AMTRAK REALIGNS FOR FUTURE;REGIONAL CAMPAIGNS PICKING UP STEAM, AS NATIONAL ADS SLOW

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WASHINGTON-Amtrak, faced with a $200 million deficit, has cut service by 25% and reorganized its marketing operation.

The reorganization includes a greater emphasis on hard-sell regional campaigns and less on national image advertising.

Amtrak officials say the service cuts will help build a more efficient, reliable, consumer-oriented passenger rail service because it will be able to concentrate more intensely on the remaining routes.

Despite the service cutback, "the only way Amtrak is ultimately going to make a profit is to aggressively sell its seats. And the only way to fill those seats and trains is to advertise," said Jeffrey Zieler, group account manager at DDB Needham Worldwide, New York, which has handled Amtrak's national campaign.

Amtrak since last October has been discussing a restructuring of its marketing operation; the shortfall in funds accelerated those changes. The estimated $25 million marketing budget for fiscal '95 wasn't trimmed in the reorganization.

Most advertising will be redirected from Amtrak headquarters here to "strategic business units" in three main travel zones-the Northeast Corridor, with an office in Philadelphia; Intercity Rail Services, based in Chicago; and Amtrak West, based in the San Francisco Bay area. Those offices will receive 60% to 70% of the marketing budget. National advertising gets the rest.

More specifically, the Northeast Corridor, which runs from Virginia to Vermont, and Intercity, which covers the Midwest, will each get 45% of the regional ad budget. The remaining 10% goes to the West Coast.

Rick Donnelly, director of marketing and sales for the Northeast Corridor, believes he will be able to get as much as $10 million.

Current plans are for local offices of DDB Needham to handle the regional accounts, though the marketing directors wouldn't be prevented from picking other agencies.

"The goal of the reorganization [into strategic business units] was to improve the service, to get closer to the people running the product," said Ira Silverman, director of national marketing.

The three marketing directors (Steve Scott is VP-marketing in the Midwest and the West Coast slot is still vacant) will use regional ads to target the needs and travel habits of local passengers, business commuters, pleasure riders and tourist groups.

For example, ads for the Vermonter sell the ease and comfort of train travel with the excitement of skiing and biking in the Northeast mountain ranges.

Amtrak and promotion agency Einson Freeman, Paramus, N.J., also offer package deals that give Amtrak ticketholders discounts on bed & breakfast and hotel stays.

Ads will run not only in national newspapers but in local publications and broadcast stations, at hotels and ski resorts, and on outdoor boards along trains' stopping points. Ads for commuter lines will appear on bus shelters, transit boards and building walls.

Mr. Silverman said the Washington office will continue to spearhead national campaigns, though the "There's something about a train that's magic" theme has been scrapped.

"The parent organization's responsibility is for national marketing programs that cut across all of the strategic business units' lines so that the consumer may still see one Amtrak," he said. "The goal of the national campaign is to prevent Amtrak from appearing like a hodgepodge organization."

DDB Needham's Ms. Zieler added that future national campaigns will sell "the inherent benefits of train travel and the idea that the train is a forward-thinking mode of transportation that is needed in the next century."

Said William C. Rolle Jr., president-chief operating officer of marketing consultancy Jaffe Associates: "Amtrak has found a better way to reach the consumer by going after the retail or price market and by being more factual than image-building."

Comparing Amtrak's tactics with similar strategies used by USAir five years ago, Mr. Rolle said the decentralization of Amtrak's marketing forces has both strong merits and potentially debilitating drawbacks.

He explained that it's more logical, sensible and efficient for Amtrak to "put advertising and creative control where the action happens." But the division of power could also splinter Amtrak's central theme and cohesive nature.

Mr. Rolle warned: "Amtrak must be careful that its different messages are in sync and not in conflict with each other and its national campaign."

So far, Amtrak's cuts appear to be paying off. As of March 31, Amtrak was $17 million ahead of its board's plan to improve the bottom line by $173 million for the fiscal year, and revenue passengers per mile rose 4% from a year earlier.

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