A recent article in U.S. News & World Report disclosed that in 2010, airlines have generated $2.1B in additional passenger revenues through clever, and often egregious pricing strategies. If they had asked their customers for ways to make travel memorable again, would they have selected this strategy to grow revenues?
The “pay to breathe, walk or eat” pricing approach is rapidly eclipsing customer service in the airline industry, and customers like me are furious. Their nickel and dime strategy are earning them billions: Extra baggage fees comprised $600M in additional revenues and flight changes comprised another $900M.
StarCite, a B2B technology company serving the travel industry, has charted a different course to fuel growth. I recently met with Greg Dukat, their CEO. He outlined a customer-centric growth strategy that challenges the airlines’ approach, and will surely outlive it.
First, some background. StarCite, Inc. has developed a global, Web-based technology platform that makes meeting and event management simpler and more cost-effective for corporations, hotels, venues and meeting suppliers. StarCite offers visibility, cost savings, and control over meeting spending for businesses. It also enhances revenue opportunities for suppliers. They automate every meeting planning step, including planning, payment and procurement. Today, corporate meeting buyers and associations can connect and conduct business with over 93,000 hotels, venues, destinations and suppliers.
Instead of using price increases as a growth strategy, Dukat and his team are listening to their industry members and travel association. Says Dukat: “More of our corporate customers wanted greater visibility into their travel spend. The corporations who use our solution will spend over $2B in corporate events. Last August, we partnered with the National Business Travel Association because more and more of our customers wanted clear standards and benchmarks on which to focus.” This led to the successful launch of an entirely new certification program called the Strategic Meetings Management Program (SMMP).
Where were the airlines when Starcite was designing this program? If they were truly listening to business traveler customers or cared about retaining customers, would they be so bold as to charge passengers for using the loo (as we’ve seen with Ryan Air)?
The secret to Starcite’s success is neither the technical elegance of their solution nor the huge capital infusion from equity partners. This certainly helped them build the foundation. Instead, Dukat places a great deal of credit to their innovative culture.
Unlike most commercial airlines, Starcite continues to experience a steady stream of happy customers and high renewal rates. Even if you are not facing 30+% annual growth rates, consider how they foster innovation, and how you can apply this strategy to your business.
Dukat continues; “We have an abundance of ideas within Starcite and among our NBTA members. We have also scheduled two customer advisory panel meetings annually to gather input. The secret is how we filter those ideas quickly and act on the good ones.”
Growth companies such as Starcite have an unusual and somewhat enviable challenge–they generate too many ideas, and seldom see the light of day. Here is the discussion guide they use to move their best ideas forward:
1. What’s the source of the idea?
2. Has anyone generated this idea before us?
3. If not, how can we use our customer advisory panel in this idea generation process?
4. What do other industry leaders think of this innovation?
5. Are there things we are doing within our internal operations that would help us refine this idea, and bring it to market sooner? Where can tribal knowledge help us?
6. Once we choose how to proceed, how will we measure the success of what we have done?
7. What else can we learn from this experience? Might this spawn other new product ideas?
Even when a customer cannot anticipate their future needs, Dukat asserts
“I think it’s all in the questioning. Open-ended questioning gets the dialog started and helps them get outside the traditional box. Their feedback helped us successfully launch our QuickStart programs, which are pre-packaged solutions for specific markets.”
Does this filtering process work? The proof is in the numbers. Within the past nineteen months, Starcite has maintained a very high customer renewal rate, expanded their footprint within existing organizations, improved the quality of their customers’ workflow, and reported strong profits.
Dukat summarizes “In smaller high-growth companies there are not enough resources to go around. Focus on the actions that make a difference and do a good job of vetting them, and execute well. Be careful you don’t keep adding to the list.”
I hope the airlines are taking notes and adjusting the knobs on their control panel. Otherwise, their customer base and repute will fall into a black hole.
This post originally appeared on FastCompany.com.
Copyright 2010, Lisa Nirell. All rights reserved.
[Photo courtesy of Greg Dukat]