Friday, October 07

Marketing madness on the railways


In a previous blogpost, I mentioned how the state of Czech Railways affects the business performance of the country. Since then we have seen the arrival of Mr Jancura's RegioJet and the response from Czech Railways. The result is madness, and it is going to get more mad.

RegioJet has started running three trains a day between Prague and Ostrava. Czech Railways already operates a train to Ostrava every hour. However the speed and quality of the trains varies greatly, because Czech Railways doesn't have enough high quality trains, specifically Pendolinos. RegioJet doesn't offer quicker journey times, but it offers more comfortable accommodation for a lower price. Competition; that's good, right?

Well not really. Because Czech Railways already had stiff competition on the Prague-Ostrava route. It is called a motor car. Most drivers believe that their car will get them to Ostrava quicker, and despite all the roadworks and accidents on the D1, it will probably be quicker, point-to-point. And of course the business driver in his company Audi A6 believes it is part of his heroic job description to drive himself in his prestigious car as fast as possible to his meetings.

In Western Europe the railways - and the transport ministries - have long understood that if people are to be attracted from their cars to the trains for inter-city travel, the train has to be significantly faster than the car, so that the overall journey (e.g from office in Prague to home in Ostrava) is about the same time but without the stress of the car journey. The trains also have to run frequently, at least once an hour, so that a journey is possible when the customer wants to travel.

In the Czech Republic this means a Pendolino needs to run at least every hour from Prague to Ostrava, to Brno and Bratislava or Vienna, to Berlin; and at its top speed of 230km/h for long parts of the route, so that Ostrava is 2.5 hours and Brno 1.5 hours journey time. Otherwise, most people will use their cars. This is not going to happen because Czech Railways only has seven Pendolinos, and they are not allowed to travel faster than 160km/h.

Instead the transport ministry has encouraged bogus competition with false choices for the customer. Regiojet increases the number of seats available on the route, yet most of Czech Railways trains were half empty already. And next year apparently a third company will be allowed onto the same route, increasing the number of seats even more. But these seats will only be filled if people are encouraged to switch from their cars. They won't, because the trains are still too slow. Now Czech Railways has responded to this "competition" firstly by lowering its prices, and then by moving the one Pendolino that ran to Bratislava off that route to serve Ostrava instead. So what about the customers to Brno and Bratislava? They no longer have a Pendolino, and they do not get the low prices that customers to Ostrava enjoy.

What is the answer? It comes in two parts. Firstly the government needs a strategic plan for the railways which treats it as a vital transport "artery" keeping the "body" of the Czech Republic moving effectively. So it needs a plan to radically improve all inter-city routes. Will privatisation bring this improvement? No, because most of the improvement is needed to the infrastructure, not just the trains. Secondly the government needs to ensure that with the entry of private companies, a regulatory body decides how to award private licences in a way which encourages more people to travel on the railways overall. Left to their own choice, private companies will choose the Prague - Ostrava route because it appears to be the most lucrative. But such routes are only lucrative if they win all the passengers from the existing provider, because they cannot provide services which attract more new passengers.

Marketing requires that you start with what your customer wants and needs, and considers how that can be provided better than the competition provides it, in a way that optimises long term profit. Message to Mr Zaluda and Mr Jancura. Stop your childish games. Your competition is not each other. Your competition is stuck in a traffic jam on the D1.


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