Learnings from the no-frills model...
Ryanair has unveiled its new strategy: being nice to customers (followed by a sharp intake of breath). The no-frills model, once a novel model, has turned the airline into Europe’s second-biggest airline by passengers flown, behind Deutsche Lufthansa AG1. Now widely copied, intense competition is threatening the model and its success.
To win back customers, Ryanair relaxed hand-luggage restrictions and redesigned Ryanair’s website. It cut fees and told staff to be less confrontational. “If I had only known that being nicer to our customers was good for business I would have done it years ago,” Mr. O’Leary says.
Ryanair is now targeting Germany, in particular. Lufthansa, meanwhile, is seeking to build its own low-cost business and “won’t be squeezed out of its home market,” Chief Executive Carsten Spohr said in an interview last year.
Does it take competition for companies to be nice to customers?
Let’s take a railway. Competition is coming from buses, car sharing, family cars and airlines. The family car will win over short distances, but to entice these potential passengers, more must be done on offer. For example: group fares easily purchased, or a real discount, ancillary services, electronic ticketing, real time information, more coaches on routes during high capacity issues and flexible season ticket sales.
Being low cost doesn’t mean that you can’t be nice to your customers, it’s an opportunity to be more efficient in the journey which means more use of technology to create a seamless travel experience. This is great customer service already. How is an airline able to deliver a low cost but efficient service? By focusing on the customer: quick turnaround of a flight, onboard services, a small range of fares that everyone understands and the ability to print at home or even better, mobile ticketing.
Where new competition like car sharing companies have got it right, is that they make it easy for their customers to find out what they are buying and how they get from A to B. They use peer sharing information about the travel experience - this is the number one way to win or lose passengers.
However, infrastructure charges are expensive for a railway, on top of maintaining the fleet, this is then reflected on the price of a ticket and that is picked up by the passenger.
Yield and fare management systems can provide a better means in which to spread the load across multiple services and maximise revenue. We don’t see good last minute buys either, most has to be bought many weeks in advance in order to benefit, with no flexibility. If railways can get the pricing right, there is an opportunity to recover those lost passengers.
Ancillary services, fine tuning the customer experience
One way of making that extra yield on existing bookings is to offer ancillary services. Unbundling from the airline industry allowed airlines to then start offering extra baggage, seat selection and other services such as food and beverage or even carbon credit purchase.
Today’s technology opens this opportunity of upselling services that travellers are willing to pay for to make their journey more enjoyable. This comes from the low cost carrier model and has served them well over the years when selling seats very cheaply was a priority.
Railways too can exploit the available technology and increase their yield on journeys, booking a seat with a table, ordering food before travelling, a daily newspaper. There are many add-ons that could provide the customer with a new experience.
So, be nice to your customer, build loyalty, create desire through a comfortable travel experience, the rest they say will take care of itself.