Marketing Done Well

Ok, another airline example, but this is a good marketing example. It has to do with Southwest Airlines. If you do not fly them often or at all you probably think they still have the “cattle call” boarding process that rewards people who arrive at the airport hours early with the best seats on the plane. Actually it hasn’t been that way since they began to allow Internet boarding passes. Today, you can get your boarding pass 24 hours in advance, and first come first served in terms of boarding. With two exceptions and an additional benefit. (I’ll get to the cool marketing idea soon, stay with me.)

Boarding on Southwest is by boarding number, the lower the number, the earlier you board. And, now they have you line up by exact number so there is no need to stand in line at all until boarding starts. They actually now have the easiest boarding process in the industry. And it’s still fast. (But I digress.)

So, how else can you get a low number: Two ways. One is to fly them a lot. If you do, they reward you with a low number (usually below A-30) no matter when you get your boarding pass. The second way is to pay a Business Select fare. Usually about $10 more than full-fare and potentially a lot more than the lowest fare. The reward is boarding number usually between A1-A15. Again, no matter when you get your boarding pass.

So what’s the cool marketing idea. Well it is actually the whole way in which you board and get your low number, but they have added a really good promotional idea recently. Now, when they announce boarding they call the “Business Select customers A1-Ax.” That way everyone knows that if you buy a Business Select fare you can be an early boarder. Free promotion every time they board a flight. I like it a lot.

Mitch

Which comes first the chicken or the egg?

Back to two of our favorite subjects: customer service and airlines.

The AP reported on May 20th that once again the U.S. Airline industry had received “dismal” grades from their customers. But then who is surprised? I doubt even the airlines are surprised. Once again Southwest came out on top (and they make money), while U.S. Scareways(excuse me US Airways) came in last. Their supposed target merger partner, United Airlines, came in next to last, so that merger is unlikely to improve anything. Likewise with Delta and Northwest which were the next two on the bottom of the list.

Southwest’s score improved to 79 from 76 and the next airlines on the list were American and Continental at 62. Quite a gap from #1 to #2.

The director of the research center at the University of Michigan that conducts this study, Claes Fornell, suggested that consumers were not necessarily blameless in this cycle as they continue to buy the lowest airfare possible. He believes this has created a cycle of cost cutting and a business model that “leaves no one happy.”

I suggest another hypothesis: People buy on price becuase the “product” being provided is undifferentiated, so why not. In other words, the consumer’s price focus is a result of the universally dismal level of “product” provided, so the only thing left to consider is price. If all providers “suck” why pay more?

So which came first, the price focus or the universally dismal service? I’m sure the airline execs would suggest that the price focus came first, it justifies their actions. Even if that is true, why is it that Southwest can make a profit and provide a better than average “product?” Because they have “cost advantages” goes the traditional thinking. What cost advantages can they have that have not been available to the other airlines? Southwest is not a start-up airline. I submit their cost advantages come from knowing where to cut costs that don’t add value for the traveler. The other airlines appear to have no clue what is of value to the customer.

Several years ago I wrote an article about TED (The United Airlines low-cost competitor) predicting it would fail because United had no idea what aspects of Southwest to emulate. It failed for the reasons I predicted.

So what can the airlines do? I suggest they read Moments of Truth. This decades old book about how Jan Carlzon turned around SAS by focusing on what was valuable to the customer is dead on and industry related, so it won’t be a stretch to apply what he talks about.

There is no question in my mind that if an airline understood what was valuable to its target market, it could provide it profitably. Southwest figured out how to do it for their niche. They can’t be the only smart people in the airline business … or maybe they are.

Mitch

Is It Safe To Fly?

Since I fly a lot, people have asked me a bunch of questions about the current American Airlines maintenance debacle. Questions have ranged from “do you feel safe flying” to “how can they do this to their customers.” As you might expect, I have lots of thoughts on these topics.

 

First, yes I do feel safe flying. The airline industry has an impeccable and improving safety record. In addition, pilots have a self-preservation motive to make sure the planes they fly on are safe too.

 

However, the customer issue is a whole different thing. American Airlines instituted a policy last year that no longer allows customers to talk to them about ANYTHING that is not current flight related. If you have a question, feedback, complaint or issue you have to email it to them. And their email response is no where close to prompt in my experience.

 

However this policy has probably done one thing for them. They have found an effective way to reduce customer complaints.

 

Regarding the current debacle, who knows. I have found that most airlines operate as if passengers are an inconvenience to the efficient movement of airplanes. And, since most of the airlines benchmark their performance against each other, the bar is not very high.

 

The better airlines, like Southwest (who was also caught cutting maintenance corners) are usually full and a full airplane is less comfortable than a ½-full airplane. So, flying on the other airlines can have its advantages when they are not full.

 

However, now that the “majors’ (not that Southwest is not a major, but Jet Blue certainly isn’t) are reducing flights, their flights are full too, so their benefit over Southwest has been reduced. And with Southwest if you buy a business fare or if you fly them a lot, you can guarantee yourself an aisle or window as you prefer no matter when you book.

 

Anyway, as long as the employees of the airlines hate their management, and airline management operates as if customers don’t matter, nothing is going to change no matter what the lawmakers try to do. Safety is not really an issue in my opinion, and you can’t legislate good service. The market has to demand good service, and since the airlines appear to have banded together to remove that it makes it tough for the traveler in normal times, much less with the current debacle.

 

 Mitch

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.

Why is US Airways the worst US Airline?

First, let’s get clear on the ranking. Consumer Reports reported in their June issue that a survey of their readers (over 30,000 respondents) ranked US Airways as the worst US Airline. Now, the question is how do they earn that distinction? 

Well, I don’t know for sure because in my experience as a VERY frequent flyer, most of the airlines treat their non-frequent flyers pretty poorly. My comment is that airlines (for the most part) operate as if passengers were an inconvenience to the efficient movement of airplanes.  

Some are different. Southwest appears to treat everyone the same virtually all the time. They rank pretty high in customer satisfaction and if what they do works for you, they are a good, consistent choice. Jet Blue, ranked #1 by Consumer Reports and JD Powers, appears to have a staff with a different attitude. I don’t fly them enough to comment, but I believe I can tell you a bit about why US Airways is ranked dead last. Their employees don’t appear to care. Don’t know why, probably because of how they are staffed and managed, but the result is the same. 

For the first time in 20 years I missed a client engagement because I could not work around the airlines poor execution. To be fair, the fundamental problem was created by United Airlines, but the true customer service failure was at US Airways. I’ll tell you a shortened version of the story so you aren’t reading a novel. 

I had to get to Pittsburgh yesterday. Had reservations on United from San Jose to Denver, and Denver to Pittsburgh. The San Jose flight was 2 hours late so I was going to miss the last connection to Pittsburgh. The United 1K desk (see I do fly a lot) offered to route me on the red-eye from SFO to Pittsburgh (operated by US Airways). While that was not optimal it allowed me to make my client commitment. I agreed. 

United sent me an email as promised with my new itinerary showing the US Airways flight from SFO to Pittsburgh. I arrived at SFO 10 hours later and a bit over one hour before my flight so I could check in. The kiosk would not check me in. I stood in line to talk to the (yes “the” not “one of the”) counter agent. Forty minutes before flight time I connected with her. She confirmed I had a seat on the flight (an aisle seat even though when I had called earlier in the day I was told they only had middles left, but whose going to complain about that good luck). She then asked for my “ticket.” What ticket?, I asked, I’m on an electronic ticket. 

She pointed out that was a United ticket and she needed a US Airways ticket. Knowing the lingo, I asked her if United had “pushed” the ticket to US Airways as they should have. She said, we don’t “push” tickets anymore. (So much for knowing the lingo.) She asked for my ticket # which I did not have. (It appears on your ticket, if you have one, but then if I had a ticket, this would have been moot.)

I immediately called United to get my ticket #. They gave it to me and the agent told me that since that ticket was from San Jose to Pittsburgh it would have to be reissued. I said go ahead. She said only United could do that. (Why they had not done so previously is the root cause of this problem, but that was human error, which we all suffer from.) 

I then asked the 1K desk person to help re-issue the ticket (now 30 minutes before flight time). She said a supervisor would have to do it and she would get on it. I am now on hold with United. In the mean time, I asked the US Airways agent if I could just buy a one-way ticket on her flight to Pittsburgh. She said the flight was oversold and she could not do that. (Odd since I had an assigned seat on the flight, and I just wanted to pay for it again.) I was too stunned to deal with that one, so I waited for United to get back on the line. 

25 minutes before flight time, still no word from United. The agent then considers giving me my boarding pass to get through security and having me get the ticket piece at the gate once United had finished with the transfer. Then she realized that would not work. Why you might ask? And I quote her, “Gate agents don’t like to deal with that kind of stuff.” So, getting to the gate was no longer an option. 

About this time (20 minutes before flight) she denied boarding to two other people who had been in line for 15 minutes and missed the baggage cut off time. Knowing that two seats had now freed up on her flight, I asked again if I could buy a seat. She said no, it was now too late to sell me one even though there were empty seats on the plane. (It’s not clear to me it was ever over-sold.) 

At 15 minutes I determined I could no longer make the flight and gave up. About 10 minutes later United did get my ticket over to US Airways, so they now have to move it back to get me my refund. 

The plane left on time, with empty seats and a passenger who has time today to blog about this and be reminded once again that passengers are an inconvenience to the efficient movement of airplanes. The fact that a lack of passengers in the earlier part of this decade cost thousands of airline jobs does not seem to connect for the employees of most airlines when dealing with each of us as single passengers.

Mitch