Nickels and Dimes

The much maligned airline industry as once again in the news every day; oil prices have put a hurt on the industry that will force major restructuring as a survival tactic - once again - for many of the major players. This begs the question, how are the airlines dealing with customer loyalty through this transition? What can we all learn?

The much maligned airline industry as once again in the news every day; oil prices have put a hurt on the industry that will force major restructuring as a survival tactic - once again - for many of the major players. This begs the question, how are the airlines dealing with customer loyalty through this transition? What can we all learn?

The temptation is to assume "badly" and "not a lot" as respective answers. However, there are insights from their approach. First of all, it's clear the flying public are not enamored with the airlines as a group. The U. Michigan survey results have created some buzz around the topic. I'm not a fan of customer satisfaction metrics as they are too limp a measure of success, but that illustrates the point perfectly. If so few customers are even satisfied (a score of 62 is an historic low) then how many customers are actually promoters? Are their any promoters left for the major airlines?

The real story here is the tactic for dealing with a genuine problem. Nobody doubts that the airlines have cost problems outside their control (oil prices) but their choice of pricing tactics is interested. Afraid of reducing demand, the tactic of choice is to level fees at just about anything they can think of. Seat assignments, luggage, food and drinks of course along with the usual charges for changing tickets etc etc.  Some of these charges will be buried in the fine print.

Will this prove a good tactic? Ultimately, it has the same effect as a fare increase. It's just that the customer only realizes the increase as they progress along the experience corridor with the airline from purchase through check in and actual travel. The airlines hope that customers, like the proverbial frog in the  hot water, will be boiled to death slowly without jumping out of the water.

Except it's not the same as a fare increase, not from a loyalty perspective. In that regard, it's a major negative. Transparent charges are really price increases, so the airlines are focused on "out of sight" charges that the customer only becomes aware of as they travel. Bad profits are usually characterized by unreasonable fees being levied on captive customers - and airline passengers define captivity!

Watch this space. The likely winners of the next decade will be the airlines who play fair with their customers. That means transparency in costs and simplified pricing structures that make sense to the buyer. Develop a reputation as an airline that extracts bad profits rather than an honest deal and expect the backlash down the road. With the exception of Southwest, will we see leadership from others?

The temptation is to assume "badly" and "not a lot" as respective answers. However, there are insights from their approach. First of all, it's clear the flying public are not enamored with the airlines as a group. The U. Michigan survey results have created some buzz around the topic. I'm not a fan of customer satisfaction metrics as they are too limp a measure of success, but that illustrates the point perfectly. If so few customers are even satisfied (a score of 62 is an historic low) then how many customers are actually promoters? Are their any promoters left for the major airlines?

The real story here is the tactic for dealing with a genuine problem. Nobody doubts that the airlines have cost problems outside their control (oil prices) but their choice of pricing tactics is interested. Afraid of reducing demand, the tactic of choice is to level fees at just about anything they can think of. Seat assignments, luggage, food and drinks of course along with the usual charges for changing tickets etc etc.  Some of these charges will be buried in the fine print.

Will this prove a good tactic? Ultimately, it has the same effect as a fare increase. It's just that the customer only realizes the increase as they progress along the experience corridor with the airline from purchase through check in and actual travel. The airlines hope that customers, like the proverbial frog in the  hot water, will be boiled to death slowly without jumping out of the water.

Except it's not the same as a fare increase, not from a loyalty perspective. In that regard, it's a major negative. Transparent charges are really price increases, so the airlines are focused on "out of sight" charges that the customer only becomes aware of as they travel. Bad profits are usually characterized by unreasonable fees being levied on captive customers - and airline passengers define captivity!

Watch this space. The likely winners of the next decade will be the airlines who play fair with their customers. That means transparency in costs and simplified pricing structures that make sense to the buyer. Develop a reputation as an airline that extracts bad profits rather than an honest deal and expect the backlash down the road. With the exception of Southwest, will we see leadership from others?