Recently, American Airlines announced that it was going completely à la carte with its service offerings. Want a blanket? Pay X. Want to be put on standby? Pay Y. It is an attempt to wring out every last penny from all revenue sources in a somewhat desperate time.
Southwest, however, continues its one-price-and-done approach—and remains the most profitable airline.
As for brand reputation, there is little guessing as to which airline dominates.
Offer an Experience
Southwest is making money. It has done the math. Along with lower costs because of its fuel hedge purchasing strategy, it also knows how much it costs to deliver a passenger from point A to point B, including all the amenities and services. But because Southwest packages it all, the hassle is reduced. No need to worry about correct change or having your credit card.
Hassle-reduction reduces stress and creates a better experience, adding to the airline's aura.
You offer an experience by...
- Understanding clearly your prospects' interests
- Packaging a specific offering tailored to their needs
- Simplifying the prospect's life, giving choice and even delighting them
Packaging Starts with Data
Knowing your prospect well enough to tailor experiences means collecting data about them.
I do some work in the healthcare sector—where you market something that people don't want, and it may be years before they need it. Of course, you might say that about many more industries that are directly affected by people's having less disposable income in this economy.
In either case, the relationship becomes more long-term, and more about creating tipping points for choice. So, for example, I counsel my healthcare colleagues that it is not just about the in-your-face, obvious information about a prospect that you are interested in (i.e., their health condition) but also about what is going on in their lives—so that you intersect the two.
Collecting data means...
- Creating a culture in the organization of not just formal collection but also relaying of observational and of anecdotal information.
- Understanding people's interest so you can intersect it.
- Understanding people's influence so you can leverage it.
Here is what seems to be a trivial example. Mary Smith comes to the assisted-living facility open house. She doesn't need assisted-living services—she is there for the free food. Nonetheless, the staff welcomes her and tours her around and they ask questions and listen. Mary tells them she is a dog lover and specifically likes a certain kind of dog. She offers more information. After the tour, a staff member records Mary's interests in the CRM system. Lo and behold, after a few years, Mary becomes a resident of that facility. When she walks into her room, there are pictures of her favorite dog on the wall and a coffee table book about dogs. Observational data created an experience that Mary and her family will talk about to others.
Subtract, Don't Add
Car salesmen will tell you that you always offer a prospect the loaded model first. They will negotiate and take things, away but history shows that they take less away than if they started with the base model and added features.
Researchers have shown that higher price (bundled) is associated with higher quality. And to take something away implies lessening the quality by taking away benefits. So people take less away and feel good about it. When prospects use an additive model, they focus more on the cost increase and less on the benefit.
That is why I find the airline nickel-and-dime strategy confusing. I travel frequently, and what I have witnessed is that few are buying the à la carte offerings. So airlines' expenses might be reduced, depending on their buying patterns and forecasting, but they certainly will not add the revenue they envision. From my observations, I notice more people buy something in the concourse and then take it on the plane (almost for the principle of it, it seems).
The Brand Consequences
When you make your offering a complete solution, you enhance your brand and become less of a commodity.
Think in terms of...
- Wanting to be sought versus sold: Laundry detergent is sold. The iPhone is sought. Southwest is sought. Other airlines' services are sold (and purchased with reluctance).
- Emotionally blah versus emotionally "Ah!": Fred Lee, in If Disney Ran Your Hospital, notes that patients judge their hospitalization not by how their clinical care was rendered but by the entirety of their experience. When you consider the whole package and the end experience, and bundle accordingly, you create an emotional attachment with customers. If any part of a hospital stay goes awry, it affects the overall experience. That is why hospitals, such as The Cleveland Clinic, have hired a Chief Experience Officer to look at the consistency, the total package, of how the experience is delivered to employees and to patients.
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Is your company packaging experiences? Are they sought—or are they sold? And, drilling the concept down one more level: have you ever looked at yourself and considered the package that you offer and the experience you provide?
In the current downturn, where layoffs loom large, those with the better shot at developing business or finding a job understand that the complete package and the experience contribute to a brand identity that stands out in a crowded marketplace.
