This process – referred to by Time as “the unbundled skies” – points to a business model that I see becoming more prevalent, and not just in the heavens, as price-sensitive brands lower entry points in order to get customers to commit, and then use “upgrades” to restore margin and, according to the article, add another 50% or so to the real price. Pay less, get less. Want more? Pay more. Ryanair have even suggested, somewhat controversially, that “more” could include access to the toilet. In fact, according to one consultant quoted, there are up to 35 add-ons available when you fly, ranging from baggage and food fees to flight-delay insurance and keeping the middle seat empty. You literally get what you pay for.

This seems like an expedient answer to customers’ demands for cheaper goods. Lure them in – then trick them into paying more. It’s not exactly customer-friendly but at least, some would argue, it’s a way to compete.

True, but changing the competitive model this way is not without its consequences. One is that as the product itself becomes less valuable and valued, service now comes not just at, but with, a price. That in turn shifts the emphasis from what customers get to what do they not get, and what shortfalls they are prepared to do without.

For the moment what’s happening in the aviation sector amounts potentially to a complete economic rebalance of the product at that end of the market. As the article points out, “In the unbundled world, airfare is merely the price of admission to get on a jet. If you crave comfort, convenience, less stress, decent food — what was once called good service — expect to pay up.”

In time, the service itself, not the seat, will become the real competition point, as customers look to ‘build their own flights’ made up of base product and services that they are prepared to ‘add to cart’. Staff meantime will find themselves being judged on their ability to up-and cross-sell services in order to make targets.

We shouldn’t be surprised. As sectors continue to fill with competitors, radicalization of branded business models is inevitable, with all-included at one end of the market and not-included at the other, and increasingly little between them.

While the model has far wider applicability than the airline industry, the dilemma for brands in such a scenario is that when you uncouple what people get from how you want people to feel, you reduce every part of the experience to a transaction, and every element of loyalty to the same level.

Everything becomes “do I or don’t I?”

As to where this might go, well that seems fairly predictable too. As the fight for seats gives way to loss leader seat strategy, and a squabble over a la carte services and the quality and profitability of those services, medium-term we’ll probably see airlines respond by using a mix of lower fares, bundled services and loyalty incentives to adjust and respond to value perceptions.

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Neither airline can be considered a strong business or a strong brand, but perhaps consolidation will finally lead to an improvement in business results and customer satisfaction. The only question to my mind is which of those two things is the chicken and which is the egg?

The conventional wisdom is that airlines suffer from systemic problems that make it tough to run a successful business. This post from Investopedia suggests four basic reasons why airlines struggle financially.

1. Unprofitable airlines keep flying and so undermine demand for the other carriers

2. Fixed and variable costs are high making it difficult to respond to changing market conditions

3. Exogenous events can have a big impact on demand e.g. volcanic dust clouds

4. Airlines have a reputation for hassle and bad service

Bankruptcy, which would often see normal businesses shuttered for good, seems to be a safe haven from which the airline uses to effect cost efficiency plans and upgrades they could not afford otherwise. They then emerge from bankruptcy with the expectation of improved financial performance, but the same dismal customer service. What is the definition of madness? Doing the same thing repeatedly but expecting different results.

Airlines in general have a low customer satisfaction score by comparison to other industries and it is notable that the two smaller, value airlines – JetBlue and Southwest – achieve satisfaction scores significantly higher than the traditional carriers: Delta, US Airways, American and United Airlines. We saw exactly the same picture last time when we measured U.S. airlines in BrandZ back in 2011. Southwest was far better known than JetBlue, but both brands were meaningfully different from the competition and poised for growth. None of the legacy airlines came even close to matching the equity scores achieved by the value airlines, which were seen to be setting the trends for the category.

Brands that fail lack a meaningful difference compared to their competition. They tend to be equally well-known but they are unable to establish positive and differentiating perceptions of the brand, particularly among the people who use them.

Of course, you don’t have to offer great service to make money in the airline business. Ryanair in Europe makes more money than British Airways, has a lousy reputation for service but it is well-known for being the cheapest. The problem with the traditional U.S. carriers is that they need to command a premium to keep flying, but are not able to deliver the service necessary to justify that premium. Unfortunately, I am not sure the merger between American and US Airways is going to make any difference on that count.

So what do you think? Is customer service the chicken or the egg when it comes to airline profitability? Please share your thoughts.

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While President and chief brand advocate, we conceptualized Song in late 2002, it began flying April 15, 2003. Song was merged back into Delta on May 31, 2006, during Delta’s bankruptcy process. Today on Branding Strategy Insider, more on the Song story and how we created a differentiated brand in a cluttered, uninspired marketplace:

Once we had gone “boldly, where no man has gone before  . . . ” and designed an airline brand for women, it was important that men not be alienated in the process. Shortly after the new brand was introduced, we did some perception testing and found that while women “got” the brand right away, men were “curious” about it. That, of course, was a good thing, since their curiosity would lead them to at least try it once! Our marketing and product development team quickly got to work. Knowing at the outset that men would focus on the onboard satellite TV, the team insured that our offerings included a few ESPN and business channels like CNBC and Bloomberg. We also decided to create an interactive trivia game using the TV monitors, and enabling customers to compete against each other, no matter where their seats were on the airplane. This turned out to be a big hit. As did the good-sized (yet healthy) organic sandwiches and wraps, and imported beer we offered with our “food for sale” program.

One of the key gender-neutral elements of the Song brand was its dedication to making flying fun again. Our Flight Attendants were chosen for their pleasant personalities, and were encouraged to personalize, in a fun way, the in-flight service. This included the pre-flight, safety and arrival announcements, and the manner in which they sold food and drink. After a few months, we decided to commission the production of “Song of the Day” safety briefings, which set the usually tedious safety announcements to a variety of musical themes ranging from the Irish Jig to Flamenco to a Barry White-like Soul rendition. Even the FAA Inspectors liked these, since they all got the customers to pay attention to the Safety briefings like they had never done before!

Throughout the brand-building process, we continuously surveyed our customers to see if we were on the right track and where we should focus our energies to make improvements. Interestingly, all of the good things we did and offered seemed to be expected by the women in our audience, who were, of course, our target. Again, they “got” the brand and expected us to meet the brand’s promise. Men, on the other hand, once they tried it, were perhaps somewhat surprised, but clearly more impressed. In fact, flight attendants occasionally reported that they sometimes had trouble getting people off the airplane.

One of the other measures that customer service organizations use to gauge their standing in the marketplace is the Customer Compliment-to-Complaint Ratio. This ratio is generally skewed toward the complaint side, since customers are much more prone to write the company about an issue they had, than they are to compliment a company about their experience. In the case of Song, the ratio went the other way. Customers wanted to let the Company know they liked their experience and wanted more of the same. Interestingly, a disproportionate number of complimentary letters came from men, many of whom were captains of industry, including the CEO of one of our nations largest railroads, the creator of an iconic British brand and airline, a world famous celebrity wrestler and quite a few Jazz and Rock musicians. But most interesting of all, the coveted Frequent Flyer base, who were not-at-all our target, voted over-whelming support for the new brand in a special Frequent Flyer survey Delta commissioned.

Was it true that “Where Women Go, Men Will Follow”, or were the gender–neutral attributes of the brand strong enough to attract the non-targeted audience? Probably, a little of each, but what became clear to us as brand builders was that alienating any potential customer was not a good business practice, but building on curiosity, choice, personality and fun would stimulate traffic in an otherwise mundane, commoditized industry.

To deliver on the brand promise every day, we needed the employees to buy-in and become completely engaged. How we went about this most important aspect is the subject of my next installment on living the brand!

— John Selvaggio is the former President of Song Airlines. In his 30+ years as an executive in the airline industry he helped airline brands discover and adopt new strategies to enhance the customer experience and drive profit in a highly competitive environment. As partner and brand strategist at The Blake Project, he helps airline brands create value through unique brand differentiation workshops that lead airline brands out of the commodity space.

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As the creator of the airline, and builder of the brand, I am at once gratified by their fondness yet disappointed that the airline became a casualty of bankruptcy and the need to economize – maintaining two independent airline brands and workforces was more expensive than one, and austerity was the rule of the day.

Yet people still talk longingly about Song, even though it hasn’t flown in six years. Why is that? Isn’t the airline industry just one big commodity provider? For the most part, yes, certainly in the case of the legacy airlines it is true. Each of them has created their airline to be the “carrier of choice” for the businessman.

But as niche airlines have developed, we have seen product differentiation start to take shape. Most people still remember People Express, a true low cost carrier that appealed to the common man versus the traditional well-heeled customer, and was dedicated to the proposition that everyone should be able to fly. On the other side of the spectrum was MGM Grand Air, which provided an uber-First Class experience, but was expensive to fly, served very few markets and not enough customers to be successful.

How have some of the other non-legacy airlines differentiated themselves? Well, for Southwest, it was the peanuts and the flight attendant humor. For Spirit, it’s ultra-low cost fares, but you must be willing to pay for everything else, yes even charging for toilet use was announced then scrapped. JetBlue introduced live in-flight TV and an upscale low cost product, while Hooters Air chose to appeal to the …well, you know who you are.

So then, what was the Song brand about and how was it developed? The first differentiating element had to do with the fact that it was a “carrier within a carrier” (a very traditional carrier at that); and, no airline had ever successfully launched a “carrier within a carrier” that worked! Obviously, we were going to have to do something very different, and not be just another low fare carrier, as was Delta Express, Delta’s previous carrier within. Very different meant we would not be the “businessman’s airline”, so why not be the leisure woman’s airline? No one ever built an airline around women before, and since they represented 51% of the population, why not let the other umpteen airlines fight over the 49%? And, as we subsequently discovered via data-mining, over 80% of family vacation travel was booked by women. Wow, building a brand that would attract women would be exciting and potentially lucrative! The Red, White And Blue paint jobs of virtually everyone else might be scrapped for a color that would appeal to women. How about green – we could “own” green, because no one else did. And not just green, how about “parrot green”, as Kate Spade would call it; and why not have Kate Spade design the Flight Attendant uniforms and accessories? Then it was, why not do Women’s Focus Groups and find out what women wanted on airplanes?  Healthy Food – OK, let’s make it organic and charge for it. Charge for it?  No one ever paid for airline food, and it was in fact, the butt of many jokes. But if it was organic, that would differentiate it enough that people might pay. And they did. How about drinks – wine, beer, OK, but how about Martini’s? A Martini Bar in the Sky serving Cosmo’s, Appletini’s, Song-A-Tini’s (cranberry juice based), a total of five in all, and all hand-shaken by your well-trained, smiling Flight Attendant for just $5.00 apiece. An instant hit. Sometimes, we would sell a total of $1600 per flight  – just organic wraps and treats, and martini’s!

What else did women want? Something to keep their kids busy so they could get some free time on the flight. TV did the trick. Bigger screens and digital vs. analog gave us an advantage over jetBlue. How about exercise? Yes, we even had exercise bands for passengers to use in their seats and “work-out” while they flew. And good music for them to enjoy with their headphones on, while the kids watched TV. But, what kind of music?  When we asked, it seemed everyone had a different Song going through her head. Which one should we use? Hmmm…why not just name it “Song” and give the customer their choice. Why not make everything about choice, – the music, the TV channel, the food, the exercise, the martini – a totally differentiated airline in a commoditized industry. And what would you name an airline that let everyone march to her/his own different drummer? Yes – “Song” was born, and it was, quite literally, a “carrier of choice”, designed for the woman who appreciates the difference between being “One In a Million” instead of “One Of a Million”.

Great, but can an airline survive if it only appeals to women and children? Here’s more on that and airline brand strategy.

— John Selvaggio is the former President of Song Airlines. In his 30+ years as an executive in the airline industry he helped airline brands discover and adopt new strategies to enhance the customer experience and drive profit in a highly competitive environment. As partner and brand strategist at The Blake Project, he helps airline brands create value through unique brand differentiation workshops that lead airline brands out of the commodity space. Contact us for more.

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It is all a long way from the launch of these three business-class airlines only a matter of months ago. The chance to focus on one particular market segment with a very specific positioning made a lot of sense. This was certainly the viewpoint of Deloitte partner and airline expert Graham Pickett, who believed that Silverjet, in particular, had a lot of potential. ‘It is a hassle-free experience. When you go to Silverjet, you go into a terminal dedicated to Silverjet passengers. The only aggro you have is getting off your backside to go and sit on an aircraft,’ he said.

The benefits of a clear brand positioning for a single target segment were also apparent in the cut-through achieved in the three airlines’ ads. Eos’ print executions showed a couple attending a packed tennis game, except for their section – empty save for a dedicated waiter. The strapline was ‘By removing the crowds, Eos Airlines has completely transformed transatlantic travel. No lines, no waiting, no stress.’ If only it had added: ‘And no chance of staying in business’, the ad would have been spot-on.

While rising fuel prices may be responsible for the immediate downfall of the three airlines, the real reason for their demise was targeting.

While a single positioning to one target segment is attractive from an execution point of view, the reality is that you need to target multiple segments to make serious money. The economic advantages of multiple target segments almost always outweigh the marketing benefits of a tight, singular positioning to just one group.

Two segments increase the overall size of the market potential you can attract. They also provide a hedge against economic fluctuations. When the economy is good, for example, most business schools make their money from executive education with fat, happy corporations. When the economy slows, they switch focus and make most of their money from the individual MBA candidates recently released by their employers with a big exit payment and time on their hands.

This dual targeting strategy is particularly appealing to airlines because, thanks to aircraft construction, it is remarkably easy to target two distinct segments and service both separately. In economy, punters can enjoy their free mini-bottle of Sangria, while, up front, the pampered masses lie back sipping their Dom Perignon. Both are oblivious of each other and the fact that the airline needs both types of consumer to survive.

The only viable model for airline success is to target economy and business passengers. If you don’t believe me, consider all the big boys who continue to operate a mixture of both offerings on most of their flights. Still don’t believe me? Look at all the low-cost carriers such as Britain’s easyJet, Australia’s Virgin Blue and the US’ Jet Blue. Each started with a specialist focus on the economy segment, but are now devoting increasing proportions of their planes to business-class seats and targeting premium travelers.

They say things come in threes. Maybe, in marketing, what we really mean is that segments should always come in twos.

30 SECONDS ON … BUSINESS-CLASS ONLY AIRLINES

– MAXjet introduced its fleet of Boeing 767s in November 2005.

– Operating out of London Stansted, it initially flew between London and New York and later added flights to Las Vegas and Los Angeles.

– It ceased operating and filed for Chapter 11 bankruptcy protection on 24 December last year after efforts to raise more capital had been
unsuccessful.

– Eos also launched in 2005, with a fleet of Boeing 757s, flying between New York’s JFK airport and London Stansted.

– It sought bankruptcy protection at the end of April and stopped all flights after failing to win investment.

– Silverjet launched in January 2007, flying from London’s Luton Airport to New York and Dubai.

– Shares in the airline have been suspended after funds it had secured as part of a loan agreement failed to arrive in its bank accounts.

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