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Flexing the Business Model to Keep the Customer

October 1, 2007 - 2 Comments

air_canada.jpg Earlier this year, I read an interesting article in the USA Today by Barbara De Lollis on the rebound of Air Canada. As an aviation nut, I am always interested in the inner workings of the airline industry, but in this case, it was a interesting case study for what’s possible with service providers too.The article covered how Air Canada went from struggling to be a”profitable pioneer” -it did so not by changing its industry, for as at its most basic level, it still delivered people and cargo from point A to point B as it did before. Rather its change was more to its business model, largely focused on changes to allow customers to”personalize” their air travel experience to meet their own respective needs. For example, instead of having just non-refundable or refundable tickets, it unbundled them so that, as a flyer, you can have a non-refundable outbound but a more flexible return ticket, should the meeting end ahead of schedule and you can get to the airport earlier. If you want to reserve a seat, you can for a small charge; or if you don’t care where you sit, then no problem, just take any unreserved one. If you don’t check a bag, they’ll give you a $5 refund. Don’t care for frequent flier mileage, they’ll give you money back for that as well. And they increased the entertainment options as Dameon D. Welch-Abernathy from Phoneboy shares with us here. With all the options, some may think that the margin would plummet, but what they’ve found is that 75% of their customers are upgrading and taking advantage of one of the services. So by giving greater control and options to consumers, Air Canada became the preferred carrier for many and helped to boost their bottom line.This same focus on personalization, a more flexible business model, and the customer’s overall”experience” can just as easily apply to providers. With a platform built on IP, they now have the means to offer very unique, blended services which aren’t necessarily voice, video, data, or mobility but a mix of all them all. And those services don’t have to be significant entities unto themselves, such as TelePresence, but they can just as easily be smaller features, such as network-based parental control or turbo button on broadband, which may not be of value to all subscribers but could be of high value to some. By having a number of choices to for the customer to select, the provider can permit each subscriber to craft the type of experience they want and, in turn, build their loyalty. So while the fundamental”services” providers offer is the same, the way that they offer them can be different, resulting in a better experience for customer and better profits for the provider. I hope this example gives you a greater appreciation for the power and value of personalization. For Air Canada, their focus on personalization has enabled them to become the premier Canadian Airline and their rewards program has been hailed as the best in their industry based on its flexibility and the increased customer patronage and loyalty that it has created.

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  1. You are absolutely correct! Apologies for the errant link and thanks for the catch.

  2. I think you may have meant to link to this USA Today article instead: