The greatest pricing hack of all time

Before I tell you this story, you need to understand a couple surprising facts about airlines.

Fact 1: The airline industry is a ‘net loss’ industry. If you add up all the profits and all the losses of airlines since commercial aviation began it’s around $60 billion in the red.

Fact 2: The profit margin on a 1 hour flight is around $2 per passenger. (around 1 GBP)

Now for the greatest pricing hack of all time.

When a low cost carrier like Ryan Air sells 10 pound fares, or 1 pound fares for that matter – they make more money then we’d imagine. The reason is simple: around half of the travellers who bought these ultra cheap tickets don’t turn up.

They buy the tickets as a kind of ‘future travel insurance’ – a ticket in case they want to go to Prague… I mean they intend on going, but the tickets are often bought very long in advance, and so cheap, life gets in the way and they decide to not go. It’s only a small amount of money, the cost of a coffee….

Ryan Air CEO

Crazy Michael (The Ryan Air CEO) keeps the money. The ‘no show’ money is 100% pure profit, and often more than what they’d make with an actual passenger. But here’s the kicker, there is no refund or changing of dates, so he gets to sell those ‘no show’ tickets again. After a period of time Ryan Air have worked out an algorithm of how many forgo their cheap tickets. They then over sell the flights by that amount of passengers. They know the percentages, and they’re nailing it.

This hack will keep on working, so long as they don’t get greedy. If the special is on too often, it will reframe price expectations, and change the ‘no show’ ratios. If they can resist temptation, they have a winning formula.

It’s another great example as to why price should never be an afterthought. The price is something every startup should be hacking daily.

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Give us a taste

I was recently flying with Emirates and got talking to the cabin crew. When I later asked for a cappuccino they gave me a nice little extra effort. See below:

For the uninitiated, that is the Emirates tail logo as the chocolate on my coffee. I was impressed so much I didn’t want to put sugar in and mess it all up. She did mention that it was normally reserved for 1st Class passengers, but they thought I might appreciate it in business class. They gave me a taste of for next level.

My question to entrepreneurs is this: How are you giving your customers a taste of the top tier?

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Screen Culture

TV was the first entertainment screen in our lives and belonged in the living room. And it stayed there for the best part of 30 years before it multiplied. Slowly, it made it’s way into the other rooms of the house. It was linear and unidirectional, but it was also the start of a new culture. A culture that would shape more than entertainment.

In less than 20 years since the birth of the graphical web, screens in all shapes and sizes have started to pop up all around us. They’ve made things simpler, easy to understand, and just made life better. So much so, that screens now permeate virtually every aspect of our lives.

I call it screen culture.

And it’s much more than TV, web browsers and smart phones. It’s every screen we see. All web enabled, all around us and consumers expect the screens to serve them without a hitch.

They’re in our pockets, they’re on our desk, the car dashboard is now a screen, on the back of airline seats, the airline check in counters, supermarket checkouts, shopping centre directories, in all retail spaces, in the back seat of taxi’s, bus shelters, community spaces. They exist where ever communication and commerce does. Every machine now has a screen. Every time we interact with technology, the interface is increasingly screen enabled. And we often attend to multiple screens concurrently.

The more we learn about the screen, the more it learns about us. The best screens can be manipulated, touched, caressed, controlled and even spoken to. It’s our job to humanize the screens so that they are culturally sensitive. They need to intuitively know what we want… and lead us to that solution. The interface has to be the instruction manual. Screen culture demands that we teach people “how”, while they interface. That the learning, and the solving, happen simultaneously. The screens need to serve us. We must be able to navigate the tight spaces of the small screen, if we can do this, then conversion to the big is easy.

This can only happen when we design as humans, not technologists.

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Kulula Air – Eyeball worthy

I was recently email some pics of Kulula Airlines livery. I’d describe it as eyeball worthy. Because it’s worth looking at, it’s worth talking about. There is no shortage of in cabin jokes from cabin crew while talking to passengers, but few have the courage to paint their personality on the fuselage like Kalula have. In an era of media proliferation, the trick any startup needs to master is the ability to be talked about. Nice work Kulula.

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Southwest Airlines – customer service

Here’s a nice piece of personal input from a staff member at Southwest Airlines. Although they do have a reputation of doing things a little different, the thing that really matters is the fact that they let staff ‘add value’ and be real people.

I like it…. I’d be interested to know if you do, or if you’d find it annoying?

For startups, simple service innovations and staff input cost almost nothing. If you’re lucky, 25,000 people will see it on the internet!

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Dubai Series: You snooze, you ‘win’

These are starting to pop up in the better airports around the world. But every airport has the space for them in the international departure lounges. I’ve seen them in Singapore and now in Dubai International Airport as seen below:

airport-sleepers

They are just a cool idea which makes sense for ‘the people’. A classic ‘1 percenter’. When we are traveling for days at a time a little welcome relief on the ground or a stopover might just make us go through that airport on our next global trip, instead of that other one.

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