Lionel H0 Comments

Corporations donít commit a lot of money to a project if they donít think that it will succeed.  Lionel spent a lot of money on its H0-Scale line of trains with the intention of making more money.  In some ways, they succeeded, yet knowing that the H0 line would be alive for only 10 years also points to the fact that Lionel had run out of gas for the moment.  They would try again in the 1970ís for several years, and again in the late 1900ís, but it was never meant to be.

Entering the H0 market in 1957, Lionel went to Rivarossi of Italy for help.  There were more than a few common threads with this relationship, but it was short lived. So, too, Lionel used Athearn for a single year, 1958, but from the model railroad market, why buy the Athearn-built Lionel H0 when you could just buy Athearn? Lionel finally got its footing in 1959.  They wanted to do well in the market.  This advertisement showed the design features of Lionel H0 to the serious model railroaders:

As pointed out, here, the Lionel mechanism was relatively similar to many other units that were in the market from other manufacturers, but, in the end, it came to naught.

On one hand, Lionel was serious about pursuing the H0 market, but on the other hand, it could never quite get away from its toy train image in the model railroad market. There were other odd missteps which were the result of Lionelís financial state.  In looking at the range of sets which were offered from 1957 to 1966, a few things become obvious.

  • In some cases, a locomotive was manufactured without an accompanying caboose.  To the toy train buyer, this wasnít really a concern, but for the serious model railroader, it was a negative.  This is an example of Lionelís fragile financial status, but the serious modeler would see train set such as 1963ís 14153, which had a Southern Pacific steam locomotive and a New Haven caboose.  For someone playing with trains, this was irrelevant, but to the serious modeler, it was a mistake.
  • Toward the end of H0 production, there were no new sets. After 1964, no new train sets were issued. This clearly indicated that Lionel was exiting the H0 train sector. For that matter, it seemed that Lionel was exiting business overall.  Of course, that was not to be, but it was a sad time for a once great company.
  • The $20.00 train set. Manufacturers establish ďprice pointsĒ for their products, and Lionel was no different. These various price levels are usually maintained for several years so that the buying public has a good idea of what is available for their budget.  Which is to say, there are expensive train sets and inexpensive train sets. Ultimately, there is a point which sets the absolute minimum. For Lionel H0, it was the $20.00 train set. For the span of ten years of Lionel H0, there usually was a $20.00 train set.  And for that $20.00, you got a locomotive, three cars, circle of track and a small power pack.  In later years, the $20.00 price point briefly eroded to $18.00, with a stripped down version of the same set available at $12.00.
  • The sweet spots. On another page is a table which shows the various sets at the various price points.  As with so much else, things follow the bell shaped curve. Lionelís favorite spot for train sets was $40.00 (1960ís prices), with 23 sets. Below that, the $25.00, $30.00 and $50.00 points were popular (typically 11 sets). The highest priced Lionel H0 sets were at $60.00, but there were only five of them. In 1964, Lionel marketed two very cheap sets, an experiment that was not repeated. Over the years, Lionel would play with the set contents, but the price points were general the same each year until the end, when the product line began dwindling away.
  • Market research. Big companies spend big money on market research, and sometimes it makes sense.  In other cases, companies see the research and make bad decisions anyway.  Consider Lionelís decision to make a certain train set in the 1980ís.  They had left the H0 market to others by 1977 and were concentrating on their core business.  Market research pointed out that their potential customers wanted a $100.00 train set. This at a time when the typical train set in 0-Gauge was selling for about $150.00 and up.  So, after a lot of discussion the $100.00 Train Set was commissioned and manufactured. To get the cost structure right, certain concessions were made along the way.  The $100.00 Train Set did have Lionel track, the low end 0-27 track. It did have a locomotive and cars.  It did have a power pack. However, to make the set profitable, the locomotive was driven with a cheaper DC motor rather than the more expensive AC motor used in all other Lionel locomotives. Likewise, the power pack was a cheap DC power pack rather than the more expensive AC power pack.  But the real kicker is that whoever bought the $100.00 set could go no further. If they tried to run their locomotive on a conventional Lionel layout, the AC current would burn this little locomotive up.  In short, if the buyer of the $100.00 set wanted to get into real 0-Gauge model railroad operation, they had to start over. ďBut market research told us......Ē
  • It ainít necessarily so. It should be noted that just because an item appears in a train catalog, this does not necessarily mean that the item is available.  Or that the item was available in the color shown in the catalogue. A lot of things happen between the time a catalog illustration is commissioned to an artist and when a customer takes a look with the intention of buying. In addition to communication errors, it also happens that a decision is made after the catalog is at the printer. In short, you may see a certain car in the catalog in a certain color, but that doesnít necessarily mean that it exists in the real world.