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3 mins Read

Improve Customer Experience Strategy & Keep Costs Low

Published June 13, 2013

What’s your strategy for business success? If, like Southwest and Costco, you're competing primarily on price—and have aligned this with your customer experience strategy—your company is likely among the best when it comes to delivering a kick-ass customer experience.

If, however, you're a low-cost leader like, say, Spirit Airlines, and you haven’t even developed much less aligned your customer experience strategy, your customers’ likely feel trapped and frustrated.

Recently, The New York Times ran an article about fee-happy, no-frills Spirit Airlines.  Yes, Spirit has clawed its way to profitability in the highly competitive airline industry, which is no small feat. But they’ve done it through bait-and-switch tactics, seemingly arbitrary policies, and a culture that—from the customer’s perspective—seems to take a perverse pride in delivering poor service.

describe the imageFor example, Spirit’s laundry list of “optional” fees makes most domestic airlines look downright transparent, starting with the fact that bringing any luggage is going to cost you $20 or more in fees.

Sustainable Price-Leadership Means Delivering More Than Low Cost. It Means Delivering Value.

The interesting thing is, Spirit CEO Ben Baldanza defends these practices in the name of delivering lower costs. In the article, Baldanza says, “I cringe a little when people say I don’t care about customers. We care about the thing that customers tell us they care the most about, and that’s offering the lowest possible fares.”

He continues with this gem; “We schedule our flights when the gate is available as opposed to when the customers want to fly. It doesn’t matter that no one wants to fly at 9 a.m. or 2 p.m. or in the middle of the night. The reality is that they want to fly when they get the low fare.”

Sure, on a literal level, Spirit Airlines is giving customers the bare minimum of what they want. But one of the points Mr. Baldanza is missing is that it’s always a vulnerable position when customers are choosing you only on price. But a couple changes on pricing policy from the big airlines, and Spirit loses the one advantage it has.

The other point he’s missing is this: Low-cost doesn't have to feel cheap. Far from it; among the many companies that compete on price and deliver a great experience, the feeling customers get is value.

A Winning Strategy for Low-Cost Leaders: Value-Driven Self Service

Far from feeling cheap and antagonistic—like Spirit’s offering—cost leaders don’t have to skimp on customer experience at all. Take Ikea, for example. Low-cost self-service isn’t a detriment to their customer experience, because they’ve optimized it around great design, large selection, and high-value products.

Or look at Costco. In giant warehouses around the globe, customers happily break down palettes of canned goods, clothing, beer, and books, carting flat-bed carts of purchases to the register by the gross.

Both these companies have made self-service a defining characteristic of the customer experience. Yet their customers embrace it, because the experiences are easy, enjoyable, and align with their expectations.

For these and other low-cost customer experience leaders, self-service creates value for customers and their firms, driving down internal costs and cost to customers. The result is market leadership and a sustainable competitive position that isn’t at risk because low-price is just one of the things their customers expect.

When Self-Service Meets Digital Innovation (Are You Listening, Mr. Baldanza?)

Certainly, Spirit Airlines doesn't have huge retail stores. But they can learn from these experience leaders. Because what Ikea and Costco have done is embraced and optimized customer self-service as a customer experience strategy, but within the context of their business.

So what can other low-cost leaders learn? The truth is customers self-serve almost as much as they can with every airline, not just Spirit. But what Spirit doesn’t seem to get is the potential to use customer experience as a lens through which to view, plan, and deliver excellent, cost-effective experiences across all channels and touchpoints—from check-in to the front counter, on the web, through apps, phone, and more.

Forrester Research, Inc. notes three components for low-cost leaders who adopt a self-service strategy: simple, automated, and error-free. Here’s my interpretation:

  • Simple: Simplifying products and services to make them more efficient reduces complexity and potential problems, making it easier for customers to succeed while benefitting your bottom line.
  • Automated: Leveraging digital innovation to automate interactions drives customer convenience at a very low cost across channels and touchpoints; from transactions and information gathering to product and service delivery.
  • Error-Free: When things go wrong, customers get frustrated and upset. “Making it right” takes time, money, and effort. A self-service experience that’s prone to error can’t really be considered a self-service experience anymore.

By delivering a self-service experience that works really well, companies can meet customers’ needs without requiring higher-cost human interactions. With this strategy as the lens through which experiences are designed, Customers will perceive self-service as an increase in value.

They’re not going to feel tricked or trapped, because in a well-planned experience, the lower prices they get are well-worth any “work” they’ve had to do themselves. Increasingly, customers prefer to do it themselves anyhow—provided, of course, that the experience is simple, automated, and error-free.

Hopefully, more price leaders will use low-touch, low-cost strategies like this to better serve their customers, instead of just to better gouge them.

Until then, at least one thing is clear. We know which airline to avoid...

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