers. All of these channels were developed by Fremaux during his tenure as VP of customer relationships and revenue. They have been essential for Amtrak in dealing with professional, educated customers on its Northeast and California routes.

The bonus is that the new systems, while helpful to customers, also help Amtrak maximize its revenue. Booking an Acela ticket is now sophisticated in a way that the old Amtrak never was. Amtrak borrowed from the airlines’ experience with analyzing load factors (the percentage of capacity that is sold) to develop a differentiating pricing strategy for the Northeast Corridor. Peak-hour trains are costlier, as are same-day round trips. This premium price competes with airfares for the same routes, taking advantage of rail travel’s greater convenience to downtowns, lower susceptibility to weather-related delays, and less-restrictive security measures. Conversely, weekend excursions are priced to allow couples and families to use the trains less expensively. The challenge for Amtrak now is to apply these innovative marketing approaches to all of its business lines, taking broader advantage of the customer-focused capabilities that enabled the Acela to succeed. It can certainly be done: One success story is Amtrak’s Guest Rewards program. It, too, targets the business traveler, featuring partnerships with corporate hotel chains and car rental firms as well as plentiful points earned on full-fare tickets, which can be redeemed on leisure trips or membership in frequent-traveler lounges.

Despite increased competition from low-cost airlines and the Northeast Corridor’s creaky infrastructure, ridership continues to rise. This growth, which has contributed vital revenue streams to Amtrak, has begun to subtly shift public opinion on rail travel. Especially as environmental issues become more prominent, gridlock confronts more automobile users, and airports struggle with security measures and overcrowding, the appeal of high-speed rail is growing.

It’s growing so much, in fact, that the U.S. Congress has proposed a new reauthorization bill for Amtrak that not only would pay $3.35 billion toward general upkeep of the infrastructure until 2011, but also would create a $5 million per year fund for more high-speed trains, dubbed the Next Generation Corridor Train Equipment Pool. If passed, these long-term investments will allow Amtrak to revamp its infrastructure and rolling stock to keep up with its advanced marketing and product management strategy.

 
 
 
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Resources

  1. Harry Bruce, The Pig That Flew: The Battle to Privatize Canadian National (Douglas & McIntyre, 1997): An overview of CN’s history and illustrates its progress and growth as a company.
  2. Viren Doshi, Gary Schulman, and Daniel Gabaldon, “Lights! Water! Motion!s+b, Spring 2007: Forward-looking view of expansion of transportation, energy, and water infrastructure, which are all linked together, with rail systems particularly important for travel within and between cities.
  3. Edward Landry, Andrew Tipping, and Jay Kumar, “Growth Champions,” s+b, Summer 2006: Survey data from Booz Allen Hamilton and the Association of National Advertisers identifies marketers who drive growth by leading product innovation and new business development.
  4. Geoffrey Precourt, ed., CMO Thought Leaders: The Rise of the Strategic Marketer (strategy+business Books, 2007): Insight from 15 top marketing leaders on the current and future direction of their field.
  5. National Association of Railroad Passengers (NARP) Web site: Includes a helpful overview of the U.S. Passenger Rail Investment and Improvement Act of 2007, with regular updates.
  6. For more business thought leadership, sign up for s+b’s RSS feed.
 
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