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Customers are up in arms – will the Ryanair brand suffer long term damage?

John Aves | Oct 13, 2017 162 views 10 Comments

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The mass of cancellations by Ryanair that has seen customers’ plans turned upside down has led to widespread condemnation of the low-cost airline. Andrew Haines, head of the Civil Aviation Authority is furious, the Belgian government is threatening legal action, Michael O’Leary has been forced to admit Ryanair have been acting illegally, customers are up in arms and there are reports of pilots and cabin crew defecting to other airlines in search of better terms and conditions. Despite all of this, there are no commentators who think this threatens the survival of Ryanair or that the brand will suffer long term damage. The company has seen its share price dip by 4% in the last few weeks but the trend has been strongly up since the start of 2017.

Ryanair raises some interesting questions for those of us working in the customer experience space.

“Customer experience” is what an organisation delivers to customers every day through every interaction, direct and indirect. Customer experience is sometimes confused with customer service but they are different. Management of the customer experience requires executives to make strategic choices about what they want their brand and their company to be known for, which customer segments to focus on and what mix of cost/price, product and service strategies will serve them and their customers most effectively. The goal of any CX strategy is to deliver a differentiated experience for target customers based on superior service, leading edge products or lower prices that drives profitable growth.

Ryanair is very clear about its customer experience and that it is not founded on service. The company wants to be known as the go to airline for low fares. It targets customers for whom price is the dominant purchase driver. The airline is laser focused in executing a business model that enables it to deliver low fares to high volumes of passengers through:

  • A fleet based on one aircraft type that keeps maintenance costs low
  • Use of regional/secondary airports with lower landing charges
  • Efficient use of its people and pay rates that are lower than those of other airlines
  • Additional revenue from add on services such as food, baggage and duty free

Notwithstanding the current pilot scheduling “boo-boo”, as Michael O’Leary calls it, what is wrong with Ryanair’s strategy you might ask? The airline has the lowest cost base in the European shorthaul aviation sector and there is no question that Ryanair has expanded the market for shorthaul travel across Europe. Profits are expected to be between £1.2bn – £1.25bn in the current year.

There are two challenges that Michael O’Leary faces. The first is whether low prices on their own are enough. Customers are becoming more demanding, they are less loyal and ethical behaviour is increasingly important. Customer abuse – something Ryanair has been regularly accused of – is never a good strategy (as Gerald Ratner found out 25 years ago), even if it is in exchange for a cheap flight. Recent research from the UK’s Institute of Customer Service has shown that only 15% of customers are prepared to compromise service for the cheapest deals whilst 62% are looking for a reasonable balance between price and service.



The speed with which customers’ defect depends on the state of competition – and this is Ryanair’s second challenge. Even though international aviation is highly regulated and there are barriers to entry, competition does exist from other airlines, other modes of transport and other places for consumers to spend their hard-earned cash. Customer choice will continue to increase and the question is whether a strategy founded entirely on low fares is enough to continue to drive the growth that Ryanair has seen over the last decade.

What we are seeing across so many sectors is that competitive prices, quality products and good service are what customers expect and organisations not delivering acceptably on all three are shunned by customers. A strategy based on low prices does not have to mean poor service. There are plenty of examples in the airline industry and other sectors that show you can have both.

Maybe there is a third challenge facing Ryanair: Michael O’Leary. He seems firm in the belief that whatever he says and does, however much customers are inconvenienced and disrespected, they will return as long as the airline continues to offer industry leading low fares.

Whether Ryanair, and Michael O’Leary, learn anything from the events of the last few weeks only time will tell.

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10 Responses to Customers are up in arms – will the Ryanair brand suffer long term damage?

  1. Shaun Belding October 14, 2017 at 6:26 am (4 comments) #

    Great discussion topic John. Is there a company better suited for the focus of a price/service discussion than Ryanair?

    Back in 1999, our company conducted a survey of 1,200 Canadians which identified that around 13% of the population were exclusively price-driven – and not significantly influenced by service levels. There have been a number of similar surveys since in other countries, most with similar results. Ryanair targets that market, and they do it quite well.

    In many ways, it is a far easier market to work in. Yes, you are competing within a 1/8th piece of the pie, but you only have one lever to worry about – price. In the other 7/8ths of the pie, companies need to balance price with the service experience – including people, processes, policies and practices.

    I suspect they will continue to be successful – no matter how low they sink in terms of service.

  2. Raghunathan Kuppuswamy October 14, 2017 at 6:40 am (2 comments) #

    Low levels of service may not be the problem, but poor services sure is.

    Low price and low service – there’ll be always takers especially on short-haul, not an easily assailable strategy, me thinks.

  3. Michael Lowenstein October 14, 2017 at 7:12 am (1320 comments) #

    For every consumer, there is an emotional price/value ‘tipping point’ with vendors where, no matter the cost or savings, the end of the relationship is near Poor delivery of service and disdain for the customer- especially when there is accompanying massive and negative image and reputation-related WOM, causes customers to make defection decisions. Ryanair needs a massive cultural overhaul, otherwise they will follow the path of other defunct airlines.

  4. Chip Bell October 14, 2017 at 12:11 pm (189 comments) #

    Interesting question. K-Mart tried the “low price” strategy, targeting the audience that values that particular differentiator. But, along came Wal-Mart that showed the “low price” audience that they could have both–good service and low price. K-Mart went bankrupt. Ryanair might pull it off. But, the challenge they will face is that even customers who prefer low price occasionally get a taste of great service. They eat lunch at a Chick-fil-A or order a product from Zappos. It elevates their expectations for the floor of the service they receive, even from Ryanair. Also, Ryanair just might have a new entry into their marketplace (even with its high cost for entry) that, like Wal-Mart, can do both. Ryanair will need a culture renewal to consider. plan and deliver both. “Culture eats strategy for lunch,” wrote Peter Drucker.

  5. John Aves October 16, 2017 at 3:09 am (8 comments) #

    Chip, Thanks for the K-Mart/Wal-Mart example. I agree. Customers’ expectations are often shaped by their experience in other sectors and, despite the barriers to entry in the European shorthaul airline industry, competition will increase. Ryanair is dominated by the towering figure of Michael O’Leary and I seriously doubt that any serious cultural renewal will happen with him at the helm, however much that is needed.

  6. John Aves October 16, 2017 at 3:37 am (8 comments) #

    Hi Shaun. Where the tipping point at which customers say enough is enough depends on changing customer expectations and the state of competition. Michael O’Leary has frequently abused customers – and recently his own employees – in Trump like outbursts. Some customers do have short memories however, I suspect O’Leary will see the small percentage of customers who stay with Ryanair regardless, get smaller.

  7. Andrew Rudin October 16, 2017 at 9:55 am (240 comments) #

    Like any strategic decision, RyanAir’s low-cost market position involves trade-offs. If European economies have stagnant or declining growth, RyanAir occupies the catbird seat, able to provide service to an ever-growing market of penurious customers. In that situation, the other carriers will be breathing RyanAir’s exhaust, because they won’t be able to easily move their brands downmarket without sullying their reputations and alienating their core customers. Those carriers are placing their marketing bets differently.

    RyanAir has a different set of problems. Customers have low expectations, they just want cheap with a capital C followed by an exclamation point. I don’t think customer abuse is expressly RyanAir’s strategy, though I don’t question that to some, it might appear that way.

    One hallmark of a good strategy is that it is hard for competitors to duplicate. Anyone who watches the airline industry knows that Cheap! is hard to pull off as a long-term strategy. Despite the widespread criticism, RyanAir appears to know how to do that.

  8. Shaun Belding October 16, 2017 at 10:03 am (63 comments) #

    Hi John:

    It pains me to say it, but the research suggests that, for a percentage of the population, there is no tipping point. “I got a good deal” trumps “I got abused.” Being in the customer service training & consulting business, every fiber of my being rebels against this notion, but I think it is true nonetheless.

    Having said this, to Chip’s K-Mart/Wal-Mart comparison, I would expect that If someone comes along with the same pricing structure as Ryanair PLUS better service than Ryanair, it will be a different story.

  9. John Aves October 17, 2017 at 2:55 am (8 comments) #

    Hi Andrew,
    You are certainly right that airlines like BA have not known how to compete with the low cost carriers – which is where all of the growth has been over the last decade. BA has been on a relentless cost cutting strategy to enable it to offer low fares in its economy cabin and in the process has confused consumers, confused employees and trashed its brand.

    With its scale and cost base – the lowest in the European shortfall market – it is difficult for other carriers to compete with Ryanair. However, even the regulated airline sector is not immune from disruptive change. It’s not many years ago that the idea of booking a ticket, checking-in, choosing a seat and issuing boarding cards all on a mobile phone would have been unthinkable, especially in a post 9/11 world. Today is is the reality.

    Ryanair will need to be able to respond to changing customer expectations and that will encompass a lot more than just low fares for a growing number of consumers I feel sure.

  10. John Aves October 17, 2017 at 3:14 am (8 comments) #

    Shaun

    You are right, for a percentage of the population there is no tipping point and, as you say, it is a relatively small percentage of customers. There are two big questions. (1) Will this segment get smaller as we move out of the austerity that has plagued our economies since the 2008 financial crash? (2) Will someone come along with a disruptive proposition that changes the traditional value equation for customers? Think Amazon. Think Tesla.

    To Chip’s point, I don’t see another airline coming along with the scale and cost base to be able to compete easily with Ryanair. More likely the threat will come from outside the airline industry.

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