Customer complaints generally have a loose but inverse negative correlation to return on invested capital,” Wolfe Research analyst Hunter Keay says, noting that well-liked JetBlue Airways (JBLU), Virgin America, and Southwest Airlines (LUV) lag financially. “The commitment to make the customer happy costs money.” Keay says the low-cost model rightly treats airfare as a utility. “There really does not need to be a service component attached to consuming airfare.
The Most Hated U.S. Airline Is Also the Most Profitable via BloombergBusinessweek
As painful as this is to read from someone that has spent much of his professional career touting the benefits of CRM, customer care, and the importance of fostering loyalty through superior service, there is an important truth. The lowest cost providers in most sectors can also be financially successful. but it is a ruthless business where you are shaving costs everywhere to eek out margins. Thus you are squeezing customer, employees, partners, vendors, and investors. It becomes a numbers game where it is about delivering the least amount of value while still maintaining a steady stream of business.
Long-term however, it is hard to see how these models succeed given the massive churn. For every other business that is not chasing the absolute cellar in terms of price and service, the best play is to invest in your customers and create a great experience.
(via marksbirch)
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