I’ve recently been flying a bit and have been considering the business of nickel and diming that seems so popular with airlines these days. If the long lines for the Southwest are any indication, people are not enjoying being taken for a ride (so to speak).
Compare and contrast this with the experience of buying apps on the iPhone. With both the airline and iPhone, you are buying one thing, and then buying additional things to enhance the experience. This is why I think airlines fall into this trap. They believe that there is genuine value in checking bags, or buying softdrinks, or having a window seat, or sitting in a seat with extra leg room. In isolation, these things do add a unique value, but I think there are two major differences.
- The Implicit Expectations of Service vs. a Product
- The Transactional Cost
First, when you are selling a product, the product has clearly delineated boundaries. The product provides this and by itself is sufficient. A product can be “hired” to provide lots of different services, it’s packaging clearly labels the features it has, and one can match the “job” to the specs to decide if it will be up to the task.
A service on the other hand is hired to provide a very specific objective. Normally, this objective is defined explicitly, but has implicit expectations (i.e. provide me with a way to get me and my stuff to a new location), the subsequent “value add” charges run contrary to the expectations of the service that was purchased. It also starts to make the service feel like a con game — now that you’ve said yes to the first thing, give me more of your money. I’m required to check my bags because otherwise I can’t go home, so I’m forced to buy an “improved service” at the gate (even though I thought this was the service I was buying when I purchased my tickets – though I certainly don’t think this anymore). This, of course, seriously backfires as the following illustrates.
I was flying on Frontier back to CA and they had a storm delay that required an overnight layover in CO, but they were unable to get anyone’s bag nor compensate anyone because, after all, it wasn’t their fault. We went to go see if we might be able to get our bag, and overheard a man say in utter exasperation: “First, you make me miss a day of work and make me go find a place to house my family for the evening [which costs money]. Then, after MAKING me pay you to take my bag, you REFUSE to provide it for me for our overnight stay!” Having there be a fee, changed yet another implicit expectation, that the bags are now being handled in a special way.
Services are tricky because there are lots of expectations that are not spelled out very clearly in the business arrangement and the expectations of what they are going to get, can vary wildly from the reality of the service. I think this, in part, is why services tend to have such a horrible track record with customer interaction.
Second, there is an inherent transaction fee associated with each decision to “upgrade”. Each decision is one that you might later regret and as such gives people pause. Obviously when they mug you at the front counter to check your bags, there is not much choice, but when it comes to buying a better seat, one by the window, getting on the plane first, or watching the TV on the plane. Each is something you have to consider, leading to additional frustration that these weren’t included in the original purchase. A product on the other hand is already doing it’s job, and when you consider an “upgrade” you are deciding whether that addition is worth the price. No one is forcing you to do this, and so you more willingly decide on the things you want to spend your money on. The other ingenious thing that I think Apple does, which they probably do to save money on the Visa transaction, is bundle your weeks purchases into a single statement. This makes the small decisions all feel like a single purchase.
Expectations are critical to your customers success and trying to charge your customers for something they think they already purchased will lead to a death spiral. Trust is broken. If you are selling a service and something isn’t communicated properly up front, then provide it free and make sure you communicate better next time. If it’s a constant sticking point, find another way to extract the value you are providing.
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