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

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