It was inevitable, I suppose. Spirit Air steps up to the plate with a fee for carry-on baggage leaving passengers no doubt arbitraging between check-in and carry-on bag rates. Weighted, of course, by the probability of enforcement, or your ability to persuade the flight crew that the refrigerator box with a gaffer-taped handle and fake “Tumi” logo will, in fact, fit in the overhead bin. In England, your “bin” means your trash can, which seems very fitting.
Anything you can do, Ryanair can do better. Time to look at charging for using the loo, it turns out. I’m not sure if it’s the money or the symbolism for Ryanair; I sort of imagine a group of execs sitting around brainstorming new cost saving ideas and coming up with that one. “The PR value of the announcement is worth more than the cost of implementation” would seem like a good argument, from the school of PR that suggests any time they can spell your name correctly is good PR….
Our instant reaction is horror. What a recipe for Detractors. If Richard Branson seems to be the epitome of an airline executive who practices an NPS mindset, Michael O’Leary, the highly quotable CEO of Ryanair is his mirror; playing Darth Vader to Branson’s Skywalker. And yes, I know those two ended up on the same side.
O’Leary seems to covet the role of villain. If you ran a root cause analysis on Detractors at Ryanair (I’m not necessarily going out on a limb by suggesting they might not do this), their strict no-refund policy would show up as a key driver. Addressing his #1 complaint, O’Leary framed this closed loop response this way: “… say my granny fell ill. What part of no refund don’t you understand?”
So that’s conclusive, book closed. We, the judge jury and executioner of performance in NPS land can confidently predict that they are out of business. And we should assume Spirit Air is going the same way, after all, they seem to be following the same logic.
Except that it works for Ryanair, and it might just work for Spirit. Works? It works spectacularly. Ryanair market capitalization exceeds that of BA, Lufthansa and Air France (although admittedly, that’s not a strong industry group for shareprice and profits have been beaten down recently). So NPS must not work. Ryanair MUST have low NPS and yet they are winning.
Perhaps it’s the exception that proves the rule?
Possibly, but you can build a plausible argument that both Ryanair and Spirit are right in their choices. The governing factor of course is price – providing the ultimate context for NPS.
Here’s how it works. NPS is measured by individuals in the context of expectations; we have a notion of what we expect based on marketing and prior experience with products and services. This is not the same as what we want. I want my cable guy to show up 10 minutes after the my request to fix my service; I expect him to show up on a scheduled date as promised. Actually, for my cable guy I expect him to randomly arrive exactly when I’m not available … but I digress. What we expect is the context in which NPS gets formed.
And we know that expectations get shifted by many factors – but price is the biggie. Shift the price, shift the expectations - after all, it’s the only numeric comparative component we have for products and services. Ryanair and Spirit are embarking on a strategy to reduce price so dramatically that their expectations are rock bottom. In this instance it might be “Ryanair will phyically move me to my destination safely, at some time during a given 24 hour period”. These expectations may be elegantly aligned with a $5 airfare. Against that expectation – bingo – Ryainair exceeds and creates Promoters.
Baggage policies on the surface however, look like bad profits. However, that’s only in the context of prior industry expectations. There is no logical business reason that you should have a bundled baggage allowance; I say bundled, not free, as you are paying for it somewhere in the ticket price. The reason it’s a change at all is simply because airlines traditionally – in an era of much less competitive prices and costs – bundled a lot of services (including use of the toilet). Our expectations have been formed on that traditional industry model, not for any inherently logical reason but just because of tradition. In fact, you could make the argument that it makes more sense to charge for carry on bags, as you are simply segmenting your customer base and providing a discount for customers who don’t use that facility! In fact, many of Spirit’s customers wrote in to favorably make exactly that point…. activated Promoters in action?
The bad profits argument can be overplayed. Just about any type of fee or charge could be considered bad profits, yet logically there is no reason we should penalize one particular pricing mechanism – unbundling in this case – from another. Rather, I would suggest we gauge bad profits against the measure of transparency and expectation. On both counts, you could build a case that Ryanair is in good shape. You could argue their website is one constant upsell game, but where is the crime there? On the contrary, you could argue that Ryanair comes closer to transparency in their brand promise than full service airlines that advertise the opportunity to fly in a state of nirvana as you are pampered by exemplary service.
Many companies understand that the best way to create an army of Promoters is to change expectations in an industry. Usually that’s upwards – through creation of a breakthrough product or service. In the airline industry, it just might be downwards through expectation reduction and low fares.
As O’Leary puts it: “The European consumer would crawl naked over broken glass to get low fares.” Sounds like low expectations of service that perhaps even Ryanair can deliver on.
