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  • Captive-Audience “Customer Service” vs. Real Service

    Posted by Jonathan on January 7th, 2004 (All posts by )

    (I wrote most of this post last June but never completed it. Today’s announcement that JetBlue will offer, at no additional charge to all passengers, XM satellite radio — in addition to satellite TV which they already offer — reminded me that my original post was still topical.)

    ——

    A while ago I bought a cheap wallet from a retailer of modestly priced leather goods. Ten bucks on sale at one of the company’s airport shops. When the wallet’s money clip broke, I went to the company’s website, found a 24/7 phone number, called and was directed to a local store. I dropped by and they cheerfully replaced the clip and refused payment. That’s great service: not only is it pleasant to shop in their stores, but I can do so without risk because they stand behind their products.

    Contrast the leather store’s attitude with that of the typical airport concessionaire. He has you by the short hairs, especially if he sells food and you are hungry. You get charged $3 for a stale pretzel or a multiple of that for a crummy sandwich. And why not? Repeat business isn’t a factor, there’s little or no competition at the airport and you can’t go elsewhere. You pay up.

    National chains that don’t operate exclusively in airports, like Starbucks and the aforementioned leather shop, tend not to follow this pattern. Perhaps they realize that charging what the market will bear can in some circumstances alienate customers, and isn’t always worth it in the long run. Or maybe these firms see opportunity in providing reasonably-priced service to customers who are accustomed to being overcharged at places like airports.

    One of the problems with the major airlines — and I think it’s one of the reasons they are doing poorly — is that their attitude toward customers tends to resemble that of airport pretzel venders. They are willing to compete for business, up to a point, but want to treat customers as captives after tickets are purchased.

    We’ve all heard stories about bad service and bad attitudes. Consider also the missed opportunities for airlines to sell tickets. For example, you can take your laptop on a flight, but often you can’t plug it into the airplane’s electrical system. Or you have to pay up for a higher-class ticket to be able to do so. It’s generally not worth it unless you are a time-pressed business traveler on an expense account. On the margin, an airline that made it cheap and easy for anybody to use his laptop might gain customers from airlines that didn’t.

    Then there are the telephones that cost a buck or two per minute. I assume that these are used mainly by business travelers. But might airlines not do better to provide lower-priced communications equipment, to attract all kinds of customers?

    United recently announced in-flight email service — at a minimum price of $15. But how many people will pay that much (especially since using the phone may actually be cheaper for short messages)? How many more travelers, especially nonbusiness travelers, would use these services (and how much more business would airlines get) if computer power and a certain amount of phone and email capability were provided at cost, perhaps bundled into ticket prices? I think a lot of us would prefer to fly on airlines that routinely provided such services for less than expense-account prices. JetBlue, which offers passengers free TV (and now satellite radio) seems to understand this. Delta’s Song quasi-spinoff promises to do something similar. These are promising signs.

    Before deregulation, airlines weren’t allowed to compete on price, so they competed on marginalia like meals and the attractiveness of their stewardesses. After deregulation, fares became competitive but service was often neglected. This situation created opportunities for service-oriented companies like JetBlue.

    But the old lines still don’t seem to get it. They are driving off business by trying to make money from overpriced services that are routine conveniences in the non-captive world. They might do better to learn from Starbucks and other successful retailers. Nickel-and-dimeing customers won’t generate enough revenue to overcome United’s bloated cost structure and make it profitable. Getting a lot more people to buy United (as opposed to Southwest or JetBlue) tickets might. One way to help make this happen might be to start treating customers better — for example, by providing modern entertainment and communications facilities at prices that encourage the traveling masses to use them. In other words: make people want to fly on your airline. A few airlines seem to understand this. Perhaps some of the others will wake up before they are lost in high-cost, customer squeezing, bad-attitude death spirals.

     

    13 Responses to “Captive-Audience “Customer Service” vs. Real Service”

    1. Anita Says:

      I’m told that the airlines refer to people in economy/coach sections as “self loading cargo” which I think goes a long way to explaining the service!

    2. Antagatron 2000 Says:

      Top notch post.

    3. nitpikker Says:

      y’all have some major problems with your site. Invisible lines, top half invisible, and stuff. Please fix toot sweet.

    4. Jonathan Says:

      Antagatron: Thanks.

      nitpikker: These are bugs or config problems in Movable Type that I don’t know how to fix. If someone else does, I would be grateful for suggestions.

    5. mike Says:

      Does the rent charged by the airport play a role on venders prices?

    6. Andy B Says:

      Bingo mike, most major airports award a concessions contract to one vendor who runs the whole operation. In Chicago, it is always a vendor that happens to have at least one executive with a tight relationship to Mayor Daley, his wife, or a various flunkie. All costs to the lessees are dictated, and they are HIGH. This city views it’s airport, residents, and businesses as revenue streams to be squeezed, nothing more. If the rest of the country is half as bad, it explains Jonathan’s quandary.

    7. Jonathan Says:

      It may be the airport owners who are ultimately responsible for squeezing customers, but then my point about attitude applies to them too.

      It could be that big chains have better service at airports because they have better service everywhere — that’s why they became successful. Business that provide bad service typically are not successful except in uncompetitive venues like airports.

    8. Rob Says:

      Nice post. You should submit it to the CoTC this week.

    9. Jonathan Says:

      Thanks, that’s a good idea.

    10. Bill Roule Says:

      Compare Chicago’s airport concessions to Pittsburgh’s. The standard contract for stores in the Pittsburgh airport prohibit them from charging more than they do at a non-airport location. How often can you buy a beer at an airport bar for less that $3? Prior to the increased security due to 9/11, PIT almost doubled as a shopping mall.

    11. JK Says:

      Actually overcharging is as demonstrably shortsighted for airports just as it is for the airlines. In the UK the government privatised many of the big airports, including Heathrow. They have since gone from being the last place you would want to buy anything to become major shopping centers, and far more profitable as a result.

      The root cause of the overcharging Jonathan talks about is not stupidity on the part of the airlines – it can always be traced instead to a group with a chokehold over the operations of the business, which has a vested interest to protect. In the case of the airports it us usually corrupt city bureaucrats giving the concessions to their friends. In the case of the airlines it is the pilot and employees unions’ endemic exploitation of the fact that any transportation business can be bankrupted within weeks.

      As a result the airlines’ labor costs are so high that any service they try to deliver has to be wildly overpriced in order to break even. The reason this doesn’t offend me is that I always carry on whatever I need (how hard is it, really, to see 6-12 hours ahead?) and don’t buy any of their overpriced stuff.

    12. Jeff Says:

      Good post Jonathan. It always bugged me too that airlines and hotels try to put the screw into their paying customers.

      One positive development I noticed is Marriott put high speed internet bundled with unlimited long distance phone calls into their rooms for a flat $10. Not bad compared to other hotels, and downright cheap if you’re a heavy user and the company is paying. At Sheraton, I made a 2 minute call to a cellphone for the low low price of $9.50.

    13. Jeff Says:

      As a side note, you ever notice no matter what airport you go to, there’s always construction somewhere?