The company that pioneered ultra-low cost, no-hospitality air travel is encountering some turbulence with its strategy.
For years, Ireland’s Ryanair has prided itself on being the ultimate no-frills airline with unapologetically poor customer service. They lead with low fares, and then layer on an endless series of fees for everything from speaking to a live representative to printing your boarding pass at the airport.
Their CEO, Michael O’Leary, once called his customers idiots, and has also floated the idea of charging people to use the lavatory. (Thankfully, lavatory use is still free – what a bargain!)
The low-cost, no-service strategy had legs. Ryanair’s passenger volumes, and profits, grew rapidly for years.
In the past, I’ve pointed to them as an example of a company that set very clear expectations with its target clientele (i.e., we will nickel and dime you, and won’t offer good service in return) and, as a result, was able to consistently deliver on customer expectations and grow the business as a result.
Fliers may have scoffed at Ryanair’s tactics, but when they wanted a really low fare, many managed to look past all the ugliness.
A few weeks ago, Ryanair shocked the stock market with a profit warning (the first in a decade), as flight bookings have fallen appreciably. And at the firm’s latest annual meeting, several shareholders went public with their concerns that the company’s abysmal customer service is hampering growth.
O’Leary probably didn’t help matters by proclaiming in the company’s most recent quarterly earnings presentation that Ryanair was “Number One” for customer service (as selectively measured by on-time performance, mishandled bags and cancellations).
But, in light of the disappointing forecast, the CEO is starting to change his tune. At the latest shareholder meeting, he acknowledged that the company “should try to eliminate things that unnecessarily piss people off.”
How’s that for an insightful revelation from the corner office?
The lesson here (beyond reconsidering that Ryanair flight you were going to book) is that there are certain basic needs demanded by any consumer who has at least a few brain cells left.
No matter how well you telegraph your brand and manage expectations (which, let’s face it, Ryanair was pretty adept at doing), consumers will draw the line somewhere – and they’ll let you know when you’ve crossed it.
I’ll leave it to others to debate just what threw Ryanair’s customers over the edge – the perceived absence of basic fairness, the company’s antagonistic posture towards people, the inflexible enforcement of irrational policies… Take your pick, there are so many irritants to choose from.
Being a low-cost, low-service provider is a legitimate business strategy, and it can work in some circumstances. But if that’s the strategy you’ve embraced, think carefully about where your customer draws the line.
Because, as Ryanair is discovering, there are limits to how bad an experience customers will tolerate – no matter how low your price.