Posted by: qmaxim | November 28, 2012

Customer comes LAST

Recently I read an article on airline industry  in  the TIME magazine. According to the report, airlines which are delighting customers are losing huge amounts of  money year after year. Whereas airlines which are nothing but “bus in the sky” are raking in moola.

Take the case of  5 year old  Virgin America owned by British mogul Richard Branson. This full service airline has been rated the highest by the travelers’ surveys and some publications have called it the top overall  airline in the U.S.. It has also won numerous  awards such as best overall passenger experience, best   cabin staff and so on. Virgin has 3 class seats, leather seats, Wi-Fi, live TV, etc. Now consider no frills airline Spirit Airlines which has been voted the worst airlines for years (rating 2.5/5) and has been receiving numerous customer complaints. In this airline, passengers have to pay extra for checked in luggage. Apart from many semi legal practices, airline is actively considering other creative “fees” such as  for using the toilet.

Virgin has been losing money year after year and is in the red to the tune of  US$ 671 million  so far. Many analysts are wondering why it has not  shut down yet.  Spirit on the other hand has been the most profitable airline in the U.S.

Customer centricity has  been the first principle of quality standards, TQM, business excellence models and numerous business publications. For example, business excellence model EFQM gives a lot of importance to  customer perception   for deciding how good a company is. Many of  best practices recommend  doing  customer satisfaction surveys &  changing behavior for  pleasing customers based on these surveys. Is this principle no longer valid?

Probably, this principle needs refinement.  Companies should spend money on features for which customers are prepared to pay. Figuring out which part of the offering is most important and delivering it well   is a must for long term survival of companies. Customer surveys (C-Sat) should be designed keeping  this aspect in mind.

Of course, consideration must be given to the fact that price  counts a lot for most people if they are paying from their pocket.

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Responses

  1. Hi Jag. Nice article. You actually answered this predicament in the last paragraph. Quality and Customer come after business model. If a business model is built around basic service and it begins charging luxury fee – no customers will turn up. Same way, if a model built around luxury starts flying all routes – few customers would turn up.

    • Mr Tiwari:
      Thanks for your comments. You have summarized succinctly.
      Some other points I was making was:
      There is a significant difference in attitude towards a service offering depending on whether the person is consuming the service in a business situation or in his personal capacity.
      It is necessary to know as to which part of offering customers are prepared to pay a premium otherwise company may end up in losing money which might ultimately lead to bankruptcy.


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