Are You Sacrificing Loyalty for Short-Term Profits?

How often do you make a change that you’re just sure that customers are going to love and are met with dead silence?  Or worse, vociferous complaints?  Today’s Wall Street Journal reports that US Airways is reversing its decision to charge for water and soda, saying that the customer backlash is overshadowing efforts to highlight ontime service and baggage handling improvements.  The airline had started charging fliers $2 for bottled water & sodas, and $1 for teas and coffees.  Many airlines have increased fees for extra baggage, meals, preferred seating, and more to counter sharp increases in fuel costs.  All these fees are expected to generate an additional $400-500 million during 2009.  However, US Airways simply went too far.  No other airline joined them in their fee increase, leaving them at a clear competitive disadvantage.  Starting next week, they’ll be offering free beverages, but the customer backlash is going to have painful consequences for much longer.

Doug Parker, US Airways CEO, said that the program was a success because the aisles were less cluttered and the lines for the lavatories were significantly shorter.  Talk about putting lipstick on a pig. But does the customer care more about shorter lines and not having their elbows bumped by the drink cart, or about having the last minute travel perk ripped away from them?   Clearly US Airways has proven to their fliers that they are more interested in short-term revenue than the long-term revenue  generated by loyal customers.

This is a great example of what happens when you make changes without considering customer consequences.  Customers clearly care more about free beverages than the shorter lines–so much more that they’re willing to switch carriers.  When you’re dealing with such a highly competitive market, you can’t afford a misstep like this one.  You need to spend time with your key customers to gather clear customer insight and develop a comprehensive customer strategy that prevents the destruction of value like this mistake clearly proves.  Do you know exactly what your customers value?  Do you know what priority they place on your services?  Do you know which ones must be improved, and which ones can be relaxed?

The last line of the article is quite telling when they quote from an employee newsletter: “despite our on-time record in 2008, market research shows that many customers still don’t perceive US as being an on-time airline.”   US Airways went from last place in 2007 to a close second in 2008.  And customers didn’t notice, and apparently didn’t care.   Focusing on this operational excellence is important, because customers do care about being on-time, but only to the extent that they don’t miss a flight.  None of the airlines are exemplary in on-time departure, and everyone knows that they regularly pull away from the gate and park on the tarmac for an hour to “maintain their on-time departure” scores. We accept it.  But don’t take away the drinks.

The money they spent in going from last to second would have been better spent in striving to reach 10th or 5th, and using the remainder to provide free drinks.  Or give back some small perk that other airlines have taken away.

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