The continuing problems at K-Mart have many correlations with the problems that Amtrak has faced for the last 31 years. K-Mart is having many difficulties including marketing, customer service, and management. In many ways, Amtrak is suffering from the same problems as K-Mart and many others, and Amtrak’s new president Mr. Gunn needs to solve these problems quickly or it will continue its downward spiral.
Much like K-Mart, one of Amtrak’s biggest shortcomings is the lack of knowing what its market is and who its competition is. With K-Mart, it is trying to go head to head against Wal-Mart, however like Amtrak it may be aiming its guns at the wrong target.
Let's compare K-Mart with one of its main competitors: Target. Unlike K-Mart, Target understood that its market was not going head to head against Wal-Mart. Instead of trying to beat the big guy on prices, which it knew it couldn’t, it decided to market its stores as a level above Wal-Mart. Target carries better product lines and upgrade products from what you will find at Wal-Mart. Will Targets prices be lower? No, but then again they are not trying to have lower prices, they goal is to have a higher level of product, and its working for Target. While it may not have the traffic counts that a Wal-Mart may have, it does make a higher gross margin than Wal-Mart, it has higher customer satisfaction and is doing well in the retail war.
Another example of a company that did not have a clear target of its market was the National Trailways Bus System. In the 60’s and the early 70’s Trailways strived to be at a higher end of the bus industry. After being purchased from Holiday Inns, they changed their market focus and became just another Greyhound, trying to go head to head against Greyhound. Instead of being a step above Greyhound with its Golden Eagle and Silver Eagle service, they lowered themselves to Greyhound’s level. Of course the rest is history. Trailways trying to go head to head against Greyhound caused them to become awash in red ink and by 1987 became part of them. (Trailways still exists to some extent as it continues to franchise its name to independent bus companies with joint marketing and purchasing power).
Amtrak seems to be in the same boat as the K-Mart and Trailways. It does not seem to know where its market is and has had a difficult time finding its niche. Is it trying to compete against the airlines? Obviously they can’t compete against the airlines on the long distance trains. One irony of Warrington’s labeling the long distance trains as “leisure” trains, he pointed out that Amtrak and he had no idea what their market is. After all to attract “leisure” market you need a product that provides more than basic transportation. Why do people ride the American Orient Express or the Rocky Mountaineer? Because they provide a unique experience that is not available anywhere else. What does Amtrak have to offer to this market?
It is clear that there is a market for long distance trains. Whether Amtrak is going realize that there is a market out there, and that this market is underserved, and it has great potential, remains to be seen.
Customer service is the most important part of operating a company that deals with the public. If you do not treat your customers well, your customers will go away. Amtrak’s passengers have many options for traveling and Amtrak is only one of them. If Amtrak does not provide a level of customer service that is satisfying, the customer will go away.
Customer service levels are another area where Amtrak and K-Mart have too much in common. One of K-Mart's biggest problems is that of their customer service. Trying to find help is difficult if not impossible and when you do find someone to help you, they often are not very helpful. Then K-Mart came up with their self-serve check out lines. Their corporate people claimed that it would be easier to find help because of them, but little changed. Meanwhile, at K-Marts competitors, you usually do not have a problem finding someone to help. While this may vary between individual stores, overall K-Mart has some of the worst customer service in the marketplace.
Then take a look at Southwest Airlines. Although many mention low fares as a reason for flying Southwest, the other component that often comes up is their level of customer service. In my experiences I have never encountered an unfriendly employee at the airline. It seems as though their employees, whether on the ground or in the air, are there to satisfy their customers.
How does this compare to Amtrak? As part of Warrington’s slashing before leaving his office, they had severely cut on board and station staffing. They also cut out amenities for first class passengers and from the Coast Starlight. These are features that the passengers have come to expect, and even though railfans may pass these off, most customers who expect them will be displeased.
Recently on the All_Aboard email, there was a story from a regular poster who had many trials on his trip. Another member of the group said, well if those things happened to me I would just sit back and still enjoy the trip. One of the problems was that there was no Pacific Parlour car on the trip. While the person who posted may be able to sit back and not care, many passengers will not be back.
One of the biggest problems in some businesses, and is very prevalent in politically oriented organizations is when a new head honcho is hired, and that person does not fully understand the business that they are running. This is not bad if they do the right thing and surround himself with people that understand the business, but in most cases they then hire their buddies and other people they “owe”.
A few years ago at a major computer manufacturer, the company brought in new management as existing management was stepping aside. They brought in people from the telemarketing division of one of the major phone companies. They in turn started to hire their own people and get rid of existing management. However, they did not have an understanding of the company and tried to bring in their corporate philosophy to the computer company. What happened was that due to their lack of knowledge, sales went down, morale went down, experienced people left, and after one year the old management had to return and try to pick up the pieces.
Amtrak faces many of the same problems that many other companies have faced, in that their management has been part of the problem. Warrington, Downs, and now Gunn all came from the transit industry. One of the problems this causes is that they do not have a thorough understanding of Amtrak and the market it serves. While some will argue that both provide rail transportation, the target market that a NJ Transit rail, Metra or Metrolink is after is a different market than what Amtrak should be going after. The employees have to be a different type of employee, you need to provide a different kind of service, and you have to market your trains in a different way.
Sadly, the tendency to bring in your own people is even more prevalent with political animals such as Amtrak than it is in private industry. In the case of Amtrak, instead of bringing in people with knowledge of intercity transportation, previous Amtrak Presidents brought in their own people who followed them from NJ Transit. Mr. Gunn now has the opportunity to change this practice.
For the last 31 years, Amtrak has gone year to year, seemingly not being able to decide where it is going and how it is going to get there. After all these years it still fails to understand its market and to realize that it must provide good customer service to attract customers. The latest cuts by the outgoing management have put Amtrak into a dangerous situation. If Mr. Gunn is going to act, he needs to act quickly to keep Amtrak from permanently falling into a black hole it cannot recover from.
References: Bus World Winter 84-85 “Trailways Five Year Plan”
Fall 1987 “Why Trailways Failed”
Stores Magazine “Restoring Focus”
AP Business Wire March, 2002 “Discounter is Right on Target”