Stopwatch Marketing Blog

As has been well-documented and commented-upon, the airlines, led by American have begun charging roughly $15 per bag for checked luggage…a service that was, with very few restrictions or exceptions, free for the first eighty years or so of commercial airline service in the U. S. I’ve had many, ahem, discussions with my friends and family members who, unlike me, rarely travel by air. They are up in arms about the appalling notion that they would have to pay the airlines to check their bags. I have responded that, as both a marketing consultant and a believer in free markets, I am actually all in favor of this trend. As a frequent traveler, I nearly always use carry-on bags. As any first-year economics student would quickly note, that means that I am subsidizing the “free” checking service of which my compatriots are availing themselves. The same analysis, of course, holds for airline food, which I generally avoid and was, until recently, also “free.”

These discussions rapidly became incendiary (rather like discussing religion or politics at Thanksgiving dinner). I was able, however, to quickly diffuse the arguments with the following point: I also, unlike my infrequent-traveling friends have a souped-up pda/smartphone from T-mobile that allows me to send and receive emails, among other features. “Do you think,” said I, “that I should be able to get that email service for ‘free,’ when you don’t ever use it and don’t even have a phone that could use it if you wanted it, or should I have to pay – as I do now – an extra fee to do data on my phone?”

Putting this argument more broadly – and in terms we marketing consultants love to use – this trend to a la carte services will result in multiple opportunities for airlines differentiate themselves and more closely align pricing and services with the value provided.

Finally, in thinking about all this, I had an idea and am wondering if FedEx or UPS are thinking the same thing. First, the cost ($15) is only part of the hassle of carrying bags to the airport, suffering delays while standing in line to check (and now to pay for) them, throwing my back out carrying the twenty pounds of bricks my wife makes me check for her when we go on vacation, etc. So, here’s the big marketing idea: “Ship Ahead from FedEx/UPS.” For roughly the same amount of money, around $15, (rates vary according to things like distance) one can ship a 20 pound package by ground to one’s destination, say, the Ritz-Carlton in Atlanta. Most businesspeople work in offices with daily pickups, so it should be easy for them to bring their bag to work a couple of days before their trip and have it waiting at their hotel when they arrive.

Thinking about business travel in this light opens up several opportunities. For instance, most companies will be willing allow their traveling employees to put this on their T & E, so FedEx could enter into cooperative marketing arrangements with corporate travel departments, travel agencies, websites like Travelocity, etc. They could also enter into joint-promotion efforts with the airlines themselves. Imagine, competitive companies cooperating to provide greater service to their customers. As the practices and technology improves over time, one could even imagine the shippers (FedEx and UPS) cooperating with the rental car companies. Part of my Gold Service with Hertz, for instance could include (with two days lead-time) arriving at O’Hare and finding my “Ship Ahead” luggage conveniently loaded in the trunk of my rental car. I wonder if anyone at FedEx, Hertz, Avis, or UPS is thinking about this as a new product / service opportunity.

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I recently suffered through a complete computer crash (while presenting to a client), requiring Dell to FedEx some parts and dispatch their local technician to replace my laptop’s motherboard, display, etc. This is the second time in four months this has happened. Dell’s premier-level customer service center (that is, the one I pay extra $$$ for) behaved atrociously, as usual, requiring me to re-phone several times, losing or “forgetting about,” or failing to follow-up on, my service calls more than once. I’ve posted blogs on Dell’s horrible service before, so I won’t belabor that issue here. If you follow Dell, you know that they give considerable lip service to the idea that they understand they’ve had some customer service lapses in the past and are working hard to address them. Michael Dell, himself, has publicly taken responsibility for assuring that some fixes get executed.

But, I do want to make two points about how these ongoing, truly lousy service lapses are affecting Dell’s business:

First, it cannot possibly be profitable for Dell to have their people on the phone with me for hours (I am not exaggerating here) and to have TWICE FedExed parts to Connecticut and paid a third-party service technician to visit my office, spending a couple of hours rebuilding my laptop. So, on the specific transaction – my purchase of this new laptop last September – Dell must be losing money.

Second, Dell is asking me to tolerate an awful lot. They have probably lost me (and my little consultancy) as customers FOR LIFE. No matter how well the thing works now (I’m typing on it to compose this post) I feel burnt by the service experience. This, of course, is Marketing 101: No amount of outstanding advertising, distribution, PR, etc. can overcome poor product quality and/or lousy service experiences. Moreover, I simply don’t have the TIME to deal with Dell’s lousy service over and over. My stopwatch doesn’t tick that slowly.

For a very good discussion of consumers’ “tolerance levels” see Drew McLellan’s recent post on this very issue.

Now, for the more positive part of this post:

The local, third party technician allowed as how he thought Dell was completely wrong in their estimation of the problem. He thinks it’s simply a matter of too much heat and recommended that I get a chill mat. For those of you who don’t know, a chill mat is a computer accessory about the size of a place mat that contains two fans and sits beneath your laptop. It ensures that the laptop “runs cool” so it performs better and faster day-to-day and doesn’t overheat, thereby crashing at the precise moment you are making your brilliant strategic summary points to your boss. The chill mats also serve the purpose of keep the desk or table from absorbing a bunch of heat.

Here’s a picture of the one I quickly purchased:

 

Full disclosure: I pointed out to the local technician that I have a client who makes chill mats, namely Targus. He said – again, I am not exaggerating – that Targus’s are the best and the ones he uses and recommends. Targus markets a whole range of computer accessories. Check them out.

So, two more, final, marketing lessons:

First, a company (in this case, Targus) can build a whole business around accessories to the base product built by some other company. Targus has a nice business in mice, power adapters, backpacks, etc. This strategy can, of course, be applied to tons of other businesses: I have a client, for instance, who builds cup holders for cars.

Second, marketers should diligently communicate directly to such third party gatekeepers and thought leaders, such as those local technicians that Dell so frequently sends out to do repairs. They can important recommenders and, occasionally, channels of distribution to lay people. Like me.

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Why has the U. S. economy so stubbornly refused to fall off a cliff into a serious recession? After all, we have not yet even entered a mild recession, just a slowdown. The anxiety of pundits to declare a repeat of Seventies Stagflation is nearing unseemly levels. The parallels are certainly there: Increasing general inflation, a weakening dollar, layoffs in some major industries (housing, especially), and, most visibly, rapid increases in oil prices.

The commonly accepted reasons for why this combination has yet to deliver a true recession are that A) the economy is less dependent overall on oil these days, B) our economy is broadly much more resilient and adaptable than in the Seventies thanks to deregulation and a host of other reforms instituted in response to that very stagflation, C) the inflation has yet to hit truly scary levels, D) exports are surging, and E) it is only one sector that is really hurting, housing.

As one who is old enough to have wasted countless hours sitting in gas lines during the Seventies, let me offer as a key difference between the current economy and that of the Seventies exactly that: There are no gas lines this time. I recall that the U. S. (with Federal government-imposed price controls) had gas lines in the Seventies while Europe (with no price controls) had none. Gas at $4.20 per gallon is infinitely better than NO GAS at $2.50. “NO GAS,” by the way, is what the sign said for months at my local Amoco station in those long-ago days. (Amoco doesn’t exist anymore, having been taken out when oil dropped to $10, a reflection of the natural cyclicality of commodities markets…but I digress.)

The key point – and the key difference between now and the Seventies – is that no one is wasting hours (yes, hours) per day simply sipping a soft drink in the gas line that is snaking around three blocks of their neighborhood. This is a combination of items A) and B) in my earlier paragraph. To emphasize the point: when government doesn’t step in to try to “solve the problem,” or “help out suffering consumers,” or “achieve energy independence,” or some such excuse for legislative and judicial meddling, perhaps, just perhaps, individual businesses and consumers simply find a way to adapt to higher prices without tipping the economy into a full-blown recession. Put another way, perhaps, just perhaps, what really caused the recessions of the Seventies was NOT high gas prices, but our government’s response to them: price controls, leading to horrible shortages, wasting billions of person-hours in gas lines. How many of Safeway’s and Wal-Mart’s and GM’s trucks were simply idling in lines, generating carbon emissions, rather than revenue?

In addition to the direct cost of the wasted person-hours multiplied across millions of businesses there was, of course, the psychological impact of consumers wasting hours in gas lines. Consumers who are time-pressed because they spent two hours at the local Exxon station have neither the time nor the optimism to head out to the mall and start shopping. Instead, they might well go home, turn on the TV, and watch some pundit declare that high gas prices (not gas lines) have driven the economy into a ditch.

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