18 March 2009

Airline Seats as Razors?

Tim Hughes - whose blog I really like - writes in his column from down under today on the notion of the airline seat vs ancillary revenues as the Razor vs Razor blade discussion.

The concept founded so many years ago by King Gillette (yes that was his real name) of selling the larger product at a loss or zero cost but making the profit of the use of the product is clearly not and not necessarily news.

However adopting this model comes at a huge price that not many may be willing to pay.

Consider this - if (heaven forbid) Ryanair was to have an accident and lives lost or serious injuries what would happen to Ryanair? probably a lot since it has little brand value other than price. Were the same thing to happen to Lufthansa - its a different proposition as LH has a much higher brand value.

if therefore you append the Razor/Blade model over airlines today many things happen. The investmant in the brand proposition changes. The value proposition changes. Most definitely what happens is that you destroy the value of your proposition compared to comparable products and services. In the case of the airline trying to make money out of the initial reservation/seat sale - then they become no better than Ryanair.

Indeed in my opinion this works for someone like Ryanair. It doesnt work for a premium product airline or even an association with a brand that is lesser in perception terms.

All in all its not a good idea.

Seperating the brand proposition from the product works for things like Game Consolers or Razors. It doesnt work for a premium long established airline in my view.




Martino said...

I remember attending a conference where the CEO of Tiger Airways, Tony Fernandez said (talking about Chinese travellers): "if I was allowed to run a casino onboard, I would give away flights for free".

Martino Matijevic
CEO, WhichBudget.com

Bon said...

"[Ryanair] has little brand value other than price"

Ryanair might be a one trick pony, but don't underestimate the power of that pony. After all, it can carry Michael O'Leary on it's back.


Bonamy Grimes
Co-founder skyscanner.net

Martino said...

Oops, did I say Tony Fernandez ... I meant Tony Davies.