‘Being nice to flyers pays off for Ryanair’ - two years ago, you’d have been more likely to see this headline in The Daily Mash than in The Times but, sure enough, the airline’s once-belligerent boss Michael O’Leary has attributed its strong results – with passengers up 16% and profits up 25% – to the “enhanced customer experience” it’s offered of late.
Ryanair had been notorious for its bare bones approach to customer service – just one of many blunt implements to batter passenger morale. There’s an anecdote in our family often trotted out: after becoming particularly irate, having been forced to take items out of his hand luggage and put them in his coat pockets to get the bag under the magic 10kg, my dad wrote to Ryanair, sardonically drawing attention to a missed business opportunity. Why weren’t they charging customers to use the toilet on board, he said? A few months later, news broke of Ryanair planning to do exactly that.
O’Leary’s marketing strategy, it often seemed, was to make the process of flying as difficult and unenjoyable as possible, thereby making it next to impossible anyone would ever forget its one and only point of appeal: those unbelievable prices. For a long time, it produced spectacular results – but society moved on. While cheap flights were once a selling point, they are now an expectation. In 2013, with profits about to undershoot forecasts, O’Leary finally realised this and announced a radical change of tack. Anyone who has travelled with the airline both before and after this watershed is likely to agree the change has been impressive – and has proved shrewd business, too.
The lesson O’Leary drew was this: price is a huge draw, but eventually it isn’t enough. Ryanair’s supermarket equivalents, Aldi and Lidl, already know this. “There are many parallels between what we have seen in the airline industry and what is currently happening in UK grocery retail,” says Lucia Juliano, head of fmcg and retail at Harris Interactive. “We have seen ‘no-frills’ supermarkets take off in recent years, but they have had to adjust their positioning to better meet the needs of the consumer.”
While shoppers still put price first, there is evidence it is becoming less of a priority for them. The proportion who said cost was the most important factor behind their grocery decisions fell from 48% in October 2013 to 40% in June 2015 [Him!], while those citing convenience rose from 17% to 22%. This is in keeping with growing consumer confidence, with Nielsen data last week showing the UK had overtaken Germany on the measure for the first time in five years.
Katie Littler, communications director at Him!, says the shopping landscape is being altered by a new consumer who takes competitive prices as a given, and is instead driven by convenience. “Price is still very important to this generation and forms a key part of their decision-making process,” she says, “but it is now almost expected that stores will deliver against this – there is so much choice at low cost that it is less of a differentiator across retailers.”
This isn’t to say moves by the big four to slash prices have been a bad idea. But like British Airways, which Juliano says had to “fight hard to define its position in the marketplace” in the face of the no-frills revolution, Tesco et al have big decisions to make about what comes next.
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