Monthly Archives: February 2015

Self Delusion

An article caught my eye the other day. Big headline – Consumers Actually Like Airline Fees, Analyst Contends. You can imagine my skepticism but you also know I’m a staunch advocate for keeping an open mind until we learn all the facts.  Turns out my instincts were pretty good but let’s see what you think.

Stewardess, circa 1949-50, American Overseas, ...

(Photo credit: Wikipedia)

An analyst from Wolfe Research named Hunter Keay wrote a report called Every Time a New Fee is Announced, a Fairy is Born.  In it he states the following:

Inconvenient truth: customers like fees. Maybe that sentence would be better received if we had said “customers like paying only for what they use.” Well, guess what…that’s the same thing.

He goes on to chide the airlines for not being more like Spirit Air (on whose planes you couldn’t pay me to fly) which charges relatively low base fares and then proceeds to layer on fee after fee.  Mr. Keay believes it’s a huge missed opportunity for airlines to improve their bottom lines.  As one report about this notion said

There is certainly some logic to the idea of saving consumers money on base airfares by stripping away everything but the seat you are required to sit in (though some carriers have discussed making passengers stand), but the problem with this a la carte approach is that the fees rarely match the savings.

In other words, we have yet another example of someone advising businesses to focus solely on their bottom lines rather than on their customers.  I think we’re all aware that fuel prices have dropped.  Anyone heard about an airline revoking the “fuel surcharges” they put in place when prices were sky high?  That’s because they haven’t.  Imagine how you’ll feel when you’re charged a fee to offset the costs of the pilot and flight attendants, much as a restaurant might charge a fee to help cover the costs of service.  Of course in the latter case the need to tip usually goes away.  You won’t see lower fares.

I hope some airline follows this analyst’s advice so we can see how well it works (or doesn’t).  His shining star – Spirit – is consistently rated as the worst US airline and is one of only two airlines flying in the US – Cubana being the other – with a two-star rating.  Profits over people has turned this analyst self delusional.  Customers don’t like fees.  They like excellent service at a reasonable price.  Value, in other words.

That’s my take.  Yours?

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Filed under Consulting, Reality checks

Il Coperto

The Foodie Friday word of the day is “coperto.” For those of you unfamiliar with the term it’s an Italian word meaning “covered.” When you eat out in Italy and wish to dine sitting down, you pay the coperto – the cover charge. It’s usually a couple of euros and is meant to cover the costs of the table, tablecloth, napkin, dishes, washing and cleaning, heating and light – everything involved with a restaurant meal which is neither food nor work costs of the staff.

Spaghetti all' arrabbiata

(Photo credit: Wikipedia)

There is a corollary to the coperto – a “no tipping” policy. Since the coperto covers the non-staff items, the margins on food and beverage can be spent on staff. The US is one of the few countries where there is a two-tier pay system because we are one of the few that operates in a system in which someone is dependent upon tips for their income. The cooks and dishwashers often make far less than the better-compensated front-of-house servers and bartenders. Thanks to tips, service staff can take home as much as twice the pay of their kitchen counterparts.  This is beginning to change and I think it’s a good thing.  It’s also instructive thinking for all businesses.

Quite a few restaurants are starting to charge a nominal fee per head much like the coperto.  Others are inflating their food prices but forbidding tipping – in essence building in a 20% tip.  The final cost to a customer is the same assuming that they left a reasonable tip.  This allows them to pay a much higher wage and to provide benefits such as health care.  The transient nature of the business is changing as great servers and cooks can be compensated and induced to stay on.

What happens when there is a bad experience?  Think about it.  First, it’s rare that you withhold the entire tip.  That’s punishing an entire staff for one person’s incompetence.  The reality is that you’d probably complain to the manger.  It’s rarely a money issue.  Second, what happens quite a bit is that people are just too damn cheap.  $5 on a $125 bill is unfair but that is more the reality of the business than to person who overtips.

What does this have to do with your business?  First, ask yourself if there is a two-tier system that unfairly rewards one group over another.  Second, what have you done to make sure that your staff is incented to remain?  As with customers, I find it’s always more cost-effective to retain an existing competent person than to find, hire, and train a new one. Finally, how can you rethink how the money customers pay is positioned without seeming to nickel and dime them?

There are a lot of ways to change the US system.  At one place servers get paid either $10/hour OR 20% of their food sales, whichever is higher, and it’s almost always the over for servers.  Others charge a flat fee while others automatically add a 20 percent service charge to all bills or raise their food prices.  All forbid tipping.  Hopefully everyone wins.  Employees make more and consistent money, customers get better service due to a happy, motivated long-term staff, business owners continue to make reasonable profits.  Sounds like a plan to me.  You?

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Filed under food, Thinking Aloud

I’m Confused

One of the newsletters I receive linked to a couple of articles today which deal with the same issue from opposing points of view. I’ll lay out what they say and I’d love to hear what you think.

The issue is how to deal with social media posts made by employees on the employee’s personal pages. On one side we have an article from the AP called “How to handle an employee’s offensive social media post.” On the other we have The Atlantic with a piece called “A Social-Media Mistake Is No Reason to Be Fired.” The former calls for swift action (read that as termination); the latter urges leniency. Here is the reasoning behind each but I think you see why this is a confusing issue for many of us in business.

First the AP piece:

Whether it’s comments about news events, long-held beliefs or a bad joke, an employee’s offensive posts on Facebook, Twitter and other social media sites can damage a company’s image and profits. If the comments are racist, homophobic, sexist or against a religious group, tolerating discriminatory comments puts an employer at risk for lawsuits and losing customers.

Clearly, if posts of this sort are placed on the company’s pages, I’m in total agreement.  There is no middle ground – the person needs to be fired.  But what if, as is the case in some of the examples cited in the article, the employee is posting on their own page during non-work hours?  Are we as business people responsible for the political and religious beliefs of our staff?  What right do we have to regulate those beliefs and, moreover, what about the first amendment protections each of us enjoys?  The article says that many employers have taken to monitoring their employees’ personal pages to make sure that there’s nothing there that would be detrimental to the company.  Fair?

The Atlantic, on the other hand says:

Here’s what corporations should say in the future: “Sorry, we have a general policy against firing people based on social media campaigns. We’re against digital mobs.”

But note the one exception built into what I propose. Sometimes people do stupid things in the public eye that relate directly to their jobs… generally speaking, Americans ought to be averse to the notion of companies policing the speech and thoughts of employees when they’re not on the job. Instead, many are zealously demanding that companies police their workers more, as if failing to fire someone condones their bad behavior outside work.

The piece deals with the public shaming that bad actors often suffer.  The author believes this is punishment enough and is generally a short-term issue while a termination has long-lasting effects, well beyond the scope of the bad behavior.

So where do you come out?  Can you see why this is a confusing issue?

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Filed under digital media, Huh?