My Flawed Assessment of Basic Economy
One of the best ways to learn is to look back at your mistakes. We all make them, and in each mistake, there are things to be learned.
It is much more fun to look at your successes. Considering why things have gone well in your life is a fun exercise. Most of us chalk up the wins to our skills and talents.
Today I want to reflect on my flawed evaluation of United’s Basic Economy.
Basic Economy
In 2016, United announced that it would be introducing Basic Economy fares. These would be stripped-down offerings, with high fees for baggage, limited seat selection and no opportunity to move up to Economy Plus. I wrote about it at the time. You can read my article here.
In my assessment, I worried that the Basic Economy fares would lead to three problems. First, people would be unhappy with the poor service, especially businesspeople used to better treatment.
Second, the new fares would complicate things and customers would get confused with all the options.
Third, brand perceptions would blur as the more quality airlines offered a poor product. A brand can’t be all things to all people.
The Result
How has Basic Economy worked out? It has been a huge success.
The biggest indicator of Basic Economy’s success is last week’s collapse of Spirit Airlines. In some ways, Basic Economy was a torpedo aimed squarely at the basic business proposition of Spirit. With Basic Economy, the big airline players could compete with Spirit on price. For $50, would you rather fly on Spirit, a brand known for dismal service, or United?
What I Missed
Looking back, the thing I missed was that airlines could present Basic Economy fares with clarity and simplicity.
When the big airlines rolled out Basic Economy, they did a great job at communicating the proposition. The airlines made it very clear that a Basic Economy ticket required significant tradeoffs.
Today, when the big airlines show fares, the different classes are very apparent. Through deft use of technology, the companies offer a range of options at different prices.
This clarity has multiple benefits. It ensures that frequent flyers know what they will be getting; expectations are clear, so there is less disappointment. The airlines also limit brand damage.
The Basic Economy experience isn’t good, but this doesn’t have an impact on overall airline perceptions.
The result is that United, Delta and others can attract the price-conscious flyer without damaging the overall experience and brand.
Learnings
There are important learnings in the Basic Economy story. First, execution matters. A strategy might work or not based on how well a company implements it. Before dismissing an alternative, it is important to explore what it might look like in the market.
Second, companies can successfully offer different experiences at different price points if there is clarity and distinction. If everyone knows how the product offerings vary, a firm can put different offerings into the market.
Third, an effective way to damage a competitor is to offer their customers a better alternative. Basic Economy fares destroyed Spirit because the product was better at a comparable price.
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