Price vs. Value

 

You don’t have to have been with us long to know we believe that nothing needs to be a commodity if you look at what the customer is buying instead of what you are selling. (If you want to be reminded of this you can read our white paper on Customer Focused Marketing or for a more complete discussion you can get a copy of Mitch Goozé’s book, The Secret To Selling More.)

Readers of our ezine will remember that we often take the airline industry to task for their lack of customer focus. A while back we commented on Jet Blue’s first ever quarterly loss and how they felt that a $5 increase in fares (at that time) would have allowed them to break-even or make a profit. We were stunned they felt they could not command a $5 price premium.

Now we have even more evidence about the airline industry that confounds us. (Since we fly so much, we are probably over-obsessed with airlines, but everyone seems to be able to relate, so we think they are a good example to use.)

Consumer Reports, in their July 2007 issue reported the relative reader scores of the top 18 airlines in the U.S. The highest ranked airline (JetBlue) scored an 87. The lowest ranked airline (U.S. Airways and America West) scored 62. On a 100 point scale this indicates a very significant range of scoring that we would think should translate into an ability to charge higher prices, on average.

However, we did a bit more digging and may have discovered at least one thing that mitigates the ability to charge differently by airline. According to their (Consumer Reports) scoring (based on a 100 point scale), scores above 80 (JetBlue, Midwest and Southwest) indicated “very satisfied” while scores above 60 were fairly well satisfied. Scores around 40 (of which there were none) would indicate dissatisfied.

So, on average the 31,455 people who responded were all at least somewhat satisfied with their airline experiences. If people are on average, somewhat satisfied, then maybe very satisfied is not worth spending more money. Or maybe it is and the better airlines are afraid to test it?

Since the airlines test fare changes all the time, that can’t be the case. Though we have never seen JetBlue, Frontier, or Midwest lead a price increase. Maybe the service leaders need to find out if they no longer have to be price leaders to keep their seats full. If they can’t charge more, then they need to consider whether the “value added” customer service they are providing is really all that valuable.

Being First Is Not A Driver of Success

Charles W. Lindberg died a few days ago at the age of 86. Since he is not the Charles Lindbergh who was credited with being the first person to fly successfully across the Atlantic Ocean, you have probably never heard of him, and there-in lies the lesson.  

Many marketers believe that being first to market is important (maybe even critical) to success. During the dot-com boom of the 1990s, that was the mantra by which hundreds of millions of dollars were raised. Al Ries and Jack Trout in their book, The 22 Immutable Laws of Marketing, cite their Rule #1, “It is better to be first than it is to be better.” The book cites several top-of-mind examples of #1 versus #2 (Charles Lindbergh being one of those examples, with their question, “Do you know who #2 was?” as the proof that being first is more important than being right.) 

 

 

While I have always felt these two gentlemen (ok, I don’t actually know them so they may not be gentlemen, but I have no reason to believe they are not) are very smart folks, I have had a problem with their Rule #x since I first read it in 1994. Remembering that “Pioneers end up face down in the mud with arrows in their back,” I have always been concerned about the risk of trying to be first. Not that this risk is unwarranted, just that it is not a fool-proof method for market leadership. Look at Tivo, Betamax, Osborne Computer, Altair, Univac, and others. I have said for years that while Lindbergh may have been first to land safely on the other side of the Atlantic, I doubt he was the first to try. 

Anyway, what does all this have to do with Charles W. Lindberg? Mr. Lindberg raised the first U.S. flag on Iwo Jima (now renamed Iwo To). Why have you never heard of him? Because the famous photograph of the U.S. flag raising on Iwo Jima, taken by Joe Rosenthal and memorialized as the U.S. Marine Corps memorial in Washington, DC is a picture of the 2^nd U.S. flag raising on Iwo Jima. How did that happen? Hard to say for sure. The second flag raising picture was a much more dramatic picture than the one taken by Sgt. Lou Lowery of the first flag raising. Maybe that’s what caused AP to use that second picture.  

What’s the lesson? Being first is not sufficient. You have to be first and people have to know about it. You have to be able to make some noise even if you are, as Jimmy Buffet says, Quietly Making Noise. If a tree falls in the forest and nobody is there to see it or hear it, no one will know about it. If you are going to be first, make sure you get known, too.