Planned Obsolescence: Punitive Fees for Gain

86% think American flubbed the IQ testThis week’s Advertising Age poll asked the question: “Does American Airlines’ move to charge for checked luggage offer a marketing opportunity for rivals?”

Not surprising 86% of advertising folks felt it left the door wide open for competitive moves.

Duh. This is simple. The growing phenomenon led by digitally-oriented companies (Google, Netflix, Zappos, etc.) and the social web/Groundswell is: if you punish consumers they will seek other options. And a competitor will offer alternative.

Companies create switching barriers with those short-term and punitive profits. The problem is, it’s nearly impossible for those companies to walk away from their addiction to that revenue. It’s a bad drug in their veins.

Some easy target examples: Blockbuster vs Netflix (late fee-FREE). Name-your-retailer vs Zappos (hassle and return-FREE). Name-Your-Carrier vs MetroPCS (data/minutes FREE). Got some other examples of consumer pain-points that an e-company removed? Please add them below in the comments.

Chris Anderson, author of The Long Tail and exec-editor at Wired magazine has a new meme/book in the works called “FREE.” From what I’ve read it will be about how companies like Google dislocated billion-dollar industries by offering the same or superior service for free. And the macro-consumer-trend will be an ongoing dissatisfaction with punitive fees based on common behaviors (late tax filings or payments, for instance).

I have to be honest here, I haven’t met a meter cop I admired nor liked when they were on-duty. Probably fine people upholding some order. But mostly just hired tax collectors for the tardy IMO. And we all resent having to pay 100x premium for being late. While I don’t expect cities to get this until they have to compete, that mindset is under fire in every industry and service category. Those that remove the pain points raise the longer-term potential of their business.

What pain points exist in your industry and are you prepared to capitalize on removing them—perhaps even at the expense of short-term gains?

I believe that American would have been better off raising all rates by a small amount rather than identifying the culprits and causing them each to pay. In an industry of commodity benefits and pricing, every dollar earned off of this move will result in client attrition, because we all have to carry a heavy or extra bag once in awhile. So, competitors should have their day with American and learn from the lesson they offer.

BACKGROUND: Coming at a time when customer satisfaction with airlines declined for the third straight year, American Airlines knew instituting a first-checked-bag fee of $15 each way would be unwelcome news and tried to get out ahead of it with a detailed communications plan centered on talking points such as the impact of fuel prices, increasing competition, a detailed breakdown of the increasing cost of business and its fuel-conservation programs. All that was lost in the PR backlash the airline tried to prevent.

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UPDATE: As a quick response to this situation, I share with you The Southwest Homepage from this Month:


 Southwest Airlines Bags Fly Free

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