h1

THE VALUE OF ARMRESTS AND TRAY TABLES

May 14, 2012

If you follow my blog, you know I love airline marketing, since I spent 15 years in the industry. That’s why I want to comment on a May 11th Wall St. Journal story (A Stingy Spirit Lifts Airline’s Profit) about no-frills Spirit Airline. It’s nothing new for airlines to throw out frills, but Spirit has taken it to extremes. In fact, traveling by Greyhound bus offers you more leg room and customer service than Spirit.

Want to check bags or use the overhead bins, it’s extra. Boarding passes, they’re extra. Booking a ticket (online or by phone), that’s extra too. Rumor has it that Spirit wanted to charge for rest rooms, but backed off for now. From 2008 (the start of the great recession) to today only two U.S. airlines have earned more than Spirit, Southwest and Alaska Air. Southwest doesn’t charge for bags. Alaska Air (and its Horizon Air division) is one of the best small full-service carriers in America (read my April 4th blog). And that’s the point of this blog.

I think the ultra-low-cost model, pioneered by Ryanair in Europe, is not a long-term marketing strategy that can survive in America when the economy rebounds. Why? Because a low price isn’t what people really want. What people want is value, and as I point out in my book, value is a delicate relationship between what you pay and what you think the product or service is worth to you.

Right now, Spirit is winning this relationship. Budget travelers perceive that saving up to 30% on fares is worth the nickel and diming. However, Spirit only carries 1% of the nation’s fliers. Given Spirit’s terrible on-time performance and growing complaint level, over time, I think 99% of America fliers will say Spirit isn’t for them, especially when more service focused airlines match Spirit prices and take them on.

What does this have to do with your marketing? When was the last time you had a serious discussion with your staff about perceived value: “Is our service or product worth the price people are paying?” It is certainly worth a Monday morning discussion.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: