Friday, August 27, 2010

It's time again for "If Airlines Sold Paint"

This humorous parody of airline pricing is being republished because of a story that appeared in the Wall Street Journal recently entitled "You Paid What For That Flight?"

Alan Hess, owner of American International Travel in Bountiful, Utah originally wrote the following tongue in cheek satire titled “If Airlines Sold Paint”.

We have taken the liberty of updating his soliloquy. This story is a succinct picture of the pricing madness as (rightfully) perceived by the consumer. This may help non-industry people get an idea of the insanity that we have to accommodate in the distribution technology for the industry.

Buying paint from a hardware store ...

Customer: Hi, how much is your paint?

Clerk: We have regular quality for $12 a gallon and premium for $18. How many gallons would you like?

Customer: Five gallons of regular quality, please.

Clerk: Great. That will be $60 plus tax.

Buying paint from an airline ...

Customer: Hi, how much is your paint?

Clerk: Well, Sir that all depends.

Customer: Depends on what?

Clerk: Actually, a lot of things.

Customer: How about giving me an average price?

Clerk: Wow that's too hard a question. The lowest price is $9 a gallon, and we have 150 different prices up to $200 a gallon.

Customer: What's the difference in the paint?

Clerk: Oh, there isn't any difference, it's all the same paint.

Customer: Well, then, I'd like some of that $9 paint.

Clerk: Well, First I need to ask you a few questions. When do you intend to use it?

Customer: I want to paint tomorrow, on my day off.

Clerk: Sir, the paint for tomorrow is $200 paint.

Customer: What? When would I have to paint in order to get $9 paint?

Clerk: That would be in three weeks, but you will also have to agree to start painting before Friday of that week and continue painting until at least Sunday.

Customer: You've got to be kidding!

Clerk: Sir, we don't kid around here. Of course, I'll have to check to see if we have any of that paint available before I can sell it to you.

Customer: What do you mean check to see if you can sell it to me? You have shelves full of that stuff; I can see it right there.

Clerk: Just because you can see it doesn't mean that we have it. It may be the same paint, but we sell only a certain number of gallons on any given weekend. Oh, and by the way, the price just went up to $12.

Customer: You mean the price went up while we were talking?

Clerk: Yes sir. You see, we change prices and rules thousands of times a day, and since you haven't actually walked out of the store with your paint yet, we just decided to change. Unless you want the same thing to happen again, I would suggest you get on with your purchase. How many gallons do you want?

Customer: I don't know exactly ... maybe five gallons. Maybe I should buy six gallons just to make sure I have enough.

Clerk: Oh, no sir, you can't do that. If you buy the paint and then don't use it, you will be liable for penalties and possible confiscation of the paint you already have.

Customer: What?

Clerk: That's right. We can sell you enough paint to do your kitchen, bathroom, hall and north bedroom, but if you stop painting before you do the other bedroom, you will be in violation of our tariffs.

Customer: But what does it matter to you whether I use all of the paint? I already paid you for it!

Clerk: Sir, there's no point in getting upset; that's just the way it is. We make plans based upon the idea that you will use all of the paint, and when you don't, it just causes us all sorts of problems.

Customer: This is crazy! I suppose something terrible will happen if I don't keep painting until Sunday night?

Clerk: Yes sir, it will.

Customer: Well, that does it! I am going somewhere else to buy paint!

Clerk: That won't do you any good, sir. We all have the same rules. And you may be able to buy paint for your bathroom and bedrooms, and your kitchen and dining room from someone else, but you won't be able to paint your connecting hall and stairway from anyone but us. And I should point out, sir, that if you paint in only one direction, it will be $300 a gallon. You might as well just buy it here, while the price is still $13.50.

Customer: I thought your most expensive paint was $200!

Clerk: That's if you paint around the room to the point at which you started. A hallway is different.

Customer: And if I buy $200 paint for the hall, but only paint in one direction, you'll confiscate the remaining paint.

Clerk: No, we'll charge you an extra use fee plus the difference on your next gallon of paint. But I believe you're getting it now, sir.

Customer:  Ok, I will be painting the full room, painting all the way around from where I started.

Clerk:  OK, that is $200.  Do you want a handle and a lid on the can?  That is $50 extra.

Customer: That is insane! Here is $250.  I think I'll drive on my next trip.

Clerk: Thanks for flying - I mean painting - with our airline.

We think you will agree that airline pricing is indeed insane, and in many ways has contributed to the current financial state of the airlines, as it is expensive to maintain so many fare types and to monitor compliance to the plethora of fare rules.

Add to that the negotiated and net fares that have emerged in the post-zero commission world, and the procedural and technical challenges just keep getting more and more complex.

Lastly and most insanely, add the endless add-ons to pricing for seat selection, aisle and window seats, etc. etc. and the insanity is complete.

Friday, August 20, 2010

Individual Relationship Management (IRM) trumps CRM

Part 2 of a 2 Part Series on Individual Relationship Management (IRM) versus Customer Relationship Management (CRM) which is flawed

By Guest Author, John Fleming, Executive Advisor to Solutionz 

Individual Relationship Management - IRM - is not a technology, but a cultural foundation that must exist in a company before customer intimacy can become a reality. 
While there have been many attempts at one-on-one marketing in the past leveraging CRM technology, IRM transcends that and takes you to the next level of customer intimacy. 

IRM requires that you understand the context and situation that your customer or prospect is in at the time that you are interacting with them (the who, what, when, where, how and why behind the interaction). This is the only way that you can be assured that what you are presenting is relevant and meaningful, reinforcing your relationship with the customer and building the engagement at the same time.

CRM will provide benefits operationally as the vast experience with the various CRM tools has demonstrated. And, in many instances the frontline and the customer will have a more meaningful interaction because a new level of attention overlays the transaction. 

Yet it does not answer the IRM questions posed above. And, as such the delivery system (see model below) becomes more static and fails when it comes to being agile enough to adjust to changing relationship circumstances. 

This may be fine if your business is based on operational excellence such as McDonalds, or Amazon. But, if for example your business is based on sustaining a growing member/customer base or attempting to achieve a preferred service provider status; then it is imperative that the individual relationship be a focus of the service engagement. And, note that we are now talking about an engagement rather than a transaction. 

The IRM process must begin with a complete understanding of customer expectations and whether done by survey or focus groups, or whether your front line provides you their observations and insights, this step in achieving an IRM-based culture can't be skipped.  

Inspired by the models and thoughts contained in Service Management by Richard Normann
The engagement of both a service provider and a customer in a relationship that will result in an exchange of value between both parties. Truly, a mindset that both parties have to win or have to feel better about the relationship after the engagement than before.
As stated earlier this outcome is the result of focused effort to build and sustain a cultural foundation that is based on serving customers or serving those that do at every level of an organization.
For more information about achieving Customer Intimacy through deployment of an Individual Relationship Management (IRM) strategy, please contact us at (813) 925-0789.

Thursday, August 19, 2010

The flaw in Customer Relationship Management (CRM) as the sole approach to Customer Intimacy

Part 1 of a 2 Part Series on Individual Relationship Management (IRM) versus Customer Relationship Management (CRM)

By Guest Author, John Fleming, Executive Advisor to Solutionz

For well over a decade, customer relationship management (CRM) practitioners have touted the marriage of customer information with demographic, psychographic and behavioral propensity data to help you get closer to your customer, member, guest or prospect.

While this has taken customer intimacy way beyond what was possible before the application of technology to the challenge of knowing your customers better, there are inherent flaws in this approach.

CRM, being technology driven, largely collects customer data from past transactions with the assumption that past behavior begets future behavior. And, by putting this information at the hands of the frontline while engaging a customer will help the sales or service teams be more informed, increase cross-selling and up-selling, increase close rates, reduce expenses and in general contribute to a firms operational excellence.

The benefits of CRM accrue to the organization. If it were a net sum analysis one can see that what is gained by the firm is at the expense of the customer. This is an exaggeration of course as customers are not led in and tied down as we pry their money from them but they are guided toward options with varying degrees of energy to buy additional options. Service contracts anyone? Or the softer online approach of: “Customers who bought this also bought:…” and the list plays out before you.

This is not a “relationship” this is a system to optimize the output from each customer contact. It does not consider the different preferences of customers at different points in time or with different products, or as we suggest, in different circumstances and with different intent and with different companions.

"Do I have a relationship with 17 million people?" asked Jim VonDerheide, vice president, CRM Strategies, for Hilton Hotels , I don't think I do," VonDerheide said, answering his own question. "Do I interact with 17 million people? You bet." 

The focus of CRM is optimization of transactions and processes and has little to do with managing a relationship.

But, let’s look at the customer side of the transaction. They are always the other side of the sales/service engagement. It would not occur without them. Yet, few of us has the same need or personal mindset every time we are on the customer side of the transaction.

We could be alone or with several kids tugging at our coat tails; we could be with a spouse or a business associate or buying for one of them; we can find ourselves an endless number of personal preferences or personality modes.

To make the customer experience one that meets or exceeds the customer’s expectations we would ideally be able to adjust to these individualized circumstances and ‘relate’ to the customer in a manner that would leave them in a better mind set than when we started. And, feeling that they would want to come back and better recommend us to others. The challenge then is to be able to relate to each customer transactions as a positive engagement of two parties who collectively strive for relationship that can be repeated time and again. Not just an interaction.

The bottom-line challenge is that CRM is one-dimensional, as is the typical customer profile. People are inherently multi-dimensional -- behaving one way [aka having different preferences] when they are alone, another when they are with their spouse/partner, another when they are with friends and yet another when they are with family. Add to that the dimensions of intent and situation and it becomes immediately apparent as to why traditional CRM really cannot reliably predict behavior.

Stay tuned for tomorrow's blog which will present part 2 of the argument for IRM - Individual Relationship Management.

Saturday, August 14, 2010

Driving - New Lost Cost Competition for Airlines? (turns out it is not so new)

For the last 4 years, it is a well known fact that I have been a champion of the drive market. 

This week I was looking back at a book that I co-wrote in 2001 with Kathy Misunas - Multi-Channel Distribution The Essential Guide.  I found this chapter.   Turns out that we first started talking about this then.  

In April of 2002 when this was published, nearly 60% of all travel was by car.  It is now over 85%.  This is not a temporary trend. 

If you would like to learn more about this, click on the image below register to download this free white paper about the opportunity to differentiate by serving this market.

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