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Many of us were struck earlier this month by the brash comments of Ryanair CEO, Michael O’Leary, regarding his customers and the extra fees his airline charges for certain behaviors.
If you are not familiar with the story, an English family of five was charged 300 Euro (about $380) for failing to print their boarding passes in advance. When they got to the airport in Spain, they were forced to pay the fees in order to board their flights home. When the mother posted the experience to Facebook, it generated around a half million likes, and the airline’s CEO felt compelled to respond:
“We think Mrs. McLeod should pay 60 euros for being so stupid,” he said. “She wasn’t able to print her boarding card because, as you know, there are no internet cafes in Alicante, no hotels where they could print them out for you, and you couldn’t get to a fax machine so some friend at home can print them and fax them to you… She wrote to me last week asking for compensation and a gesture of goodwill. To which we have replied, politely but firmly, thank you Mrs. McLeod but it was your ****-up.” Time
Eventually, he clarified his statement:
After describing the woman and anyone else who doesn’t print out boarding passes in advance as “idiots,” O’Leary later backtracked slightly, explaining to the Irish Independent, “I was not calling her stupid, but all those passengers are stupid who think we will change our policies or our fees.” Time
As part of an oligopolistic environment such as the airline industry, Ryanair does not have to be concerned with the same competitive pressures that many other companies do. Imagine if the pizza parlor in your neighborhood, tacked on huge fees and called customers who incurred them idiots publicly? How long would they be in business?
The rules are different for oligopolists. In the case of bank customer service, we are often held hostage by switching costs and lack of differentiated alternatives. In the airline industry, air travel has been commoditized and people’s choice of airline is usually dictated by cost, time, and loyalty rewards — not customer service.
The reality is that airlines can become more profitable by charging excessive fees because consumer choice is so limited that the downsides are not that high. (Unless you try to charge soldiers returning from war $200 per bag.)
In the end, what I found most interesting was how Mr. O’Leary views his customers. His comments fed the stereotype that businesses and customers are at war and that businesses are willing to step on their customers if it will create a nickel more in profits.
But the stereotype is not true for most businesses.
Having been involved in a number of businesses throughout my life and studying businesses both big and small, I can tell you that “screwing” the customer is not what drives most businesses. Does it drive some businesses? Yes, I freely concede that; however, that impulse should not be confused with profit-driven motives that are not parasitic in nature.
Are most businesses looking for more ways to be profitable? Of course. Are most looking for ways to get the most out of each transaction? Sure. But those objectives do not necessarily equate to a negative result for the customer.
You can be more profitable by being more efficient. You can maximize transactions by selling customers other products or services that add value to their lives. Businesses can provide value to customers and receive value in return, without trying to squeeze the customer for every possible advantage.
Though they can be viewed as such, profit and people are not inherently antagonistic.
The two can coexist and even thrive together. In competitive industries, I would contend that the two must coexist for firms to survive over the long term.
Stepping on your customers is a bad idea.
Sure, there are companies out there that view their customers as “marks,” objects of a game in which the objective is to take as much as possible and give as little as possible. They consider business a zero-sum game.
When I look at a customer, I see someone to whom I want to provide value, because I know that if I provide them value, they will return it to me in spades over the long term.
To me, that is the best way to maximize the value of the customer over the long term, and besides, it just feels better!
For more about the Ryanair kerfuffle and some interesting points about airline fees, check out the following articles:
When you look at your customers what do you see?
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When I see my customers I see someone who is going to spend a good amount of money on a product that still seems very mysterious. Yes, they can buy it from many brokers, but I like to humanize and educate them as much as possible. Ultimately, I see someone who needs help in not only understanding the policy, but what happens after a claim, or things you can do to avoid claims. This helps make it a little better than a visit to the dentist………:).
I ALWAYS try to do what’s best for the customer; I never let money dictate my choices.
That’s a great way to look at it. So much mystery in insurance, looking at customers as people who will need guidance is a great frame of reference!
What was the fall out of this debacle, Adam? I think I may have skirted this issue when it was blowing up. There are so many PR crises that become customer service situations, too, that yet another jamoke CEO without training is boring.
I have to wonder sometimes if this isn’t just a publicity hound staying something stupid and then backtracking with the mea culpa thinking it’s all going to blow over.
It’s hard to say what the fallout has been. As I understand it, the CEO is sort of known for controversial statements.
Could it be a publicity ploy? Maybe. Sort of to the point in my post, depending on the routes and gates this airline has, they might be in such a position of power that it doesn’t affect them much.
I only step on Welcome mats. That.is.all:)))) Cheers! Kaarina
And tumbling mats, right?
Yes! Although I haven’t done that lately:)
Like you said above, Adam, businesses who want to survive over the long haul need happy customers. And a business who sees every customer as a VIP, and treats each accordingly, has a good head start in resolving an issue if something DOES go wrong. This reminds me of your post about the three states of customer service — proactive, reactive, and inactive!
It’s tough Michelle because while I think there is a lot of opportunity for firms to use customer service as a competitive advantage (think Southwest) — the reality is that in these markets with a few big players, businesses can be profitable using a penalty model such as Ryanair.
Adam, the thing that is funny about this to me is that most businesses cannot survive without their customers.
Ryanair is famous for low fairs and get more business than they can handle likely because of it. I understand that they don’t want to be flexible in the least on their policy as that’s what got them to their model but hey, calling someone out publicly is a bit much.
I have a few clients who I would love to kick in the butt and find a firm stance with good reason is the best way to handle something that just doesn’t fit a contractual obligation. If I call them out I lose them and their respect.
I certainly won’t get any new business if I do.
I agree Ralph. Not sure why he called them out, other than as Jayme intimated, a potential publicity ploy. Either way, there are times for rules and for businesses to stick by those rules. It happens everyday, but if the rules are supporting surprise fees and other “gotcha” revenue streams, the company should expect some backlash.
I like Ralph’s comment. It comes down to respect and another word – DIGNITY. Everyone deserves to be treated with dignity–even a supposed enemy. Why wouldn’t you treat a customer that way?!
Hi Lisa, dignity is a great word in this context. And like respect, a little bit of it goes a long way!
“Stepping on your customers is a bad idea.”
Agreed. But many companies and customers do feel like they are at war with each other. Companies are trying to make a profit and customers want to get the same product for less–it’s two opposite ends. The customer is not always right, but that doesn’t excuse Ryanair’s comment. There were plenty of other ways to handle that situation, still make your point but not run all over your customers.
You make good points all around Saurabh. While there will always be unreasonable customers, I think most people understand that businesses should make a profit. But attempting to maximize that profit in the short term can often lead to poor long term results. Thanks for the comment!