How do the model train companies choose what to build?

I think they base their decision based off of what will get everyone's attention. When the ES44AC Demonstrater was in a prototype phase, it was cool because the colors, so that is probably why the GE EVO Isa poular Seller.

Some choose based on what they like - SMR, for instance, or Bultmann.  Some do a bit of market research. - Sunset or 3Rd Rail.  Some just copy popular designs - see the NYC Hudson.

They ask the O gauge Oricle. Or a dartboard. Or a stack of  prototype magazines and the Fickle Finger of Fate. Or a magic Eightball. Or Consult Cowen with a Oueji board. Or look at successes in other scales. Or.......

I'm sure each manufacturer has their own methodology that works for them.

Most manufacturers do take into consideration customer feedback they gather from emails and social media, and they also gather info from their dealer networks.  They also look at their tooling inventories and what products haven't been run in a while (coupled with how well it sold last time).

There are lots of factors they consider.  Now when it comes to new tooling, I'd tink that is where most of the gambling comes in.

This topic might make for an interesting article for the magazine...

Andy

This poses yet another question.  How do the catalogs feature items that DON'T get manufactured?  Pre-order, wait, wait, anticipate, wait some more, and then find that what you desire will not actually be made.  What's up with that?

Well, Lionel just says "Lets make some Berkshires"

If you haven't noticed, the importers are moving larger chunks of their business toward a BTO model.  So they've effectively moved the risk to the supply chain component holding the inventory -- in this case, dealers/distributors, especially those who order extra product beyond firm customer pre-orders.  Atlas-O and 3rd Rail have been operating like that for years, as has MTH for some of its product line.  Lionel just officially entered the "BTO" party a couple of catalogs ago.

Bottom line now more than ever... If there are insufficient pre-orders for a given product or a specific roadname, those items never see the light of day.  Expect to see the list of "cancelled items" grow with each new catalog.

David

Based on my experiences in business, probably, the boss asks his grandson what he would like for Xmas or birthday.

All these posts wondering or hoping what's in the new catalogs got me thinking, 

How do they choose what new tooling to build or what road names to put out on existing tooled models?

Do any of us truly know?

No, none of us outside the industry itself truly know. Most of the catalog wish list threads contain a lot more dreaming than reality. Lionel has been TOY trains for over 95 years. Now we have the recent trend of scale models from a toy train manufacturer, which is great. But there's no way this SMALL market is going to financially justify the variety that has been long available in HO - where there is market justification.

And yet all the manufacturers have given us plenty of clues. At the TCA presentation a few years ago when Williams introduced the GP30, Jack Lynch explained the logic for that locomotive choice was that many railroads owned this model, so it could be produced in a variety of road names.

In 2005, Joe Hayter explained that at that time, tooling for a new piece of rolling stock can be over $150,000.00 and take nearly 5 years to recoup that investment cost. All the manufacturers have said the same exact thing, yet many chose not to believe it. Atlas has said it takes several total sell out runs of a new product just to break even, even before any profit it made. Even the HO train makers have said the same things, it's just that their market is larger, so there is a little more security in recouping the tooling investment.

When Lionel finished the K-Line KCC SD70Mac, they made just over 3,000 units, which Lionel said at the time was an extremely large production run for a scale sized product. On the other hand, 3,000 piece is a very small run for a traditionally sized item or a starter train set.

Even after a decade of emphasis on newly tooled scale products, indications are that, while essential for the companies, the scale market is STILL an extremely small part of the small O gauge market.

There was a time not so long ago, where a porthole caboose produced in a variety of roads that may never have owned own, wouldn't bother anyone. And if it did bother you, you went to to HO.

One good afternoon of looking over train catalogs from past decades up to now will show anyone just how much new product from new tooling HAS been made in just the past decade alone. And I still marvel that, despite how much more is available in HO, that the MR and RMC magazines have always had a variety of kitbashing articles about how to make one model into another model type. Yet somehow, we 3-railers expect the few 3-rail train makers to do it all for us.

So what it really boils down to is money. Can any train maker hope to make a profit off the huge investment to produce any particular train item. And before any jumps in with the usual "bean counters" comments, remember that every single train consumer is also a bean counter. Many who might not consider themselves bean counters, are very happy to ask "who sells this product at the lowest price." 

It might sound sarcastic, but I'm not being sarcastic at all... anyone who isn't happy with the tremendous variety already available in 3-rail is completely free to start their own train company and show Lionel, MTH, Atlas and the few others, just how much more you understand the 3-rail train market than they do.

In my opinion, the ideas come from a variety of sources. Train shows, particularly the York Meet, allow the sales representatives to interface with their customers. This is a wonderful place to get ideas as to what their customers want in the future. Personally, I lobbied at the York Meet for a particular line of passenger cars to be made and they were eventually produced.

Then their are the various train Forums that are read with regularity by the manufacturers. They sure get some good idea from this resource.

Finally, they have their in-house development team that are charged with the responsibility to come up with new an innovative products. This is a very competitive market, so I am sure they are always looking for that edge. Think back at the ATSF 3000 and the introduction of the Vision Line. I am not sure that any of us came up with this engine.

It is all about market share, so the better idea, the better the sales.

Profit & risk rule the decision process.

When the market is down, make more of the same to eliminate the non-recurring costs such as methodology and tooling.

When the market is strong, invest in new tooling and technologies. Listen more to consumers preferences.

Any new tooling is a gamble. But I would think the manufacturers would be looking at ways to get multi uses out of the tooling first. For instance a diesel mold. Using inserts to change the diesel or for that matter maybe freight cars too. In a round about way getting what individuals want maybe the BTO is the way to go. The BTO in my way of thinking would be a better barometer to get a more accurate idea of what operators want...........Paul 

Interesting read, and yes, this would make a great magazine article as Andy mentioned above.

Just so that I will not lose "track" of the discussion, can someone please let me know what the acronym BTO stands for?

On thing BTO does well is it separates the serious buyers from the "looky-loo's."

Rusty

BUILD TO ORDER

A BIG factor is...

Will it appeal to the NYC, Pennsy, Santa Fe and UP modelers?

It they can get a  on 2 of the 4 then they all sit at the table and      

I would think that normally a big dose of common sense is a place to start.  As Jim said, I think a major factor is "does it appeal to the main stream modeler?"  Or is it unique enough to create strong demand?  Manufacturers also like to go with trends of proven winners like the wood-sided private owner reefers.

I can attest to how hard it is to get them to produce a favorite car such as my Spencer Packing Co. reefer that I want made.  I wish I had better insight into how they make their product decisions.  What seems like a 'no-brainer" to me, apparently does not make "business sense" to them.  It would also be helpful to know how many cars they have to sell in order for it to be a profitable run?

Art

Thanks!

That's the number that Atlas-O tossed out at one of their behind-the-booth York seminars several years ago.  Oddly enough it's taken them the better part of 5+ years and then some to deliver the entire CZ train.  So I can't help but wonder where they are in terms of ROI compared to when they first tooled up for the CZ.  

Gotta give the folks at Atlas-O lots of credit for sticking with their initial plan to deliver all car variations of the CZ despite several unforeseen events that nobody could have predicted. 

David

Its been a while, I think the TM Book on the first ten years of the Modern era, "Lionel A Collector's Guide and History to Lionel Trains Volume IV: 1970 - 1980", had a section that discusses how they decided what to make at that time.

It would be interesting to read PaperTRW's thoughts on the matter.

Never a good idea to generalize with too broad a brush.  I know when I use the term "bean counter", it's typically in reference to management that's so focused on numbers they don't know a Y6b from a bay window caboose.    That's not the kind of guy I want calling shots at any of the importing companies.  Few folks have the ability to wear several hats well.  Mike Wolf is one of them who do it well.  Scott Mann is another.

As for folks looking to get product at the lowest possible price, I've often asked them how they'd feel if their boss asked them, "What's the least I need to pay you for you to work here?".  Not a cool way to go about purchasing product.

So whether you like it or not... "bean counting" is often a somewhat tongue-in-cheek reference to folks looking to cut-corners while delivering less value to the consumer.  And in that regard, it's a well-deserved term that needs to be taken in stride.  Sorry if it offends some folks.

David

It appears that they look and see what everyone else has done - then they make more of the same thing.

Absolutely; would love to see his response.

I think that some of you give the "Big Shots" a lot more credit for logical and intelligent thinking than some deserve.  What is interesting is to look at the Lionel cast metal engine shells and see how they used the one mold. Plus in those days there were no computer controlled machine tools but lots of excellent tool and die makers. Tooling and set up, inventory, labor,  raw material costs, stir it all up and roll the dice.

Yeah, sure seems like it sometimes, doesn't it?

I think that both MTH and Lionel have very secretive processes to determine what will sell in mass quantities. Of course the "build to order" system certainly has helped processing consumer's desires.

Now, Scott Mann of Sunset/3rd Rail/Golden Gate Depot has the system down pat. With the information and requests obtained at shows and eMails, a model will be announced, then if enough reservations/orders flow in, the model will be entered into the design & construction process. Not enough responses, then move on to a different model request.

Seldom mentioned above, but they actually listen to us - the customers. Not out of any sense of duty, but when the guys who buy their things ask for certain things, only a truly dim-bulb manager - and most people don't get to be in charge by being dim-bulbs - would not simply listen. Don't you think that they read this Forum - the pertinent and rational parts?

Now, of course our expressed wants must be tempered by, first of all, common sense and rationality; also by available tooling, available factory space and available capital for investment. We all know this.

I've seen guys here "wonder" if L or M or A...would like to hear what we want? Why on earth would they not? Our checkbook votes are the most valid "market research" one could have.

It's a lot of things - but speak up; it can never hurt (unless you are rude - even "businessmen" don't appreciate being called %^$#@* idiots; this will not help get your North Possum Tail Limited built, if it comes down to one or the other), and it has helped.

3rd Rail has it a bit easier, as their customer base is not completely the same as that of "The Big Three" (or however many there are left), and they really do just build 50 of something - and the price shows it. 

So, it's a lot of things, but e-mail and post about it.

Like:

I want a NC&StL 4-8-4, Yellowjacket or Stripe version. Checkbook idling and ready.

Pretty basic I would think, can we sell enough product to make a profit.  Lionel and MTH both have to generate enough profit to retain the favor of their shareholders.  Simply put, could the shareholders make more, easier, stable earnings with their money invested some other place. 

If new tooling or NRE is involved on a product, then the ROI is gets more complicated.  Will this new product create new demand for existing products or create a window for a new product line.  An example would be the smoking caboose.  Only used once in postwar to my knowledge.  But now the smoking concept has exploded into all types of cabooses, diesels, diners, buildings on fire, rolling stock on fire, wheels and axles on fire, etc.  So what alternate uses or demands can a new technology or piece of tooling be used to generate sales.  Also how many roadnames can it be used on.  GG-1's are seldom marketed in Santa Fe or Union Pacific roadnames.   Same thing with a Shay/Logging type locomotive.  Not many roadnames to market in and probably a more limited hobby appeal.

Weathering?  My lord, we used to look for box rub marks on the sides of brand new  boxcars and now you are going to paint "dirt" on a really nice, clean paint job?  Lionel must think there is some demand for this feature on a "new" product.  I have never seen that offered as a feature until recently.  Just marketing.

Having a loud vocal market doesn't necessarily translate into sales.  Just because your local museum has a 6789 engine doesn't obligate Lionel or MTH to produce a scale replica of that engine.  However, remaking a well known and very popular postwar N&W 611 engine can be done more than once and very cheap with existing tooling.  To my knowledge they have all sold fairly well.  Savvy marketing and smart licensing trumps emotion almost every time and can translate into sales.

How many O Gauge RR forum members were clamoring for a Thomas the Tank Engine series or the Polar Express trains?  Last time I looked the Polar Express was up to 10 cars, as well as bridges, stations, dioramas, animal figures, people figures and who knows what's next.  Kind of like Star Wars, George Lucas gave Paramount all the profits on the first movie in exchange for the product licensing and sequel movie rights.  Its what follows afterwards that can be more important.

Anything with Disney, Coca Cola or Beer also seems to do well.  But I have never seen a Coca Cola or Disney unit on any real railroad track, but they do seem to sell and be collected.  And it is also very possible to over extend or wear out a product line or product feature.

The current state or projected future state of the economy is another large factor.  Toy trains are tied to disposable, entertainment income.  In a down economy, toy trains suffer due to household cost cutting.  So the forecast has to consider that aspect.  Who has money, how much do they have, and what will they buy?  Should they target older adults nearing retirement or young families with small kids?  Also will our competition beat us to the market place with a more effective alternative and kill our market?

Above all remember, Lionel has had several owners for a good reason. 

Trust me, I have had more than my share of "dim bulb" managers.

Actually, guys, the main manufacturers have a big dartboard with sections marked "K4, Hudson, Santa Fe Warbonnet, etc and a handfull of darts to use to decide what to make next.   

I recall a cartoon from 1950 in MR.  You see two men, one seated behind a desk, wearing a suit, and the other wearing machinists garb.  On the wall behind them is a sign that read "ABC Model Trains."  The man at the desk says to the other "Ed, that 4-10-2 we've been announcing for the past three years seems very popular with the modelers.  Perhaps it's time to make it."

Stuart

I worked for a very LARGE corporation, the dimmer the bulb the higher they went. I finally quit after 20 years, couldn't take it any longer. Went to work for another ex-employee and friend of mine that went out on his own, he couldn't take it either. They had a much better operation and did a LOT more business.

Lionel, like any other business will make the models that it knows it will sell. The company has to make money, anything that it knows will be less popular, they will make less of...

I recall a thread on the Atlas forum started by the late Jim Weaver involving their first locomotive, the SW8/SW9. It was a guessing game of sorts. Basically, the decision was based on eras covered -- transition to the present, roads that used it -- a lot, flexibility -- yard and local freight, variants -- SW900. Very successful model.

From a business standpoint, particularly with the rampant spread of three-rail rivet counting (admit it, guys; you'll feel better), there are factors similar to those Atlas used with the SW. How they can maximize the use of the tooling and production investment with something that will sell. The level of detail being demanded raises production and tooling costs, so that has to be amortized across multiple unit sales. In the past, you could get away with non-prototypical equipment in the 3-rail market, but not so much any more (heritage units aside). So the new offerings seem to be much more selective -- perennial favorites (F-units, E-units, certain steam, popular diesels). I haven't seen a lot of one-offs (road unique) unless there's some historical significance (S2 Turbine, DD40Ax, AGEIR box cab, Cab-forwards, Big Boys, Challengers, etc.). I'm still hoping for that CF7, but while it's historically significant in its creation, Santa Fe was the only road that had them (ironically, they're all over the place in branch line/industrial service).

In addition, Scott never asks for a nickel deposit.