Articles

Lessons From The Decaying Carcass of Qantas.

I was one of many people who consulted to Qantas from the mid-1980’s until the mid-1990’s. It was wonderful to watch that airline grow and flourish with an international reputation as a long haul carrier of first choice and to be one of many people who contributed in some small way to its global successes. As a frequent flyer, many Australian business-people like me were proud to evangelize Qantas to our friends and colleagues around the world.

It’s service was great and – at one time – it was the only international airline that could boast an all Boeing 747 international fleet and access to frequent flyer lounges in all the ports it served.

Fast-forward to now and you have an airline with an aging fleet with appalling housekeeping standards; flights that are either late or cancelled far too often; manned by cabin crews that are too bitter and twisted to want to give you service; with over-crowded frequent flyer lounges; based on a business model far too reliant on rewards programs for yield; and a self belief that everything will be alright if we focus on cost reduction and cheap airfares.

A once world-leading premium airline being led by a champion of discount air travel – struggling for meaning in a world where international competitors are lifting the bar rapidly on the travel experience and gaining massive ground in customer’s eyes by valuing up. Thank heavens for protection or imagine the position they could be in.

The lessons from the decaying carcass of Qantas all come back to a central point.

Commoditization.

If you make everything about reducing cost, you inevitably end up with low prices, low margins and huge pressure on volume. It becomes obvious to everybody that you offer low value at a cheap price and that as a consequence they become a nameless face in a sea of faces that must be dealt with through processes designed to deal with masses of people as efficiently as cost and context allows.

Every business believes that they can pull off the Houdini trick of fooling people into seeing value where none exists. That somehow they can maintain individual customer preference while they are herding them in the direction they need them to go in to stay profitable.

At the end of the day cheapest price is the most rational of all attributes. It is the default attribute of many – not the chosen attribute of us all. And because it is so rational there can only be one winner. Whoever can sustain the cheapest price – in the absence of meaningful attributes of choice – wins.

Think about your retail business and the customers you serve before you end up in the commoditization trap. Because once you are in it, it is very hard to escape.