The Press, September 2007

“Pay a visit not a fortune,” is the tagline Pacific Blue is using to promote their new low-cost domestic airline service. The low price attack is a big challenge to Air New Zealand and a situation many Kiwi exporters face from competitors overseas. How can you respond to a low-priced competitor?

Pacific Blue, the local arm of Sir Richard Branson’s Virgin airline empire, has been plying the trans-tasman route for several years. Now they are turning their considerable resources to domestic routes.

The company has led this charge based on price. Sir Richard Branson said during the launch, "It is no secret that the existing domestic duopoly results in higher fares and half-hearted competition and we very much look forward to challenging that and championing affordability for local travel."

This is a potentially devastating challenge to Air New Zealand. Especially with low cost Qantas subsidiary Jetstar predicted to enter the market also. As the old saying goes, in a price war there is a never a winner, just survivors.

Air New Zealand’s response has been a smart one thus far. They have matched Pacific Blue’s cheap flights, and analysts reckon their overall flexible fares are cheaper than Pacific Blue. In advance they had also introduced the ‘grabaseat’ promotion which offered giveaway fares on random routes. But the company has not focussed on this part of their response.

Chief Executive Rob Fyffe was quoted in the Press saying their strategy was to “. . . change the role of our staff from being transaction-oriented to being customer service-oriented.” Air New Zealand have said they are aiming to make the check-in experience a lot quicker and easier, reducing the overall time spent in airports by 25 per cent.

Fyffe talked about check-in queues being more like a modern bank. Although judging by my local bank I’m not sure this is a real selling point, the idea is to differentiate Air New Zealand around service rather than simply having a fight to the death with Pacific Blue over fare prices.

While Air New Zealand’s theory is sound, the challenge is delivery. Airlines are typically ‘plane-centric’ rather than ‘customer-centric’ making a service oriented approach easier to talk about but much harder to actually deliver.

For example, those great fare offers aren’t quite the same as the $12-dozen beer deal at the local supermarket. That is, you can’t just go on the airline website and ask to see all of the $39 fares. You have to enter your intended travel dates and then their fancy computers will work out if they can offer you a cheap flight in that period. It suits them not you.

If Air New Zealand were really serious about a service strategy, they would start looking at the ‘whole’ customer experience. For example, consider a typical business trip I make to the north shore of Auckland.

To get from A to B is a lengthy and complicated process. I leave home, park at Christchurch airport, check-in to my flight, go through security, take the 75 minute flight, pick up my bags and the grab a taxi or rental car to make the hour or more long trek to the North Shore. Then I repeat the whole process in reverse, often including a long wait at the airport.

Determining whether I had a good trip to Auckland covers this whole experience. A truly customer focussed airline would help me every step of the way. Air New Zealand will offer you transport and accommodation options online, but it is a half-hearted add-on, not an integrated part of the ticket purchase as it would be if they were really focussed on the whole trip.

Airlines, like most businesses, are engineered around their world - planes, plane efficiency and loading. The 70 minute Air New Zealand flight is often only a minor part of the trip. The company can obviously only control some of these factors, but therein lies the challenge – if you want to compete on customer service, then taking the hassle out of as much of the trip for the customer is the challenge. It’s the companies that achieve this that rise to the top.

So what can you do to build a truly customer-oriented service experience:

1. Map the whole experience from the customer’s point of view. For example if you sell a software system, then you need to map out the process from customers determining that they need a system, evaluation, through to buying hardware and managing the system for a couple of years. The customer has to go through all these phases and it is up to you whether you help them or not.

2. Decide what you can do to improve each step – what can you do to improve each part, what can others do, what contribution can you make?

3. Consistent execution – in the customer’s eyes you are only as good as your last performance. How can you ensure that you deliver a consistent experience to the customer?

Air NZ has responded smartly to the Pacific Blue challenge.But to really stand out with a service-based strategy it will need to understand that customer loyalty is gained not simply through loyalty programmes but through consistent, customer-centric service.

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