Decisions must pass the value test
Written by Tom Richard | | tom@tomrichard.comStrange economies bring out strange behaviors. The airline industry is one of the most visible, demonstrating strange behavior as it tries to cut costs, improve efficiency and make more money.
One key to business survival is to be profitable yet competitively priced. Therefore, on the surface, it makes sense that some airlines have chosen to charge a nominal fee for checking a bag. However, this nominal charge has led to an unexpected, costly ripple effect.
Airline passengers are carrying their luggage onto planes to avoid being charged the fee to have it checked. As the overhead compartments fill, the flight attendants must continually stop the boarding process and check the bags that do not fit. Hence, zero fees collected for these bags and extra work for the flight crew, which costs the airlines time and money. Adding insult to injury, the delays and costs are repeated when the flight lands.
What seemed like a good, money-saving idea for airlines is quickly proving to be more costly than the previous “no bag-check fee” policy. Said more simply, it is not working.
Flawed decisions like this can be seen in virtually every business throughout the world. To cure these flawed decisions, you must first cure the thought process that led to the flawed decision itself.
In both business and personal settings, we are all trying to cut costs, improve efficiency and earn more money. Whether scanning a financial statement or a personal checking register, it is natural to scan for line items to address. We ask ourselves what items can be reduced, what areas can be improved and what can be done to bring in more money. In spite of the thoroughness of this line-item mentality, it fails to address the bigger picture — providing the highest value.
Many airlines have stopped throwing peanuts and bad food at passengers. Instead, they offer better options for a nominal charge. This change has cut millions of dollars out of the airlines’ expenses. Yet, if passengers are not eating, how are they entertained? Ah, they have added value there, too, with in-flight wireless Internet access, personal movies-on-demand and satellite television — all as options for a nominal charge. So, passengers may have a delightful in-flight experience — if they choose to pay extra for their airline’s highest values.
Charging for luggage may appear attractive when considering it as a one-line item; however, it fails the adding-value principle and that is why the policy is failing miserably. Other profitable, value-adding options are working well and have the added bonus of boosting the morale of the company, the employees and the customers.
Ask yourself frequently if you are adding value to each situation you encounter. For more ways to work the value test into your business go to www.boltfromtheblue.com and enter FRUGALITY in the blue print box.
Tom Richard is a Toledo-based sales and marketing consultant, keynote speaker and owner of Bolt from the Blue direct response advertising. Call (419) 441-1005.
