Dean Wilkie

I have been thinking about Qantas’s moves to start a new airline up in Asia.

Starting a new airline from scratch means that consumers will hold absolutely no information about the new brand. Nothing beats a fresh start right?

Wrong.

I really question Qantas’s approach from this perspective. Qantas as a brand has strong positive associations, which consumers will use in forming brand judgments and in comparing to alternatives. A quick search of the internet and you can see that in 2006 it was voted the 2nd best airline in the world. In 2011 it was voted the 8^th best. A dramatic drop but still, Qantas is seen as the eight best airline in the world and it currently has a 14% share of the Asian market.The point is that Qantas has equity where as a new brand has none.

 The next thing I want you to consider is something called the order of entry effect. Essentially, in many categories a brand’s market share has been shown to decrease with its entry position. The later a brand enters, the lower the brand’s share. There are several economic reasons but from a marketing perspective, consumers will learn more about earlier entrants than later entrants. The more you know about a brand, the more likely you are to purchase it. To illustrate, the market share of airlines in the domestic market is roughly Qantas (65%), Virgin Blue (20%), Jetstar (10%), Tiger (5%). It is no coincidence that it follows the order in which these brands entered the market.

 My rough calculations have it that this new brand into the Asian market will be at least the 20^th entrant. Using the average order of entry estimate, the 20^th entrant into a category will get about 2.4% share. This is based on having parity with all other entrants on every other variable. In the airline category, this would be advertising, number of planes, flights, price, service, lounges etc. If this new airlines was at a disadvantage in any of these (which it will be), the market share will be even lower. In addition, the connection we have to Qantas because it is an Australian airline is the same connection every consumer will have with its local airline carrier. (Another barrier to consider).

 So you have to ask the question, does it make sense to launch a new airline or should they try and improve the competitiveness of its existing brand which has 14% share.

Lecturer Dean Wilkie is an expert in branding at the Australian School of Business.

Professor Paul Patterson

A recent American Express survey revealed that customer rage is on the rise. Prior to a customer reaching boiling point, however, an organisation has several chances to placate them and win back their loyalty.

It is a myth that customers suddenly explode into anger. In the vast majority of over 1000 interviews we found a gradual build up of negative emotions as a customer is failed again and again by an organisation, and at each failure the negative emotions become stronger. Prior to customer rage the offending organisation has been given several chances by the customer to redeem itself and every time it has failed to do so.

Excellent service quality only comes at a cost. Customer service and a firm’s productivity or efficiency are like two sides of the same coin, and one that is often traded against the other. Many firms are simply short sighted and fail to invest in excellent customer service, by for example hiring the best people, continuously invest in training, and building a service culture. Telecommunications companies are a case in point – you only have to look at the ever increasing number of complaints to the ombudsman; they have the rhetoric about excellent service but do not invest seriously in it.

An American Express review published today, of consumers in 10 countries, found 33% of Australian consumers think that companies are paying less attention to customer service in the current economy compared to other countries.

Customers have specific psychological needs such as self-esteem, a sense of belonging, a need for control, to be treated fairly and security. During rage incidents it’s important for customer-facing staff to be empowered to solve a problem quickly rather than having to refer it upwards to a more senior colleague. When solved at the first recovery opportunity, damage to the firm’s reputation, loyalty and repeat patronage is minimised. But if the problem is allowed to go unchecked, disaster can follow.

The American Express survey showed that Australian consumers displeasure ranked second only to that of Italians. Almost half the Australians surveyed (46%) said companies did not make any extra effort to retain their business.

A sense of fairness should be restored and often this should involve a sincere apology. Incredibly, out of over 1000 case studies from this research study an apology was only offered by the organisation in 13% of cases. Speedy, respectful, professional and courteous treatment of customers actually boosts self-esteem, and while you’re making your customer feel good, they’ll be friends for life.

Professor Paul Patterson, Head of the School of Marketing at the Australian School of Business.