By Peter Armaly
There’s a great line in this Wall Street Journal article about airlines and the way they structure and price their fare classes. The CEOs of Delta Airlines and American Airlines were interviewed, and at one point, were each asked to comment on the size of the seats in coach or economy class. Here’s the reporter’s line:
“Neither apologizes for packing in more, skinnier seats. Their message: If you want more space, buy it.”
Being a frequent flier myself I know that’s the choice for customers of most airlines. Still, even if it is the right business decision, I would’ve advised some gentler messaging. Hearing that is like being on the wrong end of the sort of back-handed comment that can leave a scar. Ouch.
We approach choice a little differently. Our own experiences and observations in the high-tech industry have taught us that offering a service that is too prescriptive, one designed to serve everyone the same way, while being cost-effective, almost always ends up being a poor deal for the customer.
Why is that?
Because, in the software world, even when it comes to SaaS-delivered software, each customer feels that their implementation is different enough from everyone else’s that they need some special variation of a standard service, one that addresses their unique needs. So what’s a vendor to do?
Offering Too Much Choice Can Be a Cost Sinkhole
One sure way for a service or support organization to raise the ire of a CFO is to continually ask for more budget when, in return, that offers no substantial, measurable financial impact to the company. They can point to abstract measurements of successful implementations, increased customer satisfaction, and greater customer engagement but those things, unfortunately, are not linked return on investment.
And if that organization were to expand exponentially and offer many different packages that attempt to meet the unique needs of all their customers they would quickly set off alarm bells. Left undeterred, that would eventually imperil the company’s bottom line. So a compromise is needed, but that doesn’t have to mean an inferior and uncomfortable experience for anyone.
We believe the compromise is to keep it simple but comfortable (unlike airlines that seemingly focus only on the simple) and still make available to those customers who feel they need them, a number of add-on services they can purchase.
Even though a core value proposition of the cloud is speed, cost of deployment, and a faster time to value, in the business world it’s impossible to escape the reality that each business has its own particular reasons for designing processes that use the software in a certain way. This can be very challenging for software vendors and whether customers are aware of it or not we can’t say, but there are endless debates within the walls of those vendors about the wisdom of providing too much choice.
Still, as Tien Tzuo, founder and CEO of Zuora, says in his recent book, Subscribed, on the topic of churn and retention, “The takeaway is pretty clear: the ability to solve for a broad range of customer problems, with a broad range of solutions, increases retention.” Even though he made that comment in the context of selling to customers, I believe the same principle applies in after-sale scenarios just as well.
Respect is Not Such a Difficult Consideration
At the end of the day, again to simplify, all we’re really talking about is respect. Not all customers are the same. Not all business challenges are the same. Because one company needs to buy more service to accomplish its goals shouldn’t infer that another company that chooses to go with the base service is worth any less. As long as the base service contains sufficient value and provides a good experience for the majority of customers, the vendor can feel confident that any list of extra services would be finite and manageable. Customers will notice and appreciate that kind of choice. Those vendors that recognize this and understand how that fundamental trait factors into enhancing the customer’s overall impression (and therefore, how it weighs heavily on how they would judge their experience) will be the ones who see higher levels of retention and lower levels of churn.
What’s My Message to Airline CEOs?
No one disagrees that a business needs to offer only those services it has determined it can afford to deliver while keeping an eye on achieving healthy margins. Everything and everybody that constitutes a flight on an airplane comes with a price and so it makes sense to have different classes of service. It also makes just as much nonsense to offer nothing but business class seats. And yet, there is that nagging issue of (what should be) the need to show respect for all customers.
Choice is good for customers, and it really is a smart business practice. But even the lowest class of service needs to be as pain-free as possible. Why wouldn’t you make all classes of service as valuable as possible for customers in each class? Doesn’t it make sense that when they receive (and in the case of airlines, feel) value, that they will return the next time?