Marketing Myopia Bombardier and Amtrak Summary

1. Marketing Myopia Bombardier and AmtrakSummary Fall 2007 EWMBA206

2. Amtrak and the Northeast corridor • The Situation • How important is Acela to Bombardier? • Technological breakthrough – Hi-speed train that runs on lousy tracks • Huge global market • Showcase account • Establish relationship with Amtrak for future sales • 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 • 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. Amtrak and the Northeast corridor • 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. Marketing MyopiaRelationship Management for a “Relationship Product” • 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 • 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 • 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.

5. Learning: Marketing Myopia • 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. • Avoiding Marketing Myopia is important for Bombardier as it is for P&G. • Marketing is costly but… • So is redesigning products, costly R&D and salvaging public relations disaster.

6. Removing Marketing Myopia Marketing Orientation Execution Toolkit • 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. • 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. What happened? • 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. • 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 • 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. • 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. Analysis Framework Company Analysis Marketing Myopia Customer Analysis Marketing Orientation Competitor Analysis Marketing Strategy Product Price Promotion Place Market