Matching expectation to experience

A few weeks ago I wrote about my thoughts on the conundrum that faces banks as a result of the service arms race: the constant march to greater and greater levels of customer experience in an environment where only those with the deepest pockets can win in the long run. I controversially then suggested that a strategy of lowering and exceeding customer expectations, rather than raising expectations and not meeting them, would be one way to get out of the death-spiral of increasingly tit-for-tat competitive responses.

Last weekend, on a trip to Dublin, I had the chance to see this effect in action. We flew RyanAir, an airline that is constantly innovating in what it means to travel without frills. You pay extra for everything: the right to have checked luggage, the food, even the right to board before other passengers. It is possible, with RyanAir, to get ticket prices from 1p (yes, that's one pence) plus taxes in some cases. Despite that, they are very, very profitable.

The thing is, my partner and I are regular travelers, and we have access to all the lounges and other priority services that airlines provide when you fly often. So we were expecting our RyanAir flight to be awful. We were attracted by price, and thought, for a 1p fare, that we could just put up with whatever problems came our way.

In other words, our expectations were very, very, low.

Imagine our surprise, then, when we came to Dublin International and had only a few minutes wait to queue for check in (we had one bag to check, for which they waived the ten pound fee, for some reason). I am used to much longer wait times even with priority service. We had already paid for pre-boarding (five pounds each), so then had our pick of the seats on the aircraft (with allocated seating, you never, ever, get the seat you want). We decided that we'd like to eat on the plane and had a choice of options to select from, including wine and pizza, which set us back another five pounds each. Nett-nett, the flight cost less and we had exactly what we wanted from check-in till the moment we got off.

RyanAir don't give you anything for the ticket price but a seat and safe travel. And you don't expect anything else, excepting, perhaps, that you will have an uncomfortable journey. With such low expectations, we looked at everything that went right in a new way. We're talking about using RyanAir for all our leisure travel now.

The moral of this story is that the airline set our expectations at a low, realistic level to start with, and then exceeded them. They didn't set the expectations high as a way of differentiating and getting us into our seats, and then fail to deliver.

Back to banking,the question is whether we "differentiate on the customer experience", and, in fact, set the bar so high that the customer is always disappointed.

Colin Henderson of Bankwatch made the following remark on my original post on this topic:

But the concept of reducing expectations for an existing firm boggles my mind a bit ... can't see how that would work positively

Actually, I think the real point is that reducing expectations is not the same as reducing service. The latter clearly drives down the actual value that customers receive. But by managing the former, you have the chance to drive up the perception of the value that a customer is getting.

Comments

[Colin]

I am going to do a complete flip flop here, and agree with you now. But its a long and qualified agreement, and I am going to post on this :-)

The elevator version of my flip flop; reduced expectations is a valid approach, provided the Bank alters their business strategy. This renewed strategy would be based on a clear customer oriented focus. [This business strategy change is required, because today, most big Banks, Lloyds, Barclays, RBOS, BofA, Wells, are banks for everyone, and therefore no-one in particular.]

This new focus would potentially alienate some existing customers, but on balance would retain and grow a customer base of advocates.

Phew ... mea culpa - thanks for challenging my brain.

[Rob Findlay]

James, another interesting post, and the low-fare airlines are a case in point. But equate these models to banking - a Qantas (like Rabobank.com.au) and its offshoot Jetstar (Raboplus.com.au) each serve different markets, that use price point as an indicator of service expectation. I agree that Ryanair hits the mark, but these models are part of the increasing trend to either buy the top-end high quality expensive product or low-end no frills product. The area in between in disappearing fast. So too in banking, where we have no-frills airlines = direct pure online bank plays, and high-end quality airlines = full service bricks and clicks banks. The no-frills can teach the hig-end a few tricks about efficiencies and costs, and the high-end can pass down customers willing to migrate. I think both can play in the market, just not necessarily with the same customers. And I wouldnt be brave enough to go to our CEO and say we're going to baseline our service to such a point as there are no expectations - our competitors would love it.

[Julian]

Rob -- isn't the baseline essential for responding to the commodity end of the market? I.e. aggregators / comparison portals etc. Moneysupermarket, Confused.com etc are price driven, so I think the 'bare bones' strategy would work very well -- competitors in that market would hate it because

It's worked in life insurance -- some companries offer the bare bones product which is on portals such as TheExchange, assureweb and webline etc, and then when they do the full apply, they focus on the upsell.

I think the key question for savings and investments -- what will customers then pay for in an environment that is already no fees? Taking the flight analogy James, would I really pay any money at all for extra services? The survey over at MoneyFactsGroup, http://www.moneyfactsgroup.co.uk/surveys/viewsurvey.aspx?SurveyID=26 asks these very questions and I found myself saying, well I guess for £3/month I would pay, but only for vastly improved, and personalised service, and I wouldn't want any fees, etc etc. But if the budget got tight, this premium service would be the first to go, unless it was really and significantly making my life easier -- ideally that I'd become dependent on it.

[Jesse Haifley]

James,

I agree that it is a much better idea to set yourself up to over-deliver. Really, it’s a question of understanding the true capabilities of the organization and selling that at a fair price, rather than selling a compelling vision of the organization at an inflated price.

Reading your entry I recalled a conference presentation a few weeks ago by Citibank’s #1, explaining the many, many (in my opinion, harrowingly involved and daunting) steps required in order to reach their vision of truly being “one bank” to their customers from an operational, informational, accounts management, IT point of view. Basically, a five year plan of, as you’ve put it, rebuilding the jet engines while in flight (meanwhile, acquisitions to continue apace...). Then, he played for us a TV commercial from their big new campaign which touts – you guessed it – the unified nature of Citi. I’m afraid much of the intended audience for these ads might assume that the bank is capable of this service offering right NOW.

[S L Rottenpig-Rules]

I totally disagree that "It is possible, with RyanAir, to get ticket prices from 1p (yes, that's one pence)...". One penny perhaps but never for one pence. Pence, as we in financial circles know, is plural!