Over on the Ashpit John West and John Craft have made some useful comments about marketing economics for the C&TS, which led me to add some further analysis that may be of interest on this board (see below). This is not to overlook the many marketing ideas presented on this board, many of which I'm going to collate electronically and forward to the railroad (much thanks to all). Instead please consider the analysis (below) as further grist for the mill. If anything, the demonstrated need to rely on TV (which is effective for the C&TS as currently utilized) creates some real challenges when applied to markets like Denver or Dallas-Fort Worth. Tends to force one back to the more incremental ideas and events that have shown up on this board.
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Good to hear from John Craft again, especially when he brings us back to Economics 102 class (marginal revenue, marginal cost analysis). What's most helpful is that JAC brings abstract theory down to the real-world issues of marketing the C&TS. I'd like to extend his analysis with some further specifics.
As Craft points out, other than the marketing cost applicable to attracting each additional rider, there are very little other per-rider direct costs -- yes, there's the cost of the rider's meal at Osier, probably a bit more coal is used as well. But there are also costs that increase in a stepped fashion: eventually and occasionally a double-header will be required out of Chama or some additional clerical overtime incurred, but when averaged these are not large on a per-rider basis.
So as we know, the average ticket revenue per rider for the past three years was $69.55, $68.28, and $84.32 respectively, for an average revenue of roughly $74 per rider over the three years. For sake of argument lets assume that, besides the marketing costs of $10 per rider, the other incremental costs per rider average a conservative $14. To be prudent let's also reserve $10 toward future contingencies. That leaves $40 of net revenue per additional "new" rider that can be available to pay for the additional marketing necessary to attract an incremental increase in ridership. No wonder filling those otherwise empty seats is so important, and too often not given sufficient emphasis among "traditional" railroaders (JBWX excepted).
So, let's increase the marketing effort somewhere, but let's not bother spending more in the market that has been the primary concentration for C&TS marketing (you know, NM, So. Colo., drive-to, the folks already vacationing in the mountains, etc.). Instead lets go after the Denver market with the same intensity the C&TS uses in its "traditional" market. Or let's try the same thing with the Dallas-Fort Worth market.
For openers, comparable TV coverage in the Denver metro market would add about $250,000 more to the C&TS's current marketing budget. The DFW metro market would add another $450,000. Those prices are simply due to demographics -- lots more people in those markets; also the signals from those stations cover lots of other towns.
In Denver for $250,000 the railroad would simply be adding TV coverage to existing print and radio coverage. For DFW more than the $450,000 of TV advertising would probably be needed because the C&TS doesn't have other meaningful advertising there.
So to break-even at the $40 expected from each incremental rider, the C&TS would have to attract 6,250 net additional riders from Denver, and 11,250 (or more) from DFW. By comparison, last year the railroad got about 7,400 riders from Colorado and about 5,700 from Texas. Anyone out there willing to fund this experiment to see if enough additional customers will be willing to get in their cars in Denver or DFW and head for the C&TS this summer and, essentially, double the level of riders previously from those markets?
All this comes back to the lousy demographics of the C&TS. The railroad is simply too far from population centers (and its lack of a deep-water port for those cruise ships to visit doesn't help matters either ). Also, please keep in mind that even though the railroad is owned by the two states, all four Commissioners are experience businessmen and more than capable of evaluating the potential risk and rewards of expanding marketing.
One other thought, occasionally someone remembers the days when Bart was the operator and purportedly ran TV ads in Texas that brought in more riders. Details are hard to come by, but one thing was certain, Bart didn't pay his bills and his failure to maintain physical assets left the railroad in a shambles.
