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Spirit Airlines announced yesterday that they will begin charging passengers as much as $45 for each piece of carry-on luggage.
There is no charge to carry-on a purse or small bag that can fit underneath the seat. But if you use that space above, cha-ching! I see a future with giant purses!
The logic of this fascinates me to no end. Being a frequent flyer, I’ve seen it all. After 9/11, it was easier to just check a bag, rather than drag it through security and have your underwear held up for display. After the 4 oz. liquid ban was put into place, any high maintenance woman (me) was SOL for carry-on.
But then airlines started charging to check bags. We lowered our standards. Bought the damn quart size ziplocs and regrouped.
Spirit says, you’re gonna pay either way, so how much? You decide.
Today most travelers expect to pay for bags. Just like most consumers expect to pay a surcharge at an ATM. No one wants to – or thinks it’s a fair fee – but, like lemmings, when one bastard in a category is brazen enough to charge, the others will follow.
“Banks often move like a school of fish on punitive charges such as ATM surcharges and credit card late fees, so it’s just a matter of time before others follow suit,” said Greg McBride, a senior analyst at Bankrate.com. This in response to B of A quietly increasing their surcharge fee from $2 to $3.
Initially credit unions were adamant that they would never tarnish their image by charging such a fee. They argued against the rationale that ATMs are a convenience people should pay for. Just like the convenience of taking clothes and toiletries on an overnight trip. It’s more convenient, so you should pay.
But when banks started publishing their fee income, well, I mean, what would it hurt? Credit unions could charge a bit less and look like a hero. Right?
And then there’s Southwest Airlines to remind us of the beauty of a strong business model and the value of having the guts to stick with it.
Yesterday they announced that their stock is up 18% this year, and at the beginning of the year could boast it’s 37th straight year of profitability.
They will not charge for bags, and in fact, spent advertising dollars to show that they “love bags.”
1. They resist trying to be all things to all people. They fly one kind of plane. They fly point to point (versus hub and spoke). There is no first class – or as they like to say “everyone sits in first class.”
2. When sh*t happens (as it is wont to do in the airline business) their goal is to contact customers affected by a delay before they contact the airline. Builds loyalty and positive word-of-mouth.
3. They have the fewest customers complaints and cancelled flights. If your bag doesn’t make it, you get a $50.00 LUV voucher to use on a future flight.
They have been able to do the impossible. Good, cheap and fast.
Yesterday I got an email from Monique Washington. She’s the Marriott Rewards Specialist/Rooms Controller for the New Orleans Renaissance Pere Marquette Hotel. I’ll be staying there tonight. I’m a Gold Member with Marriott which means I stay at least 50 nights a year at one of their hotels. I love Marriott.
She noticed on my personal profile that I had no special requests. She is there to make my stay more comfortable. Wow. So I replied. I told her my travel plans. I’m speaking in Baton Rouge today (also at a Marriott). I’ll be done at 5pm, will drive the 80 miles south – hopefully not hitting too much traffic. My plan is to check-in, have a nice New Orleans dinner, and get to bed early because I have a ass-crack-o-dawn flight on Thursday.
My question to her was “Could she recommend a restaurant within a safe walking distance?”
I haven’t heard back from Monique, yet. But I’m very hopeful. This is the first time I’ve ever received an email from my hotel chain of choice. I really dig this kind of effort – especially in this economy – because it shows they are trying to differentiate.
According to my new favorite book, Flip the Funnel by Joseph Jaffe, Marriott is taking a risk.
Risk is the ability to do things that have never been done before, to boldly go where no brand has gone before. In marketing speak, to differentiate; in business speak, to lead.
I sincerely hope this risk pays off. I’ll keep you posted.
UPDATE: Sadly there was no reply from Monique. But, the front desk acknowledged my Gold status, I did get access to the Concierge lounge, and to be fair, when I signed up for my free internet, it took me to a welcome page with a link to local restaurants.
Still…..wouldn’t it have been amazing if that information was waiting for me when I checked in. I’m just sayin’…..
I got a great piece of direct mail yesterday. I know! Can you believe I said that – as much as I detest this tired old marketing method?
It was a 5 1/2 X 8 1/2 folded post card with a special cut, glossy card stock with four color printing. This piece was not cheap.
On the front was this tantalizing statement: “Coming your way: an easier and more rewarding upgrade experience” from United Airlines.
Okay, I’ll bite. I opened it up to a simple chart comparing United to American, Delta, Continental, US Airways and Southwest. It was showing how generous United has become with their first class upgrades for elite passengers. Of course Southwest scored a big fat zero on their chart because, um, and maybe United doesn’t know this – but Southwest Airlines doesn’t play the First Class game. As they like to put it “Everyone’s in first class with Southwest.”
United has changed a policy and they’re using a slick marketing campaign to look like they are doing something really cool. I used to have to sign-up for a first class upgrade and have enough coupons or miles in my account, in the event my name was called, to “buy” my way up. When you’re an elite traveler (100k miles a year) you get these coupons all the time. I never ran out.
So what they’re really doing is saving themselves time and money by discontinuing the charade of the coupon and automatically putting all elite travelers on the upgrade list. Sounds lovely, right?
Here’s what’s really going on. United has cut back their number of flights significantly to ensure a packed house. They are usually calling for volunteers to take a later flight because flights are overbooked. Very few people buy first class these days so to accommodate an overbooking, they move elites to the front of the bus. They are in effect, already doing this.
This reminds me of some member reward programs that offer free money orders to elite members. Those with over $50K aggregate balances – you know, the money order users. We’ll have to do nothing, but look like we’re doing something.
United must have some marketing budget to burn up cuz this direct mail piece is gorgeous. I gotta give them credit – but I don’t expect to be upgraded anytime soon. I dropped down to the dreaded Premier (elite) status in February. 2009 was a slow travel year for me. I am now barely above the rung with the goats and chickens.
I think I’ll enjoy my open seating, all you can eat peanut buffet and cheerful flight attendants on Southwest thank you very much.
Monday, March 8th
10:00am PST – Liquid Lunch presents: I’ll be hosting First Impressions with Lydia Johnson, Rob Rutkowski and Thomas Bowen.
Thomas Bowen, Money One FCU…a little bit about him.
“If asked why I love marketing, I would have to say because I can still sing jingles from 1970’s commercials…my mother is so proud.” Thomas considers himself the rebel child of the credit unions that he has worked for in his 16 years in the industry. The Filene Research Institution is still standing after his tenure with i3 from 2006 – 2008. He currently resides in Bethesda, Maryland with his partner of three years, Jay, and his music collection of 36 years. Thomas works for Money One Federal Credit Union in Largo, Maryland. His dream job: Johnny Weir’s costume designer. His favorite crayon is Cerulean Blue by Crayola.”
Lydia Johnson, a little bit about her….
Lydia is another briliant Can-adian (not Can’t-adian) with over 32 years of banking experience, including VP Sales and Service at Vancity – Canada’s largest credit union. Recently Lydia launched her own consulting business and is publishing her first book: The Jalapeno Handshake. Oh yes, we’ll be talking about that title.
Rob Rutkowski, Lawyer, Blogger, Painter, Renaissance Man…a little about him.
From his twitpic bio: Credit union lawyer, speaker and geek who likes art.
We’re going to shake things up. Don’t let the lawyer fool you – this is going to be a show you won’t want to miss.
It’s my birthday on Monday so if you tune in I’ll consider it your gift to me. That will save you a trip to the mall. Think about it.
My friend Kent Dicken at Shared IDiz had a great blog post last week that involved the coolness of bananas. That’s right. Imagine if you were the marketer for Chiquita. You need to somehow differentiate your banana. Go.
Any ideas? Think about it. I’ll wait.
They did something very simple. Very random, and it changed the way I buy bananas. Success.
Yesterday I was listening to the local news and a reporter, Stephanie Strickland struck her own version of Olympic gold when she was able to get the attention of Snowboarder Shaun White. How? With a banana.
As she tells the story, she knew there was no way she could get an interview with this icon, and there were literally thousands of photographers and reporters that would be waiting for him outside the venue. So…..she got some poster board, a few Canadian stickers and a banana. She wrote “Sign this Banana” and waited. It worked.
Shaun walked over and said “You want me to sign a banana?”
And so he did.
Then he posted a picture of it on his Facebook page that simply said “I had to sign this banana.” 4,582 Facebook fans agreed.
Lessons learned. Shiny happy people on your marketing stuff does not differentiate you. So stop doing it! Think like a banana. Be the banana. Find your inner banana.
I’m sitting in New York listening to Richard Owen, co-author of Answering the Ultimate Question. He has just asked for two volunteers from the audience of 450 people, from 20 countries and 40 of the United States. Their job. To hold up a sign. One says “What I Expect,” the other “What I Want.”
He proceeded to illustrate a very simple exercise in creating promoters. Many companies have a goal to exceed customer’s expectations, very few put any real muscle behind that goal. Many will try (dabble) and end up in the big fat nebulous bell curve of, satisfied. One of the biggest problems, we don’t know what people want, and we really don’t care.
Consider the airline industry. Customers expectations got lowered (dude holding the “what I expect” sign took a step to the left) in the past two years by a new policy – charging for bags. One big player starts it (American) and everyone follows. Customers don’t want these fees (dude holding the “what I want” takes a giant step to the right) but now because everyone is doing it – expectations get lowered, complaints slow, but no love is gained. No promoters = no profit.
Except at Southwest Airlines. They have always been focused on what people want. People want to get to their destination on time. That’s why they have the unique boarding process. No one can turn a plane like SWA. The flight attendants clean the planes, mechanics only have to service one type of plane, and point to point routes dodge the nightmare that is hub and spoke and snow.
The other airlines are creating even more delays with their bag policy. People are choosing to carry-on all kinds of unwieldy bags to avoid the fee.
Southwest Airlines does not have to charge for bags. And by doing nothing, they have become what customers want. Truly exceeding expectations. They are having a blast telling that story with these clever commercials.
They just posted a fourth quarter profit and logged their 37th consecutive year of profitability. It’s very simple. Stay focused on the customer, listen to what they want, get out of the zone of tolerance and have the balls to stick with something.
Richard just closed with a great quote from the late great Sam Walton (and I’m paraphrasing here)
Rule #10 – Swim upstream. You should go the other way and ignore the conventional wisdom. If everyone is going one way, there’s a good chance you’ll find success in the other direction. Beware – people will flag you down and tell you you’re going the wrong way – so swim faster….
I truly believe that corporations don’t have values, people do.
I developed this tool I call the “ripple effect” to use in my consulting and strategic planning facilitation to a) show the board and CEO that what they really value is not necessarily what is framed on the board room wall and b) to help the management team realize they have very little control over their brand or reputation.
It’s so simple in theory, but hard in practice. As luck would have it, our economy experienced a ripple effect akin to a tsunami when bad decisions, investments and values caught up with the banking system.
It has provided me with a wonderful illustration of the ripple effect. I give you the story of Washington Mutual or WaMu.
It’s September 25, 1889. The great fire of Seattle had destroyed 120 acres of the central business district. Washington Mutual begins to literally rebuild the city. They made their first home mortgage loan 5 months later. For the next 80 years, their focus was on the American Dream….owing a home, not having a mortgage. There’s a difference, in values.
The core of the ripple effect – values. So devoted were they to this value that in the 90’s they even stopped offering auto loans.
When leaders change, so do the values. In 2003 Chairman and CEO Kerry Killinger pledged to build WaMu into the “WalMart of Banking,” which would cater to the lower and middle class consumers that other banks deemed too risky. Big shift in values. The ripple effect begins.
The appetite for profits was huge and the housing market was feeding that hunger.
The ripple begins with rewards. Rewarded behavior is repeated. In the book Punished by Rewards, Janet Spence offers this observation:
[Rewards] have effects that interfere with performance in ways that we are only beginning to understand.
There is a time to admire the grace and persuasive power of an influential idea, and there is a time to fear its hold over us. The time to worry is when the idea is so widely shared that we no longer even notice it, when it is so deeply rooted that it feels to us like plain common sense. At the point when objections are not answered anymore because they are no longer even raised, we are not in control; we do not have the idea; it has us.
Values shifted. Measures and rewards shifted. WaMu began pressing sales agents to approve loans while placing less emphasis on borrowers income and assets. They set up a system that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers. Ripple.
On December 27, 2008, the New York Times featured an interview with a former WaMu mortgage processing center supervisor. The article stated:
“John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and school teachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu was all about saying yes.”
The ads were everywhere as was the word-of-mouth. Customers marketed for WaMu. Think about it. You’re WaMu’s new target audience. Blue collar worker. Renter. Suddenly you’re in a beautiful home. You brag. The power of yes is real. Ripple.
Pressure to keep lending emanated from the top (the values center) where executives profited from the swift expansion. They acquired mortgage companies in California, Illinois, Texas, Florida and New York. Kllinger received compensation of $88 million between 2001 and 2007 (the culture ripple – reward). WaMu pressed sales agents to pump out loans while disregarding borrower’s incomes and assets (the action ripple). WaMu’s the Power of Yes ads and word-on-the-street fueled growth (the reputation ripple).
“We hope to do to this industry what Wal Mart did to theirs, Starbucks did to theirs and Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.”
– Kerry K. Killinger, chief executive of Washington Mutual, 2003.
Well Kerry, you were right about one thing. In five years you would not be called a bank – you would be called the biggest bank failure in American history. Congratulations.
He began to lead with his greed instead of his head, or his cold, cold heart. He valued the bottom line more than people’s well being. He lost site of the American dream. He will be credited in history as a catalyst in this economic crisis.
WaMu’s story ended eerily on the same day it began – September 25, 2008.
As you finalize your 2010 budgets, please take a moment to see what you value. What is getting measure, managed and rewarded? What ripple effect could that have on your reputation?