1 Ganesh Iyer Marketing Myopia Bombardier and Amtrak Summary Fall 2007 EWMBA206

2 Ganesh Iyer Amtrak and the Northeast corridor l The Situation »How important is Acela to Bombardier? –Technological breakthrough – Hi-speed train that runs on lousy tracks –Huge global market l Showcase account –Establish relationship with Amtrak for future sales l If Bombardier “pulls this off”, they have a “Silver Bullet” »Nobody in the world has a high speed train that runs on lousy tracks. »The world is full of countries with lousy tracks that wants faster service l Strategic Implications »Make it work, even if the project is not a money maker »Amtrak may be a “bad” client but what choice does Bombardier have if it wants to sell high speed trains. »This as an “Investment in learning” about high speed trains. »Showcase account - publicity must be managed.

3 Ganesh Iyer Amtrak and the Northeast corridor l Bombardier’s handling of this Project has resulted in a corporate image that has been damaged »A disaster with the public and investors »Jeopardize not just high speed trains but the entire Amtrak business »The reference account is “turned off” »The technology is great and passengers like it…but Bombardier’s conflict resolution process is terrible.

4 Ganesh Iyer l Bombardier had to realize that they were marketing a relationship product not a technology. »Quality of an “Relationship Product” depends upon both seller and buyer = Relationship Management is critical l Lawsuits are the last resort. »Are you right? And can you prove it? Even then the cases may take years. »Consider the long term effects about publicly deriding the reputation of your customer l Bad press and complaints may have been inevitable but if Gunn and his team at Amtrak had a relationship with Bombardier »Bombardier could have avoided denigrating statements = crapper doors »Would exist a congenial approach to solving problems “there’s a problem and it must be due to Bombardier” vs. “how do we solve it” »This is critical for “Relationship Products” where the ultimate quality is based on both parties. Marketing Myopia Relationship Management for a “Relationship Product”

5 Ganesh Iyer Learning: Marketing Myopia l If your firm is like Bombardier (Market Leader, Technology Driven and Innovative) »Beware the curse of Marketing Myopia. »Pay attention to customers (even bad customers) and not just your product. l Avoiding Marketing Myopia is important for Bombardier as it is for P&G. l Marketing is costly but… »So is redesigning products, costly R&D and salvaging public relations disaster.

6 Ganesh Iyer Removing Marketing Myopia Marketing Orientation Execution Toolkit l Ask what is the basic customer need and not what is the great product we are selling? »A marketing orientation means understanding consumer needs and connecting with them. »It means not being mesmerized by your product. l Sincerity (Reputation) >> Product = Marketing Orientation. »You can recover from a bad product but almost never recover if the customer doubts your sincerity = reputation. »If “sincerity” is costly then avoid that business.

7 Ganesh Iyer What happened? l Lawsuit settled 2 years after the case, »Bombardier only got 42.4 million of the 70 million it was owed by Amtrak plus all the legal costs, »But Bombardier loses maintenance contract…prevents Bombardier from learning through its involvement in maintaining the trains. l By 2005…Amtrak and Acela are doing well and Bombardier is selling trains to Amtrak having re-established the relationship. »David Gunn over the past 3 years turns out to be Amtrak’s best president in years holding down costs l In November 2005 Amtrak’s board fires Gunn. »The Bush administration wants to privatize Amtrak starting with the profitable Northeast corridor and Gunn opposes it. l In October 2004, Bombardier secures the only high speed train order sold outside of northern Europe since 2002 »Sale of 20 high-speed trains to China (Bombardier’s part of the deal is $263).

8 Ganesh Iyer Analysis Framework Market Customer Analysis Marketing Orientation Competitor Analysis Company Analysis Marketing Myopia Marketing Strategy Product Price Promotion Place