Why the average consumer doesn’t matter to business.

October 12, 2012

Airline travel is less fun these daysI just returned from a weeklong visit to Washington DC, traveling back and forth on the new US Airways direct flight between Tallahassee and Washington DC. I used to enjoy the opportunity to fly, but now the experience seems to be largely a series of indignities that grow worse every year. Beyond the security issues we’ve seen the imposition of baggage fees, increased lines with less workers, and even the loss of in-flight snacks.

More people than seats waiting to board during my recent flight from Washington DC to Tallahassee

Not all travelers have the same experience that I do. The major airlines offer incentive programs to their frequent flyers. For instance, US Airways has its preferred flying program to flyers with more than 25,000 dividend miles (30 flying segments) that offers amenities such as: priority check-in; waiver of baggage fees; complimentary first class upgrades; and personal reservations service. Boarding the plane in DC I even saw a separate security line for those who qualify for “envoy” status.

This got me thinking about customer service and why do many industries, the airlines being a prime example, treat some customers so much better than others? I think the reason is that it’s the conscious application of 80/20 rule. The 80/20 rule, also known as the “law of the vital few”, states that 80% of results depend upon 20% of causes. For businesses this means that 80% of profits come from 20% of customers. I believe that the airline industry recognizes this fact and has focused its efforts on providing premium service to its top 20% of flyers while providing the bare minimum service to rest of us.

Preferred flyers get free checked bags

Preferred flyers get free checked bags.

If this is true, then much of what we’ve been taught to believe about business and customer service is wrong. I think it also gives greater justification for having strong and effective consumer protection laws. If it really is the case that the loss of a customer doesn’t matter to a business, then the economic incentive to provide good service to everyone doesn’t exist. In other words, the marketplace will not necessarily punish bad customer service while rewarding good service. Instead, the marketplace may actually reward businesses such as airlines for neglecting a majority of their customers while catering to a small minority of customers who make the largest purchases.


Leave a comment

Your email address will not be published. Required fields are marked *