The report went on to say that the days of $59 flights to Florida for the weekends are over. The airlines are even tacking on an extra fee for frequent fliers who will now pay anywhere from $25 to $60. The first checked bag now costs $15 and the second $10.
For years low-priced airline tickets have enticed passengers to travel. Airlines have offered frequent flier miles which reward customers with free flights after so many miles. That was a good idea for encouraging repeat customers. Recently, however, the airlines morphed that idea into a promotional effort by giving away enough frequent flier miles for a round trip with the purchase of certain products. T-Mobile had one such offer at Thanksgiving last year. If you signed up for a two year contract with T-Mobile, you received enough frequent flier miles for a round trip flight. With programs such as that, the airlines bastardized a good repeat customer idea into a price-dropping promotion. The airlines also have drastically discounted fares during certain times of the year. Whenever they have needed revenue, the airlines have offered special fares. In fact, their preferred method to stimulate business has always been to drop price.
When the principal way that you stimulate business is to drop price, you are creating several problems. One is that the revenue flowing in will not be enough to cover expenses, especially when the prices of materials, supplies, and/or labor suddenly increase. Even in times when expenses seem relatively stable, dropping prices reduces revenue, leaving your business vulnerable both in the short and the long term by robbing Peter to pay Paul. Eventually, you will have to pay Peter in some fashion. For years, the airlines have dropped prices and marginally stayed alive, often through mergers and acquisitions. This solution just puts two problems together, robbing Peter a bit longer while often delaying Paul's payment. With the rising price of fuel, Peter has come calling on the airlines.
Throughout all this, customers are being taught to wait for the next price drop before they book their flights. The airlines have inadvertently schooled customers to buy only "bargain" rates, never full price. A customer always asks for the discount and searches for the "cheapest" fare because that is the only way the airlines have distinguished their businesses. None of them promote a unique selling proposition. They only promote price.
This sole emphasis on price has brought airlines to a third problem. They are encouraging people who should not be customers of the airlines to use their services. I heard you mentally gasp at that statement because many of us think that everyone should be our customer. That's not true. Some people should not be our customers. When you base your business stimulation on price, you are dealing with some people who should not be your customers. They are not really able to afford your services. For the health of your business, you certainly cannot afford to deal with them because you cannot make enough revenue from them to keep your bottom line healthy. They are not profitable customers.
Doing business with enough of these people will land your business right where the airlines are today: They may end your business. The cost of basing your business on price is a high one. To do this successfully, you must have the right mix of products and/or services and a high degree of control on expenses. The airlines don't. Do you?
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