In 1977 Southern Pacific Transportation Company hired Pete Vajta as Vice President Marketing to establish Marketing within the Traffic Department. As well, Bob King was shifted from Vice President Operations to VP Traffic. Pete had previous been in executive positions with Xerox and Crocker Bank. King had been in SP operations his entire career and had no backf=ground in the commercial part of the railway.

Previous to establishing the Marketing Department, SP had a traditional railroad commercial arrangement with Pricing handling rate making and sales handling customer relationships. SP had begun loosing customers and saw declines in revenue ton miles starting in the early 1970s. The interstate highways system was near completion, fast economic growth in the western states slowed, and SP began feeling significant declines in profitability. Top management brought in McKinnsey & Co., management consultants often held in high regard, to determine what needed to be done. Among their recommendations was the addition of a marketing function. Marketing is the attempt to align the services provided with the service customers need while maximizing profitability. SP historically used pricing as its main lever to attract business.

All the while the heavy burden of ICC and other government regulations limited some of the efforts by US railroads to compete by requiring complex and very slow rate making, limiting competition between railroads and stifling innovation. In SP’s case, the problems went far beyond simply bolting on a new marketing program but improving the ability of the railroad to innovate and develop new programs attractive to a wider variety of customers was hoped to be part of the “solution”.

If you are interested in SP’s commercial efforts from 1977 onward, this forum provides an opportunity for you to add your comments and/or questions.

Gene Harmon
SP Market Manager

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