On this episode of Dear Strategy, we analyze an airline story involving a cancelled flight, a premium seat, and a not so premium re-booking experience. It’s fairly well known that flying isn’t always the most customer-centric experience. But now, more than ever, airlines may need to start re-thinking their strategies – especially with respect to how they’ve been treating their customers.
Being a planner, it should come as no surprise that I typically lay out the subject matter for each Dear Strategy episode far in advance of actually recording it. Which is to say that this particular episode was planned since at least the beginning of January – far before any of us knew the magnitude of what COVID-19 was going to do to that industry. So when it came time for me to tell this week’s story and analyze the strategy of the industry that spawned it, I truly debated whether doing so at this particular time might be perceived as “kicking an industry when it’s down.” But obviously I decided to go ahead with my original plan because: 1) The truth is the truth, and the truth should always be told, and; 2) I truly believe that it’s more appropriate now than ever for airlines to rethink their prior strategies in preparation for a world that is sure to look very much different than it ever did before.
So the original story, which happened late last year, goes something like this…
I facilitate corporate workshops for a living. And, because of that, I fall into the category of being a “frequent flyer” – usually taking anywhere from 4 to 8 flights per month during my busiest seasons. Because my workshops usually run the full course of a normal workday, most of my return flights are among the last flights of the day. And, being that I fly into and out of New York City, there’s a fairly high probability that at least some of those flights are going to be, at best, delayed, and, at worst, cancelled. So this particular story happened on one of those “at worst” days.
Now, it’s important to note that, being a frequent flyer, I do have fairly decent status with my current airline of choice. You should also know that, depending on the cost, I usually end up forking over a few extra dollars for the privilege of “upgrading” to a seat that falls somewhere between the completely unbearable section and the almost tolerable section. Different airlines have different names for these “semi-premium” seats, but to make the story a bit more generic, let’s just call this the “Tier 2” section. In any case, this magical combination of being a frequent flyer and holding a Tier 2 ticket sometimes results in my getting a free upgrade into one of those coveted Tier 1 seats. And that was my situation for this particular flight, which made its cancellation all the more painful.
But there was one shining light at the end of the tunnel, which was the fact that, at least on this particular day, my cancelled flight wasn’t exactly the last flight out that night. In fact, there was another airline whose last flight back to New York had been delayed just long enough for me to be able to hop a ride. And since there were still plenty of seats left on that considerably larger flight, my airline was able to switch my ticket and get me onto that flight for no extra charge. Of course, at this point, I realize that I’m about to be an unintended guest of the other airline, so I definitely wasn’t expecting to be given any kind of special treatment. And boy was I right!
Even though there were “plenty of seats available,” the seat that they assigned to me was literally one step above sitting in the bathroom. In fact, now that I think about it, aside from the traffic, the toilet might actually have offered me a bit more room! When I dared inquire with this new airline about whether I could be placed in a section that was equivalent to what I had already paid for on the other flight, I was told that it was possible, but only if I paid a little bit extra for the privilege. It seemed that this new carrier hadn’t yet extracted every dollar that it possibly could from my wallet. And, so, I begrudgingly paid my second upgrade fee so that I could sit in what I thought would be their version of a Tier 2 seat.
Unfortunately, the story doesn’t end there because, once I boarded the flight, I realized that this carrier actually had 4 tiers of seating, and that the seat that I had just paid to upgrade into was actually what my airline would have considered to be a Tier 3 seat. So, to recap, I originally paid an upgrade fee for a Tier 2 seat, then got upgraded to a Tier 1 seat, then got bumped back to a Tier 4 seat on the new airline, and then paid another upgrade fee to move up to a Tier 3 seat – which is a full tier below where I started! Said differently, I paid for two upgrades and received absolutely nothing in return.
Now, I know that some of you are probably thinking that this new carrier didn’t owe me anything. After all, they were doing me a favor by flying me home that night. And, by the book, you would be right, which is why I had no recourse other than to just buckle up and take the punch. However, if you took a look at this from a customer rather than a company point of view, you would see that, as a customer, I ended up paying twice for a service that I ultimately did not receive. And no matter how pampered you may think I am, that’s a situation that deserves a little more attention…
So when I was preparing to analyze this story pre-COVID, I had planned on exploring whether or not it was a good strategy for this new airline to extract as much money as possible from me; knowing full well that I probably wasn’t going to be a repeat customer of theirs anytime soon. My conclusion, by the way, would have been that, no, this wasn’t a good strategy. Why? Because even the most loyal of customers rarely stay loyal to any one company forever. So, rather than punishing someone else’s loyal customers, it is far more lucrative in the long run to try to win them over instead.
And I stick to that same answer today. However, in a post-COVID world, I’m going to expand on it just a little bit more…
Before this virus hit, many industries seemed to embrace the idea of charging relatively high prices for relatively low comfort. Airlines, bars, restaurants, theaters, taxis, commuter trains… the list goes on and on. And we as consumers, for reasons that I still can’t quite figure out, continued to buy into the notion that “that’s just the way it is.”
And then came the virus. And suddenly we all began to realize that maybe there’s a better way to do things. Maybe we can work remotely. Maybe we can eat at home. Maybe we can stream movies and even live theatre events from the comforts of our own couches. Maybe we can host virtual Happy Hours. And maybe we can do all of these things for a heck of a lot less money. And maybe all of these things, even once the virus has passed, are going to become a part of our new normal. And maybe – just maybe – the companies that have been ignoring our collective comfort for so long are going to have to start paying a little more attention.
The long and short of it is this: 3 months ago, that airline probably felt more than justified in the fact that demand outweighed supply and, as a result, they could pretty much do whatever they darn-well pleased. And, from a bottom-line perspective, that might have been seen as a smart decision. But the world we were living in just a few months ago looks a heck of a lot different than the world that we’re living in now. And the world 3 months, or even 3 years, from now is going to look a whole lot different still.
Every one of my classes is now being delivered virtually. And I expect that to continue for the foreseeable future. If my business is any indicator, airline supply is very likely to outweigh airline demand for a long time into the future. Which also means that I may very well start making my travel decisions not based on which airline wants me to be comfortable because it suits them, but, instead, based on which airline wants me to be comfortable because it suits me. And I think I can say that same thing about a lot of different industries.
So, no, I don’t think the strategy of that airline was a good one. But, going forward, I think that strategy would be nothing short of disastrous. And, if I’m being honest, I also think that it’s about damn time.
Listen to the podcast episode
Dear Strategy: Episode 111
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Bob Caporale is the founder of Strategy Generation Company, the author of Creative Strategy Generation and the host of the Dear Strategy podcast. You can learn more about his work by visiting bobcaporale.com.