Church of the Customer Blog
« Fees are penalties. Always. | Main | Twitter: the killer app for customer service »
October 19, 2009
Fees are penalties. Always.
It's a wonder why some businesses can't grasp this. Consider the U.S. airlines last month:
- Southwest reported an 8.8% increase in revenue passenger miles. Its load factor, the percentage of seats that were filled, increased 11% from a year ago, to 74.7% — a big increase for a month in which schools reopen and summer vacation travels stop.
- JetBlue saw a 9.8% jump in passenger miles. Its load factor rose about 1% from the prior year, to 77.6%.
Compare those numbers to other airlines.
- Delta: Down 5% on its mainline operation. It also cut capacity by 5%.
- American: Down 2.6% domestically. It cut capacity by 6.9%.
- US Airways: Down 6.8% domestically. It cut capacity by 5.9%.
- United: Down 6.1% domestically. It cut capacity by 8%.
What's a key difference between Southwest and JetBlue vs. the others? No bag fee charges.
Before you say, "You can't correlate those two things, Jackie!" let it be noted that Southwest has commissioned several studies that show the traveling public hates bag fees.
Southwest seems to be doing pretty well as angry passengers migrate away from the bag-fee chargers. Southwest is even running an ad campaign with this message, called "Why do they hate your bags?"
Those nickle and dime fees add up, the airlines will say, but really, they do little more than penalize customers with complexity and disguise the end price. It's no different when a phone or cable company charges activation fees. May as well call them aggravation fees, as in "It's aggravating to have a new customer."
Little wonder passenger satisfaction with the airline industry has declined for a third consecutive year to a four-year low.
Wall Street analysts don't like Southwest's position on bag fees. They say the company is potentially losing $500 million per year in revenue. That's OK. No one likes greedy, short-sighted Wall Street analysts, either.
Kevin Krone, Southwest's VP of marketing, said it best : "If we're trying to get people to travel, we should probably let people take their suitcase."
Gotta love any company that keeps the obvious in perspective.
Other blogs that reference Fees are penalties. Always.:
Is this still applicable now that the Air Freight and Travel industry's practically down with the volcano incident? The figures make sense, though, but it's something like this that makes derivatives too powerful. And we all know what happens in that case.
Would love to see any consumer research Delta, American, etc. did before implementing the baggage fees. As noted above, it's not just the fees themselves, it's the non-verbal messages these companies communicate via the fees and also bad service. I do think, that as Charles noted above, the data doesn't necessarily indicate a positive correlation. It would be interesting if any of these companies had done some test marketing or quantitative research ahead of time - comparisons between the research and the actual data might be more conclusive in that case.
Thank you this nice tale ^^ regards!
I love this article! My daughter's mom-in-law is an attendant for Southwest and said from the get-go that bag fees would hurt the other airlines. Good grief...why do we have to be nickle and dimed to death?
It would be interesting if any of these companies had done some test marketing or quantitative research ahead of time - comparisons between the research and the actual data might be more conclusive in that case.
