Why the Airlines are doomed unless they adopt Value Added Service

For my final 2008 post, I wanted to do something fun.  And what is more fun than predicting the demise of an industry I don’t know that much about (except as a customer)?

I was reading Wendy Perrin‘s 2009 predictions in Conde Nast Traveler over the weekend, and the outlook isn’t good for airline passengers who value an excellent customer experience.  She discussed how the name of the game today–as anyone who has flown in the last year knows–is nickle and diming customers to death.  Most amenities have disappeared (like American adding back all those seats they removed a few years ago to give everyone in coach more room), and the few that remain you must pay for (pillows, blankets, food).

I’ve flown well over a million miles in the last decade, so I consider myself a savvy traveler.  I am a happy survivor of the tech boom, when money flowed like water, and everyone flew across the country for one hour meetings without a second thought.  Since that travel boom started in the 90s the airlines have competed on price not service, demand has continued to climb from leisure travelers taking advantage of low fares, and after a decade of this model, today’s flying experience is about on par with a cross country bus trip. If the airlines continue down this path, they are doomed.  Why?

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The End of Free Consumer Support? Finally.

I am on vacation this week, but couldn’t resist a final pre-Christmas post to rile things up for the holidays. I just read a Washing Post article “The Bangalore Backlash: Call Centers Return to U.S.” which hits on enough controversies to keep me blogging for a month.  Let’s start with this one: Dell’s new “Your Tech Team” service, which provides a US-based support engineer and a wait time of 2 minutes or less for $13 a month or $99 a year. Add to that Apple’s successful in-store Genius Bar and Best Buy’s in your face Geek Squad, I suspect that 2009 will be the year consumers are finally forced to admit that technical support for increasingly complex and inter-dependent consumer software, computer equipment and intelligent devices offers immense value and they are willing to pay for it.  In other words, Value-Added Support has crossed from enterprise to consumer support.  And it is about time.

Judging from the multiple inquiries I’ve received from consumer technology makers in the last few months, many companies are re-evaluating their current policies about free vs. fee support. Some companies still offer free consumer support with no service contract, and as some of them will tell you, even a single support incident from a customer may eliminate any profit from the sale of the product.  And as the economic recession forces even more discounting this holiday season, these very narrow profit margins are been squeezed even further. To paraphrase a cloying line from the holiday classic, “It’s A Wonderful Life,” Every time the telephone rings, an angel gets…the quality of support they are willing to pay for.

Higher adoption of premium support? Not so fast.

One of my (many) pet peeves as an analyst is how certain ideas are repeated so often they become accepted fact, even if they aren’t grounded in reality.  The worst of these is the one you’ve all heard me grouse about before:  the oft repeated lie that 70% of CRM implementations fail.  Not true!  What is failure?  What is success?  How do you claim failure when you never defined success criteria? Aigh! But I digress.

I’ve recently had several companies remark to me about how in the age of proactive support and remote monitoring, more customers are opting for premium support contracts.  It makes sense to me.  When you look at a service contract through a Value-Added Support lens, it is logical that companies would want more services because they accelerate time to value for the purchase.

Accept it isn’t true.  I found our SSPA Benchmark information on this from 2003 and compared it with the 2008 numbers.  As you can see in the graphic, things haven’t changed much at all in the last 5 years.