Frontier Airlines Is Learning the Hard Way That Value Is King
Frontier's debacle in Denver shows that offering the cheapest price is a losing strategy if customers are unhappy with what they bought.
Recently, with all the winter weather, thousands of flights were canceled and tens of thousands of air travelers were stranded. The Denver airport was hit especially hard. Frontier Airlines simply couldn’t handle it with their limited staff. Mountains of luggage piled up and frustrated customers in a mile-long ticket line snaking around the terminal went to social media venting about how bad the company is. These people are learning that if you buy a ticket, a product, or a service based on price alone, you won’t be happy. Price is what you pay; value is what you get.
People are often initially attracted by lower prices. Then you get on the plane and ask for a glass of water, and it feels like you asked somebody to take your dog out at 35,000 feet. This is after you’ve been frisked and fondled by the TSA, after you wait on the tarmac for an hour for some unexplained delay, and after you’ve crammed your knees into seats that they just shaved two more inches of leg room off. While you may shop the lowest price, it is value that you really want.
Frontier began transitioning from a low-cost carrier to an “ultra low-cost” carrier three years ago. You can get rock-bottom fares with them. This is why people are flying Frontier now -- price. They charge extra for everything because they’ve cut costs to the point where they can’t even give you a glass of juice. By not selling their tickets at prices high enough, they can’t properly service their customers.
Service extends to every area. If you have a problem with your flight, want to try and reserve a seat, or have a question, be prepared for a long wait on the phone. They can’t pay enough people to answer in a timely fashion. Don’t expect wifi, and your tray table will barely even hold your smart phone. People think they get a great price on a flight but then get angry when they get no value from it. You get what you pay for folks.
To know surprise, Frontier has struggled with customer service ratings and high complaint numbers since they decided to be the cheapest carrier. Leaving passengers and cabin crews stranded for hours without information is just a symptom of a much bigger problem with the company— trying to beat others on price is a suicide mission, not a business practice.
Dropping price should be the last thing you do to be competitive. Margins are already tight enough. Using price as the thing that separates you from your competitors is an indication that you need to get back to developing what makes your company a unique proposition. For any product or service, there can only be one business that's the cheapest – and is that really what you want to be known for? It's a very tightrope to walk.
Businesses like Frontier need to realize that price is a myth. People buy products and services that solve problems. Rather than trying to be the cheapest, spend time figuring out where you can deliver value that is greater than the price. When value exceeds price, then price is no longer the issue for people.
Of over 28 million small businesses in America, most lose money. Why is this? The number one reason businesses fail is because their prices are too low. Price matters and you should raise yours. Selling your products or services at the lowest price doesn’t make customers more loyal or happier.
The truth is that the customers that cause you the most trouble typically are the one’s who paid the least. Just go on Twitter or Facebook and see how many people bitch about Frontier. Businesses should be looking for ways to go the extra mile. Lowest price business models look for ways to to take short cuts.
A lower price may increase traffic but will rarely sell your product. Lower prices and promotions should be used to create interest but not to actually close. There are five types of buyers and only one of them is driven by price -- which I explain in detail on Cardone University.
Don’t try and be the lowest price in your industry. Give the most value. You’ll have the margins to expand, and you will have satisfied customers who will want to buy more from you.
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