"Our Take" - Airline Bill of Rights

(Past Editions by: Date, Title, Topic)

About "Our Take"
"Our Take" is a collection of daily vignettes covering a wide range of CRM topics. It's an attempt to add our own spin to the world of CRM. We will use the column to share our perspectives, opinions, epiphanies, web nuggets, or quite frankly anything that moves us. Get ready to expect the unexpected. And, don't be shy about sharing your thoughts.

6/6/07 - Legislating Good Service
In yesterday's edition of the Wall Street Journal, an article explored what happens when airlines break customer service rules. What rules, you ask? The U.S. Department of Transportation actually has regulations supposedly to assure us that the airlines treat us right. The article highlighted instances where violations were discovered and levies were fined. However, many times the airline didn't have to pay a part or all of the fine.

While many people might be upset when airlines don't pay the penalty, I'm still awed by the mere existence of customer service rules. I assume laws about truth in marketing, access for the disabled, monopolistic antics, etc. are already covered without specific need to call out the airline industry. Does a deregulated industry like the airlines really need customer service rules?

I'll go a step further saying it might be the mere existence of these rules that has made the airline industry a poster child for how not to treat customers. It seems everyone has a travel horror story. If all customer service rules were to be abandoned immediately, my guess is competitive pressures would create many necessary changes that would improve airline customer service. Consider an industry with incredibly sophisticated technology, very safe jets, an educated workforce, and an established infrastructure. They should own customer service but don't. Let me suggest that existing customer service rules are getting in the way of the airlines cleaning up their own act. Do you agree?

Gary Lemke, Publisher
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6/7/07 - Airline Bill of Rights
In yesterday's column, I discussed how current U.S. Department of Transportation customer service rules did little to improve customer service. I went further to suggest these rules may actually be getting in the way of fostering better service because the airlines look to the rules rather than the opportunity.

Not everyone agreed with me. Truth be told, I doubt any of my positions have ever enjoyed 100% concurrence. That's OK because the point of this column is to hear all sides. One reader suggested that what the airline needs is a "consumer bill of rights created, attested to, and signed by all carriers." I know JetBlue made strides towards such an initiative in response to difficulties they faced earlier this year but I have yet to see much from other airlines.

As an airline passenger, the last thing I want is a bill of rights that each airline is forced to follow. Rather, I would like to see the rules dictated by market demand and opportunity. When price regulations went away, we saw extraordinarily aggressive airfares. I bet we would see the same thing on the service side if the customer service regulations went away. Am I simply a naive romantic of the free enterprise system or am I on to something? What do you think?

Gary Lemke, Publisher
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6/8/07 - Airline Bill of Rights - Part II
Some topics seem to be sure winners in terms of igniting reader response. Airline customer service is definitely one hot topic. Yesterday, I shared my self-described romantic idea that if the airlines didn't lean on legislated customer service rules, they may be more inclined to think more seriously about how to use customer service to differentiate themselves.

Some of you weighed in that although the airline is not regulated, some airlines have a stranglehold on certain markets (airports) empowering airlines to "abuse" their passengers. Another wrote suggesting the airlines cater to a high number of occasional passengers that are willing to put up with anything for a low fare. If that is true, I guess we as passengers are getting what we ask for. Or do we put up with poor service because we don't feel we have alternatives?

One reader disagrees with that position stating, "You are not a naive romantic. Airline passengers need to stop using the airline that treats them poorly. Today people complain but go back the next day and reward the poor performer just because the ticket is cheaper than the next guy. Reward the good performer and book away from the poor performer. It might cost you some money but you control the performance." In the long run, I still believe good service will define the winners and poor service will define the losers. Do you agree?

Gary Lemke, Publisher
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7/3/07 - Let Freedom Reign
Last month, we talked about an idea being floated around that there should be an airline Bill of Rights. The talk was inspired by customer service fiascos earlier this year. The discussion stimulated thought on whether certain industries should have legislated service levels.

Quite frankly, I was surprised by the number of people sending emails suggesting that customer service legislation for certain industries is a good idea. Although I have difficulty with how legislation would be implemented and the extent to which it would have a positive impact, I respect the goal of demanding better service levels. Allow me to offer an additional thought that I saved for this week - Independence Day as celebrated in the United States.

If one considers the absolute best examples of business viewed as "service greats," one would be hard pressed to conclude the business became best in class motivated by law. More often, "service greats" become that way through a conscious decision to differentiate their business through service and a determination to make it happen in a consistent fashion. It is the freedom of their customers to match their spending with the perceived value of the product and/or service. Let freedom reign.

Gary Lemke, Publisher
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7/5/07 - Bill of Rights Nomenclature
My column on airline Bill of Rights was a bit loose with words and definitions. Today, I thought I would write a bit more about definitions in the world of customer service. I am, by no means, suggesting these are industry standard definitions - simply, one person's perspective.

Customer service laws and regulations are rules legislated by government typically for matters of public health and safety. Typically a government agency has the responsibility for enforcing these laws. Although a customer service Bill of Rights sounds like law, it is not. It is policy set up by an individual company, industry group, or other organization. It may or may not have any "teeth" in terms of enforcement. Terms of service may be an agreement between the buyer and seller regarding setting expectations or service level agreements. Contract law typically gives the consumer certain rights under terms of service.

How are the service levels your business provides influenced by these three factors? Are there other factors and definitions yet to be considered?

Gary Lemke, Publisher
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7/6/07 - Does the Consumer Voice Always Win?
To conclude the discussion of legislated versus market-driven service levels, one reader summarized the free market perspective in a way worth sharing. He said:

"Government intervention in business policies should be limited to those areas that affect human and civil rights, such as personal safety and equal access. Areas such as customer service levels are, and should continue to be, driven by the consumer. The voice of the consumer is far more powerful to business leaders as it directly correlates with the bottom line. This is because no business enjoys the advantage of being the only provider of any product or service, therefore, actively seeking competitive advantage is an everyday way for a business to survive. And as we all know the consumer decides competitive advantage, not the business itself, and certainly not the government."

There are two basic assumptions buried in this statement. First, a free market exists where customers have choice. Second, businesses are motivated by the bottom line to care about consumers. Do those assumptions always hold true?

Gary Lemke, Publisher
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7/9/07 - Finding the Fine Line
Over the last month, I've been writing about customer service in the airline business. It seems everyone has a personal experience about something going wrong. Furthermore, people tend to remember the bad experience and are very willing to share their stories with others. Why are we so hard on the airline industry?

Why can't the airlines "get it right?" My guess is they are trying to find that fine line in a competitive market. One reader wrote: "We might not even want extremely good service levels. Consumers have made it pretty clear that they want the lowest possible price for tickets. Since service levels significantly higher than those currently in place would increase costs, consumers might not want to pay for better service. Airlines are consistently testing improved service and we consumers keep booking flights based on cost."

I imagine the results of countless focus groups and market research studies have guided the airlines to first think about low price and then about service. The consumer gets what they ask for with regard to price. But they keep their "full fare" expectations. I don't see price sensitivity changing so it will be the savvy airline that discovers that fine line between price, value, and expectations. How do these pressures translate to your business?

Gary Lemke, Publisher
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7/10/07 - Not So Fast
Not everyone bought into my suggestion that we are getting what we pay for with regard to airline service. Yesterday, I offered the notion that consumers were willing to put up with compromised service because they wanted the absolute rock bottom price.

The risk in taking the position I did, or any position for that matter, is assuming a homogeneous consumer base. A portion of the market is willing to make all sorts of compromises for the sake of saving money while others have higher service demands and are willing to pay for it. The problem is dealing with a diverse set of needs through one system - different people with different needs all utilizing the same airplane with the same set of employees.

Ah, but we have first class, business class, economy. Doesn't that address the issue? To a certain extent it does. The level of attention, leg room, and meal service can be considerably differentiated. However, the nine hour wait on the tarmac is blind to how much one paid for their ticket. Everyone inside gets that same level of treatment. More on this tomorrow.

Gary Lemke, Publisher
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7/11/07 - They Deserve It
I wanted to share the thoughts of one reader who thinks I'm being too easy on the airlines. He believes there is a general belief that airlines think they can get away with crummy service just because of low price. He writes:

"I submit that we are so hard on the airlines because the airlines deserve it. The 'experienced' airline management folk either grew up in the regulated (cost plus) environment or were hired, managed and molded by those who did. The 'newbies' in airline management look at the existing weak performance and assume that anyone could do better than that. But, they fail to recognize the complexity of a business with large capital outlays, union wages, and the world's most perishable commodity. They come to the table with no CRM concept for the passengers . . . and that is a blueprint for disaster."

Many have asked me to share the one or two "easy and quick" things one can do to improve customer service. My response is always the same. If it were easy you would have already done it. And, your competition would have done it too so it would not be a differentiator. The complexities and nuances of each business require people to understand that providing good customer service on a consistent basis to a customer base with varying needs and expectations is never easy.

Gary Lemke, Publisher
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7/12/07 - Yield Management - Friend or Foe
The airline industry was a pioneer in the development and refinement of yield management techniques - the art and science of pricing based on time, demand, and other factors. The purpose of yield management is to squeeze the maximum profit out of a mostly fixed cost infrastructure. If the technique is so good, why are margins so thin? One reader offered the following remarks:

"It's all Crandall's fault. He instituted Yield Management at AA, which leads to pricing that is opaque. I personally believe that the apparent randomness of the pricing to the consumer makes the consumer more price conscious! Since we feel the airlines are trying to screw us on price, we look to get the best price. People try to save $25 on airfare, yet show much less price sensitivity on hotel rooms where the total cost in a trip will likely be far higher."

The airline/hotel price comparison is interesting to me. The technology and safety considerations between an airliner and a hotel room are striking. Shouldn't I be more concerned that my money goes to proper jet engine maintenance rather than the thickness of the hotel's bath towels? Why am I more price sensitive to airline fares than hotel rates even though both are elements in my overall travel budget?

Gary Lemke, Publisher
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7/13/07 - Yield Management - Gaming the Game
Yesterday, we talked about how the use of yield management strategies along with price-led marketing has created a market that is hyper sensitive to airline fares. Furthermore, these sensitivities do not seem to carry over to other aspects of the travel budget that often dwarf the airfare. For example, the cost of lodging can far exceed the cost of air travel for a particular trip.

Why has this happened and what are the airlines going to do about it? Good questions. It is unrealistic to assume that we can solve the airline industry woes in a column like this but there are so many lessons to learn for other businesses in other industries. On the subject of yield management, the industry created a pricing game. One reader wrote: "The pricing is insane. It costs less to fly through city A and onto city B than to fly directly to city A. It costs less to fly 3000 miles through several connections than to fly directly to my destination 1000 miles away. This hurts the "fuel cost" reasoning for pricing."

Irrational pricing seems to lead to irrational actions. The industry created a game and we have been conditioned to play the game to see if we can beat it. No wonder the airline loyalty programs are anything but loyalty creators. . .

Gary Lemke, Publisher
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