Growth does not come from cost cutting, but from customer relationships.
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Continental Airlines recently introduced a new policy in its frequent flyer programs. Beginning this month Continental passengers who fly economy class will be penalized: They will receive only a fraction (25 percent) of the actual miles flown. But if they fly full-fare economy (does anyone do that anymore?) or book on the airline's Web site, they will be awarded full mileage credit. By doing this Continental has joined a long list of companies that fail to understand their customers' experiences. As such, the new policy will most likely generate the opposite effect of Continental's desired outcome.
The past few years brought to passengers more choice in the form of lower-cost airlines. More corporations are placing pressure on their employees to travel with those airlines instead of Continental or any of the other established airlines. Passengers are resisting the pressure, citing their mileage accounts as the last frontier of perks to compensate for the hassle of travel. Continental just took away the last excuse that passengers had to stay loyal, and pushed them straight into the hands of the discount airlines. For 25 percent of the actual mileage flown, it is not worth the fight inside the corporations. Customers will choose other battles instead.
For busy travelers with a complex, heavy travel schedule, the travel agent is their lifesaver. They have grown to trust them to save the day after flight cancellations or with last-minute itinerary changes. Asking the customers to drop travel agents in favor of online booking is another failure to understand the customer experience and what is important to them. Unless Continental is planning to provide similar personalized service, it has no right to ask customers to stop using travel agents.
Full-fare economy is a fare that does not exist in corporate travel. Continental's own sales force is providing discounts over full-fare economy prices to win corporate accounts. Yet the company penalizes the passengers who are now supposed to fly on the negotiated rates. Even if a passenger asks for a full economy fare, his company's corporate policy will not allow it. Here is a case in which Continental has set the stage and then penalizes its desired passengers without understanding their customer experience.
The new Continental policy is proof of how the recent cost-reduction trend has blinded some companies to their customers' needs, and of how customers are now the main bearers of the cost reduction's consequences. This new Continental initiative is just one sample of similar cases in which companies fail to understand their customers' experiences and design their value proposition accordingly.
The newly desired corporate objective is growth. Growth does not come from cost cutting, but from customer relationships. It is time for companies to stop making customers bear the cost of their internal efficiencies and start delivering differentiated, premium-commanding experiences that will bring customers back.
Lior Arussy is the president of Strativity Group Inc. and the author of The Experience! He can be reached at email@example.com
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