Valuing what your customers don’t

Fly the friendly skies

By today’s standards, air travel across the United States in the 1960s and 70s was strangely luxurious. Planes had roomy couch-like seats and usually weren’t full, elaborate meal services were the norm even in economy class, and both passengers and crew were elegantly attired.1 Health and safety standards were different too: flyers strolled aboard with no more screening than would be needed to board a bus, and flight attendants were ready with cigarettes and a light once the no smoking sign went off. For those with sufficient means, flying was a noteworthy occasion.

But these service levels enjoyed by past travelers didn’t result from altruism. The amenities arms race took place because airlines were legally forbidden from competing on the most basic dimension—price.

This was because a federal agency known as the Civil Aeronautics Board set fares, approved routes, and tightly regulated the entry and exit of participants. As a result, they were forced to find other ways to distinguish themselves from the pack, and they did so by finding diverse and ostentatious ways to enhance the passenger experience.

This all changed in 1978, when the passage of the Airline Deregulation Act set the industry on the path to the brutally price-conscious state that characterizes it today. Some traces of its former luxury persisted for a few decades, mostly through inertia, but in recent years airlines have disaggregated and added extra charges to even the smallest elements, slashing meal services and even removing pillows to make their fares competitive.2

An upper tier of elite flying remains, offering comforts that even the Golden Age of travel couldn’t match, but this is the exception.3 The mass of travelers now jockey for increasingly cramped spaces after passing through the screening labyrinth. They pay to bring luggage along or else do without, and when in the air pony up monopoly prices for snacks that were formerly complimentary.4

Airlines are quick to match the downgrades of their peers, and despite paying lip service to the general flying experience it has become clear that bottom-line cost is of overwhelming importance. Companies used to believe that passengers wanted prime rib carved seat-side, or an inflight piano lounge. What most of them actually seek is the cheapest and fastest way to get where they wish to go, and they will forsake comfort for the smallest savings.

Read all about it

For decades newspapers maintained enviable margins, generating enough profits to fund international bureaus and comfortable expense accounts to journalists chasing down their pet stories. Classified advertising sections were money-printing machines, holding a de facto monopoly on reaching locals with certain offers. All-news television channels had not yet reached peak saturation, and sports scores and stock prices were inaccessible to an average reader, outside of the relevant printed sections.5

Change arrived starting in the 1990s, as the audience-gathering functions that news outlets provided were quietly and effectively usurped by internet upstarts. New websites like Craigslist sprung up to centralize classifieds across cities, making a printed posting about a used car an anachronism. Specialized sites arose that provided whatever information a reader could want, without the constrained publishing schedule of a newspaper or magazine.

Outlets dedicated to specific topics began to poach audiences from traditional properties. Emerging alternatives focused exclusively on sports, business, food, or design. Subscriber numbers leveled off and soon began a precipitous decline. So began a steady erosion of advertising dollars that slowly destroyed the economics of many prominent media businesses.

The obvious solution of raising prices for subscriptions turned out to be impossible—despite their lofty self-conceptions as the guardians of truth, it turned out that most people weren’t willing to pay more than a nominal amount for the actual journalism. Publishers discovered that their foreign affairs reporting, arts reviews, or updates from city council meetings were valued at roughly zero.

When readers and viewers had few alternatives, advertisers happily footed the bill in exchange for attention. As newer ways of accessing information popped up consumers bolted, taking the advertisers with them, leaving print publishers scrambling to find a new model before the entire operation collapsed.

Get real

The breaking up of a regulatory barrier or societal convention can shake up an industry, but there are powerful upsides, notably the broadening of a customer base. Commercial aviation went from largely being the domain of upper-class businessmen to something most can participate in. The number of travelers has grown dramatically while costs of tickets have plummeted, to the point that virtually the whole globe is reachable.6

Even before deregulation there were signs of an impending change. The low-cost, point-to-point model of travel that has grown significantly in popularity was pioneered by Southwest Airlines starting in the early 1970s. They were able to avoid running afoul of restrictions by operating entirely within Texas, which exempted it from the federal board overseeing interstate operations. The removal of constraints allowed the model to fully flourish, and the concept has taken root around the world.

News was originally curated by a small number of television networks, or a local paper that often provided the lone voice on major issues. The internet has made the space a free-for-all. Information from anywhere the world is available with a click, without so much as needing to walk to the porch to retrieve the latest issue. While revenues may be plummeting, the upside is news consumption is way up.

Even here the first seeds of change were visible early, as the first 24-hour cable news channel launched way back in 1980. With its omnipresent ethos, CNN was a harbinger of how news consumption would change.

The transition to revealing true value is painful. The airline industry went through decades of upheaval, including numerous bankruptcies, labor unrest, and consolidation before it reached the approximate stability of today. Traditional news businesses are still experiencing the fallout of the digital revolution, and cutbacks and closures have affected many that are unable to live on diminished advertising revenues.7 Even first wave new media entrants have had to retrench, as their content fails to engage enough viewers to pay operating costs.

The example of these industries is instructive, as most organizations believe they provide something uniquely compelling to those they serve. It might turn out that customers value these offerings less than they appear to, or for different reasons. They may not care about your carefully curated experience, your judgment, or your gatekeeping.8 That sumptuous cabin design or inflight meals might not be worth what you invest in them.

Despite what the income statement shows right now, consider if customers properly value what you offer, no matter what industry you’re in:

• As an educational institution, are you providing knowledge, or a very complex credentialing service? What happens if there’s a more efficient way to provide the credential?
• As a media organization, is the information you offer compelling, or merely the best vehicle for advertisers to reach a coveted demographic? What happens if there are other ways to reach them?
• As a consultant, are you a source of unique expertise, or temporary labor used to bridge a staffing gap? What would you do if staffing markets became more streamlined?
• As a retailer, are you providing a curated environment, or a way to test-drive products? What happens to you if manufacturers provide other ways to trial their goods?

Mistaken views of what customers value have sunk other organizations. How certain are you that what you provide is truly valuable?

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References

Article describing air travel in the 1950s and 60s from the Sacramento Bee, and a perspective from a modern pilot in the New York Times. The Atlantic has an article on the evolution of airplane food.