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United Airlines and the Dollars and Cents of Customer Experience

By Augie Ray | April 11, 2017 | 8 Comments

MarketingCustomer Experience

We have all seen the video of the bleeding man being dragged from his United Airlines flight. We’ve seen all the social media rage. We’ve endured debates over whether it was the fault of employees, poor corporate policies, an unruly passenger or bad judgment on the part of a police officer put in a no-win situation.  And we’ve read the articles critiquing United’s communications about the situation.

But at the end of the day, will this damage United’s business as some claim? The answer is no and yes and is a customer experience lesson for business leaders.

No, It Will Not Harm Demand for United’s Flights

For all the breadth and depth of emotion, this situation is unlikely to cause people to change their airline purchase behaviors. We know this because this is hardly the first time an airline has faced this sort of social media backlash. Heck, United Airlines is the prototype for precisely this circumstance!

“United Breaks Guitars” was one of the first stories any of us heard about the power of social media and how it was changing brands. In Spring 2008, Dave Carroll got off his United Airlines flight and found his Taylor guitar damaged. He spent nine months trying to get the airline to make it right, and in frustration, he wrote a catchy tune and produced a funny YouTube video recounting his story. It went viral, and United belatedly offered Carroll compensation.

To professionals in the nascent field of social media, Dave Carroll was not just a skilled and creative guy whose unique talents and situation permitted a special way to elevate his gripe. He became, instead, a powerful everyman, effortlessly wielding free social media tools to battle a corporate behemoth. Goliath had been felled by a YouTube David.

A thousand blog posts and articles waxed poetic about the damage suffered by the brand, but did United pay the price? If so, it is hard to see.  If you evaluate United’s stock following this PR crisis, you find that in the six months following the release of Carroll’s video, the company’s stock outperformed competitors’ by more than 100%.

Over the years, I have spoken to dozens of audiences and stood in front of thousands of people and asked a simple question:

As a result of seeing the “United Breaks Guitar” video (and not because of your own personal experiences), have you ever opted for a more expensive or less convenient itinerary to avoid flying United?

Not one person has yet fessed up to altering their purchase behaviors as a result of seeing the video. You’re not surprised, are you? After all, you saw the video, and you did not change your airline purchasing habits, either. In the end, we all buy airfare the same way, choosing whichever carrier offers the route from Point A to Point B that is cheapest, flies at the right time, is easiest, and provides the right loyalty miles. If you hate and avoid United, it is because of your own experiences and not because of a musician’s YouTube video.

Does this mean United’s PR crisis this week is meaningless? No, because while (virtually) no one will change their flying habits…

Yes, It Will Raise United’s Costs

Even if not one person changes their airfare purchase behaviors, this event will still be costly to United. Those who work in crisis or reputation management know that it takes very little for a large corporation to ring up a seven-figure tab responding to, managing and combatting a serious PR crisis.

This week, at United Airlines:

  • Senior leaders earning hundreds or even thousands of dollars per hour have shifted attention from whatever revenue- or business-generating tasks they intended to work on to address this PR issue, approve statements, meet the press and collaborate with employees.
  • PR professionals and agencies are racking up hundreds of hours (and hundreds of thousands of dollars of billable hours) to assist the brand.
  • Lawyers are adding more hours and more thousands of dollars to consider legal risks, options, and offers.
  • Employees at all levels are losing productivity reading communications from leaders, being instructed what to do if challenged, watching the videos, reading articles, and discussing the incident. (They’re also responding to friends in social media, raising the risk of expanding and multiplying the scope of the PR issue and the associated costs.)
  • Social media teams are dealing with angry customers, doing their best to handle a situation but having little authority to do much more than explain and apologize. It’s possible United has had to add to staff temporarily, calling on social media vendors to help their teams manage a rise in tweets, posts, and comments.
  • And finally, marketing leaders are very likely altering their plans. Campaigns that are running may be pulled temporarily. Planned ads may be being reassessed and edited. It’s possible United’s marketers are canceling ad buys in the short term and raising budgets in the long-term to change the conversation about the airline.

All of this means that thousands of employees at United and its agencies are running up a bill that can easily top seven figures. In fact, if every one of United’s 86,000 employees lost an average of just a half hour of productivity, that likely cost the company more than $2,000,000. And for what?

This Could Have Been Avoided With Better Customer Experience Processes

I used to work in the travel industry. I know that revenue management is incredibly important and challenging. And I understand that airlines must overbook planes. People miss flights, and airlines’ margins are thin. In the last five years, United Airline’s profit margin has averaged under 6%, which means a flight with as few as five to ten seats vacant could lose money.

Ultimately, however, this is not an issue of revenue management; it is a matter of customer experience. What do customers expect? What is the value of meeting those expectations? And what risks and costs can be avoided by doing so?

United Airlines brought logic and policies to an emotion fight. The company did not seek a negotiated agreement to make all parties happy but instead set in motion a process that resulted in the police injuring a customer whose crime was wanting to use the product or service for which he paid. In the eyes of many, the company compounded the situation by offering measured, careful, logical, corporate statements in response to a situation that captured the passion and anger of many.

This all could have been easily avoided, of course. The airline could have raised its rebooking offer until the required number of passengers agreed to be bumped to another flight. For another $500 or so, United could have made every customer happy, avoided millions of dollars of costs and evaded reputational damage. Customer experience management is the right thing to do, not simply because making customers happy is nice but because maximizing loyalty, improving reputation, minimizing costs and reducing risks is what shareholders demand.

Some will argue, not without merit, that the passenger’s actions and behaviors in that video were outrageous. Others will suggest, quite appropriately, that brands cannot be “held hostage” to every consumer’s whims. Neither argument is incorrect, but brands don’t win by being right; they win by earning strong relationships. And the outcome of smart customer experience management is not just purchases and revenue; it is also trust and forgiveness. Few airlines have earned the trust or forgiveness of customers tired of being crammed into ever smaller seats while being asked to pay for things that used to be free.

Brands that rely solely on the protection of the law, contracts, or terms and conditions and not also customer experience put themselves at needless risk. Airlines may have the right to limit their offers in overbooked situations, involuntarily bump passengers, and have them physically removed by law officers, but no brand can hope to win the customer or shareholder with that customer experience.

Airlines may have little opportunity to provide astounding customer experiences given industry challenges. And they may suffer little by way of lost revenue from PR crises such as this week’s kerfuffle. But every brand can win from sound customer experience management processes, because reducing risk, earning trust, and doing what’s right is never wrong.

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  • Grant says:

    In this era of low airfares and providing options by unbundling options, maybe it’s time that United (and the other airlines) provide an option that, in return for a fee, the airline promises to get you to your destination without first beating you up.

  • The only people who will effectively stop flying United are those who have also gotten their asses kicked off an airplane.

    So far that’s one dude, and I suspect after the lawsuit, he’ll either fly free everywhere on United’s tab OR use his newly acquired jet anyway 🙂

    In many ways, this is the BEST outcome anyone flying this miserable airline can possibly hope for.

  • Carri Bugbee says:

    Good analysis, Augie. For those of us who have been following corporate PR crises playing out in social media for the past decade or so, it’s astounding that we still see it happening.

    Even though United is obviously years behind the times, you would have thought that after the recent leggings debacle that the C-suite would have sent out a company-wide memo telling all employees not to create public debacles while customers’ cell phone cameras are on. Period. Full stop. No matter what. Spare no expense.

    The fact that the CEO (and apparently no other United executives) bothered to consider this means they are dinosaurs of customer service and don’t belong at the helm of a consumer-facing company in 2017.

    Additionally, ALL airlines should consider how their own byzantine policies created this mess. United was being miserly about offering compensation to get people to give up seats voluntarily. If the United employees had provided a truly attractive offer, somebody (if not a bunch of people) would have jumped up to take it. However, we have learned in the aftermath of this fiasco that by law, airlines are only able to offer up to $1,350 to bump a passenger.

    Gee, who would have lobbied for such an asinine law? And how much did they contribute to the lawmakers who voted for it? Obviously, the law is not a “free market” idea at all. It’s protectionism for an industry that already enjoys lots of protections and it is dominated by companies that have a near-monopoly status in many markets.

    If airlines put as much money and consideration into customer service as they do in protecting their own rights at the expense of their customers, they likely wouldn’t find themselves the brunt of so much public derision.

  • Ken Hittel says:

    I think you’re missing one — & perhaps the most relevant — point in this affair. The airline business is an oligopoly; competition in it is virtually non-existent. If I get pissed off at United, do I have a half-dozen alternatives to my desired destination to choose from to show my displeasure? Nope. That is not the way the industry works. Intelligent customer experience management may help some airlines at the margins but, really, it’s largely irrelevant in the airline biz.

    • Augie Ray says:

      I agree completely, although I think this is just the other side of the coin I addressed when I said this PR crisis would have no effect on demand. As I noted, people choose the airlines that go from point A to point B cheapest and easiest, and as you point out, that means little choice in a regulated oligopoly.

      You, like me, have worked in regulated industries most of your career. I always laugh when I see business leaders in these industries complain about onerous regulation considering the only thing that has prevented more innovative startups from competing as they have in other industries (commerce, media, etc.) is those regulations. It’s good to be in a regulated oligopoly (but no brand should get too comfortable with it.)

  • Joel Shuler says:

    It matters not what service business you are in, it’s a human-to-human experience. Whether you provide digital or audio platforms that remove or minimize the human side, or you respond/react to a customer issue in a less than human, caring way, your business will suffer. You are spot-on, Augie, with the focus on customer experience–I prefer “human experience” simply because I see more and more that the “customer” is simply an input/cog in the overall business model–not a living, breathing, feeling human being. If one United employee on that plane had stopped for a moment and simply asked, “What’s the most human-to-human way to handle this situation?” the incident could have been resolved much differently. Too often–in the airline industry in particular–a customer is akin to a piece of baggage to be moved on or off the plane. A paying customer is a person, a human being, and corporations that lose that perspective open themselves (and their shareholders) to enormous risk. Think of it–this man is 69 years old–a senior citizen! He bought a ticket, was welcomed onto the plane and seated. He violated no rules, did nothing wrong. Any person who would manhandle and physically violate someone who was not a threat and had done nothing wrong whatsoever would first have to dehumanize the person in his/her mind. This is the most disturbing thing to me–the way in which this customer was dehumanized by this business; the most frightening thing is that by extension, every other person on that flight was also dehumanized–to the United employees, there were no humans on that plane, only customers. It’s a cautionary tale for any company.

  • Stephanie G says:

    True, that our travel options in the air are limited, and this incident won’t significantly impact the airline long-term for all the previous stated reasons. That said, I avoid flying United (when possible) because of stories like this one and as well as other negative experiences shared by friends who frequently fly this airline for business. This airline is always my last choice, and I don’t think there’s anything the company *could* do to elevate my perception of the brand.