$325 Equals $210? The Math of Customer Hostile Policies

This post is courtesy of a very good friend and associate and fellow consultant, and copied with permission. See More of Mike Figliuolo's work at and subscribe if you like at

http://thoughtleadersllc.blogspot.com/

So I bought a plane ticket. It cost me $325. My plans changed and I now had a credit with one of the major air carriers. No problem. I know I'll have to pay a change fee at a later date (usually $100) but not a huge deal. "At least I'll be able to use the credit" I thought to myself.

I had occasion to travel again so I called said airline and told them I wanted to book my flight to Chicago for my presentation at the Leadership Excellence 2008 Conference. The new ticket was going to be $210. "Cool! I can use my full credit and even simply pay the change fee out of what I already paid" I naively mused. Then the ugly spectre of customer-hostile policies reared its head. It went a little something like this:

"Yes sir. The flight is $210 round trip."

"Great. I'd like to use a credit I have with you folks. The old confirmation number is RIPOFF325."

"Yes sir. I have that credit here. How would you like to pay the balance due today?"

"Huh? Balance due?"

"Yes sir. There's a $100 change fee for using the old ticket."

"Yeah. I know. Just use the credit for the $325 ticket toward the $210 ticket plus the $100 change fee and I should still have a credit of $15 with you guys, right?" I mean, I did pass arithmetic in 2nd grade. Here's where things start going south...

"I'm sorry sir. You cannot use credit from another ticket to pay for the change fee." Ummm, okay. So apparently a dollar isn't a dollar to said airline. Even though they already have $325 of my cash, I can only apply it to certain things and not others? Seems like these folks need a lesson in currency mechanics.

"Fine. Whatever. I'll pay the change fee. Here's my credit card number... again."

"Thank you. You're all set now."

"What about the $115 credit from the ticket transfer? Do I need a new confirmation number for the next time I book to use that credit?"

"What credit sir?" Here's where it goes so south it's Antarctica south...

"So here's some basic math... I had a credit for $325. I just bought a ticket for $210. I should have $115 left over in credit, right?"

"No sir. It's an even exchange. If the new ticket is equal to or less than the cost of the previous one, we consider it an even exchange and there is no credit issued for the old ticket." I started to feel that little artery in my temple pulse at this point.

"How is that an even exchange? So if I had a $210 credit from an old ticket and went to buy a $325 new ticket, would that be an even exchange too?"

"No sir. You would have to pay the ticket differential of $115." I feel like I've fallen into Wonderland and my customer service rep is the Mad Hatter. We're clearly in Bizarro World where the laws of mathematics are reversed.

"That's horse puckey. It's a completely customer-hostile policy. Fine. I'll just save the credit until I have a ticket that costs more than $325 and use it then so you people don't hose me." I interrupt this call for a special personal responsibility bulletin... Now don't get me wrong - I absolutely should have read the fine print. This was absolutely my fault (seriously) for not reading and understanding the terms and conditions. What I'm arguing here is that no one has taken a look at the customer impact of said terms and conditions nor have they properly trained their associates to disclose these terms clearly and in a customer-friendly manner. Now back to our call...

"That sounds like a good idea sir." Okay clown boy... and you were going to suggest it to me when? Had I not asked for clarification on the policy, I'm pretty sure he was going to simply let me forfeit the $115 of credit plus juice me for the $100 change fee. Talk about preying on a customer not having fully read the fine print or being familiar with chapter and verse of obscure ticket policies.

So here's the trade off these folks are explicitly making: they're juicing customers for an extra $115 in these scenarios which is a nice short term profit improvement instead of building long-time customer goodwill and retention which is worth infinitely more in long-term profits. This is an inherently flawed strategy.

The worst part is, I've been a loyal customer of said airline for many years. They've generated a ton of profits from my travel as well as from my recommendation of their airline to others. Now they've sullied that relationship over a measly $115. Will I fly them again? Yes. Three more times. Once for my trip to Chicago, once more to burn up my $325 credit, and once to burn through the airline miles I still have with them. After that, I believe our relationship is at an end. And all over the paltry sum of $115 and a customer service rep who was not proactive in trying to protect my money (and instead came across as cagey and deceitful).

Take a look at your customer policies. Are they in the best interest of your customer or in the interest of your short-term bottom line? Are they designed to strengthen and lengthen relationships or to exploit them? Are your employees trained to look out for the interests of your customers even though it might cost you in the short term or are they trained to maximize profit per call or visit regardless of downstream costs?

Evaluate these questions and your business practices. You might be surprised by what you find. Remember - a customer for life is infinitely more valuable than a customer for a day.

- Mike Figliuolo at thoughtLEADERS, LLC

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Comment by Steve Paterson on April 5, 2008 at 3:58am
No more SkyBus Andy

Skybus Airlines announced Friday it is shutting down its passenger flights -- becoming the third airline this week to cease operations.


Skybus Airlines joins ATA and Aloha Airlines, which announced shutdowns earlier this week.

The low-cost carrier couldn't overcome "the combination of rising jet fuel costs and a slowing economic environment," the company said Friday. "These two issues proved to be insurmountable for a new carrier."

Skybus, an Ohio-based airline founded in 2004, will cease operations effective Saturday.

Earlier in the week, ATA Airlines and Aloha Airlines announced they would shut down flights as both companies work through bankruptcy filings.

ATA, an Indiana-based low-cost charter airline, filed for Chapter 11 status Wednesday as a result of financial problems "following the loss of a key contract for our military charter business," the company said. The company started operation in 1973.

Hawaii-based Aloha Airlines announced Sunday it would shut down its passenger operations this week after filing for bankruptcy protections last month, concluding 61 years of service.

In its bankruptcy filing, Aloha said it was unable to generate enough revenue from its inter-island passenger flights because of below-cost fares by competitors Mesa Air Group's go! airline. The company said it was forced to match the competitor's fares during an unprecedented increase in the cost of jet fuel.

Skybus said all flights Friday would be completed; passengers with reservations for Saturday and beyond were told to seek refunds from their credit card companies
Comment by Matt Urdan on April 2, 2008 at 8:44am
I think this is a great post with a lot that's relevant to the business world. I'm sure there are big corporate businesses that operate this way... But for the most part, I think restaurants have figured this out, unless it's a cheap-*** seafood restaurant in Orlando that didn't care if we ever came back with wrong food, cold food, rude and antagonistic service and ...more I won't get into.

The airlines, however, are really an entity unto themselves. They've always engaged in deceitful pricing structures. You can sit in row 22D and pay $400 for a flight and the guy next to you in 22E might have paid $90 and the guy in the 22F might have paid $1100. It all depends on when the ticket was booked? And how many seats were left available? Are you kidding me?

The same is true for hotels. They raise rates and eliminate discounts by time of year, by occupancy rate, etc, etc, etc.

If you really wanted to be transparent and upfront, a similar seat and a similar room would cost the same no matter when it was booked.

Restaurants don't have different prices for a hamburger depending on how long the wait in the restaurant is. But in the instance illustrated above, is it really the customer service rep's fault? Was he trying to be deceitful? It may be he wasn't trained very well or was new at his job and hadn't learned yet about providing WOW service and looking out for you and protecting the full value of your credit.

I think there's a lot out there that we expect or take for granted because WE know better. But what we know doesn't always translate to what someone else knows or what we think they should know.

In a restaurant it's very easy to get caught up with what we believe other managers and servers and cooks and dishwashers should know. But if they haven't learned that someone else, and we haven't validated that they have learned that, is it really fair to get upset with them when they don't meet our standards or live up to our expectations?

I find that when I'm dealing with an airline, or an insurance company, or a hotel and I'm not getting the answers I'm looking for, I often ask for a supervisor--hopefully someone more experienced and who has more knowledge and information at his or her disposal and better able to handle my issue with facility. The truth of the matter is, frontline employees may be very green, and you can't fault them for that, even if you're the one suffering or penalized from their lack of experience. Aftreall, all of us are new at what we do at one point or another, and all of us are learning new techniques and strategies and skills every day.

Cheers!
Comment by Andy Swingley on April 1, 2008 at 9:13pm
It is like SkyBus out of Columbus! $10 ticket if you can handle the stipulations and the inevitable delays....
Comment by Steve Paterson on April 1, 2008 at 8:30pm
LOL
Ever heard of Ryanair out of Ireland?
$10 one way tickets.....one wrong move and it's $400 before you know it!

I recently had a ticket on Allegiant Air that cost $37 each way, but had to change the dates, add $100 each way.

Gotta stick to the deal if you want the deal.

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