How Not to Run Your Business

[cruiseknots]

Here is an excerpt from an interesting article published in Forbes. It is titled "How Not to Run Your Business" and is about United Airlines. It gives three lessons that all large companies should learn from United. I see several areas in this article in which you could substitute Royal Caribbean for United Airlines especially when it comes to customer loyalty. After the changes to the Crown & Anchor benefits, most notably, the changes for Diamond members, and several other cost cutting measures taken by RCI, I find this article of particular interest. I am not saying Royal Caribbean is as bad as United, but they could be headed down the same path.

After losing most of my Diamond level benefits and our fiasco on the Swine flu cruise in April aboard the Marnier in which Princess, Carnival and Holland America gave future cruise credits to those impacted, we are looking forward to our first cruise aboard Princess. This is money we would have happily spent on RCI.

United Airlines Shows How Not To Run Your Business
Shaun Rein, 07.24.09, 04:00 PM EDT
Three lessons you can learn from the company's missteps.

As the world now knows, last year a guitarist named Dave Carroll was sitting in a window seat on a United plane at O'Hare airport in Chicago when he looked out and saw baggage handlers hurling guitar cases through the air. He pointed it out to flight attendants; they responded with indifference. When he arrived in Nebraska, he found that his instrument had been smashed. After months of complaining to the airline and getting no response, he wrote and performed a song, "United Breaks Guitars," and posted it on YouTube. It was viewed more than 3 million times in its first 10 days.

Across the world in China, Wang Jianshuo, a famed blogger, posted about a United flight he took to the U.S. A surly flight attendant refused to help an elderly passenger stow his carry-on luggage. The audio on the movie channels didn't work. The overhead lights turned off and on the entire trip. His return trip was worse: The plane sat on the tarmac for three hours and then was cancelled until the next day because of a fuel leak.

How does a company perform so badly? United's stock price was tottering even before the financial crisis. Now that even stellar airlines like Southwest ( LUV - news - people ) suffering, a weak player like United seems doomed to follow in General Motors' ( GMGMQ.PK - news - people ) and Circuit City's ( CC - news - people ) footsteps unless it makes major changes. This week, United announced a quarterly profit of $28 million, but that included fuel hedges and other accounting gains, without which it lost $323 million. It also named a new president. The airline's missteps over the past decade provide a case study of what not to do when running a company.

Here are three key lessons we all can learn from United.

It is doubtful that the millions who have watched Carroll's video or read Wang's blog will want to fly United anytime soon, unless they have no choice. That is terrible for the airline. It is fighting for every last passenger dollar, and trying to make inroads into the emerging Chinese travel market. Part of the problem is that the company, like many, makes satisfying customers part of its mission statement but fails to go nearly far enough beyond that.

Winning companies like Apple go past mere satisfaction to try to create true brand loyalty. Not only do loyal customers spend more, they are more likely to become brand ambassadors and bring along other customers. When everyone from the mailroom to the chief executive buys into the mantra of creating brand loyalty, the result is increased profits.

Consumers are more price sensitive in this economy, and they are trading down, but it's still a great time to capture loyalty. People don't want to waste money on brands that fail to meet their expectations. They're buying only what they trust, and they'll return to trusted brands repeatedly.

Instead of watering down its frequent flyer benefits to save costs, United should be taking the exact opposite tack. It should take a page from hotel stalwarts like Starwood and Marriott, which are offering more goodies than before to their most loyal clients. In consumer studies that my organization, China Market Research Group, has conducted, we've found that the No. 1 reason people fly United regularly is because they have racked up points in United's Star Alliance loyalty program. Why would United want to disenfranchise its most loyal customers?

As consumers think harder about where to spend their money, aiming to satisfy them is not enough. Only striving to create true loyalty will work.

Don't Forget Why You're Here

Many companies forget their main purpose and become bogged down in just sustaining their operations. United forgets that it's not only selling a means of transportation that is faster than trains or cars. For vacationers, who make up most passenger traffic, it's selling dreams and memories. An airline flight is typically the first and last part of a newlywed couple's honeymoon, or a family's overseas trip in planning for years. People remember such journeys forever. I fondly recall my own first flight on TWA when I was six years old, to Italy and Greece with my parents. Likewise, my childhood flights on Delta to see my grandmother in Florida. What United fails to get is that it is selling dreams, not just a form of transportation. Few United employees take pride in their jobs, and it shows.

One company that gets it right is Disney. A trip to Disney World is not simply an outing to an amusement park like Six Flags or Universal Studios. It is a time when families can create memories that last a lifetime. Disney trains its employees, from the monorail drivers to the people selling fast food, to be more than just salespeople. They are weavers of dreams. That is one reason families repeatedly return to Disney World, according to research my firm has conducted with visitors from eight different countries.

Unilever got it right with its Axe deodorant. That company understands that it is not selling a way to stop sweat or to smell a little better. It's selling a way for young men to be more attractive. Axe put together a TV commercial that shows a dorky guy, who happens to use Axe, getting more glances from attractive women than Ben Affleck, the movie star. The spot uses humor to imply that you, too, can be as appealing as the Hollywood star who dated Gwyneth Paltrow and Jennifer Lopez and is married to Jennifer Garner.

To create real customer loyalty, you have to offer more than just functionality. And you have to train everyone in your organization to have the pride to sell an emotional connection, not just tools.

Don't Forget Employee Morale

United's workers have been a beleaguered group for years now. They have had their wages, pensions and benefits cut even as the chief executive officer, Glenn F. Tilton, has been paid nearly $20 million dollars over the last five years (despite United's stock dropping 43% during his tenure). Does that seem fair?

Employee morale has gone into the gutter. Unhappy workers mean terrible customer service--as Dave Carroll and Wang Jianshuo and millions of their followers know. The company may have no choice but to lay off workers and reduce benefits in the downturn, but it has to do so with respect and with effective communication to the rank and file about why such pain is necessary. Every company everywhere must have an effective strategy for ensuring that its remaining employees don't lose hope or happiness, just as it must maintain its focus on creating brand loyalty.

One thing to do is to make sure that all employees share the pain equally. If there are big cutbacks anywhere, senior management should take substantial pay reductions and limits on its privileges, such as fewer business class flights and trips on private jets. The troops look to senior management for direction. If those troops see the top brass caring for itself at the expense of others, the spirit of the entire organization erodes.

In today's economy you can't get by on decent prices or acceptable service. You have to stand out and win the hearts of your customers. To do that you have to go beyond satisfaction to true loyalty. You have to provide a compelling reason, beyond basic service and price, for consumers to choose you. And your organization must be unified in that mission. Otherwise, you may be the next to follow GM into Chapter 11.

Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm. He writes for Forbes on leadership, strategy and marketing.

Link to article at Forbes: http://www.forbes.com/2009/07/24/uni...-mistakes.html

[oakley2414]

Good article.. U'd think RCI knows that it costs 3 to 4x more to attract new customers than to keep their current ones..

Give us back our perks.. even if its just a free hat and a picture frame..

[jjb415]

I hope you have a great sailing on Princess !!

[Moondawgie]

Very interesting article, cruiseknots. I hope that management at RCI gets to read it and take heed. Customer loyalty IS what keeps a company afloat (pun intended).

I read somewhere that it's not only the value of the product sold or even how many mistakes are made, but how a company fixes those mistakes to create loyalty.

[ChipLondon]

Yawn............

[shipshape sam]

I too hope RCCL (RCL and Celebrity and now Azarma(sp?)) stay customer focused.

I was recently on Celebrity Infinity and on RCL Majesty of Seas last December so I have sailed both in the last 8 months.

I am more concerned about the quality of the food/ the quality-safety of the ship/the quality of the service more than small perks. I am a Diamond and have been a Diamond C&A member for over 4 years. I personally, and this is what makes a 'horse race', don't need/miss some of the small trinkets. For example, I wish they would upgrade the C&A gifts for each level, but only give that gift out on the first cruise you sail after attaining that level. I have 6 caps! I have 6 or 8 frames! They do not make a trip memorable. I have 2 clocks!

I think the people at RCCL are smart people and are not trying to dumb down their product, dumb down their service. I think they are trying to come up with ways to save money, not spend money on things that utlimately do not enhance the customer experience.

Believe me, I get upset at the cruise lines at times as I wonder 'WHY' are they doing this or that. Just ask my wife. She has to listen to me as I am in management and thus I am always looking at things and assessing situations from an operational/financial management perspective.

I too was on a cruise during the Swine Flu. On our 2nd day out on a 15 day cruise we were told we would not stop at our 3 scheduled ports in Mexico. We did 1/2 day San Diego, a day at Catalina Island and a 1/2 day earlier into San Francisco. We got NO compensation. Would I have enjoyed some, yes and I think they should have provided some. For example, just an $100 OBC that had to be used in next 12 months would have be a nice offer and would have created bookings (sales!).

Anyway, one thing from the article that is critical and should be addressed is how any employee faces off with customers or in any public setting in front of customers. All public facing jobs/encounters are "moments of truth" and each one has a lasting impact either positive or negative on the customer/others. It is just a matter of which impact does the company espouse and reinforce vs which impact do they espouse only.

[hmsdos]

Originally Posted by cruiseknots

Here is an excerpt from an interesting article published in Forbes. It is titled "How Not to Run Your Business" and is about United Airlines. It gives three lessons that all large companies should learn from United.
United Airlines Shows How Not To Run Your Business
Shaun Rein, 07.24.09, 04:00 PM EDT
.................................................. .................................................. ...............
Here are three key lessons we all can learn from United.

..................Winning companies like Apple go past mere satisfaction to try to create true brand loyalty. Not only do loyal customers spend more, they are more likely to become brand ambassadors and bring along other customers. When everyone from the mailroom to the chief executive buys into the mantra of creating brand loyalty, the result is increased profits.

Consumers are more price sensitive in this economy, and they are trading down, but it's still a great time to capture loyalty. People don't want to waste money on brands that fail to meet their expectations. They're buying only what they trust, and they'll return to trusted brands repeatedly.

Instead of watering down its frequent flyer benefits to save costs, United should be taking the exact opposite tack. It should take a page from hotel stalwarts like Starwood and Marriott, which are offering more goodies than before to their most loyal clients. In consumer studies that my organization, China Market Research Group, has conducted, we've found that the No. 1 reason people fly United regularly is because they have racked up points in United's Star Alliance loyalty program. Why would United want to disenfranchise its most loyal customers?

As consumers think harder about where to spend their money, aiming to satisfy them is not enough. Only striving to create true loyalty will work.


Shaun Rein is the founder and managing director of the China Market Research Group, a strategic market intelligence firm. He writes for Forbes on leadership, strategy and marketing.

Link to article at Forbes: http://www.forbes.com/2009/07/24/uni...-mistakes.html

Wonder if CC will have to erase this thread... because of "copy" laws... hope some rccl "suit" gets a chance to read.. or already knows about this article... think it is verrry interesting!

[mohavemommy]

For a minute there while I was reading I was thinking this was about RCI. Brought back to reality when I saw United's name again.

A few years ago I had somebody ask me what I thought of cruising RCI vs. Carnival since I had cruised with Carnival 3 times. My answer was simple. RCI just does it better. But... if they keep up the cutting corners in past guest benefits.... then I might rethink my position and try other cruiselines. Don't get me wrong... I love RCI but it won't take much more before I start browsing.

[PhoenixDawgCruising]

I understand that you are comparing United's problems to some recent choices made by RCCL, but let me tell you something...if you want to remind yourself of all the wonderful things you love about sailing with Royal, just go sail on Carnival....

[BPWJR]

While natural with recent changes focus on replies would be on the C&A changes, another major portion of the article focuses on the service issue, or lack thereof, from United staff.

Just back from a cruise a few weeks ago and can not say that the cruise staff was any where near the level of 'disquality' that is associated with United and its attendants. In the airline business the stories about crummy United service have been out there for years before "United breaks guitars" hit YouTube - and if not seen & heard, it is worth the few moments to watch.

One advantage RCCL has United does not is the staff!

Yes, changes to C&A will make folks upset, the RCCL mangt has admitted some mistakes and has tried to find some compromises with the new Diamond lounges where possible, but the bigger issue in this service business is the staff and that is where RCCL has a competitive advantage.

It is the time the rock wall staff took with my youngest DD last month that helped her make it to the top of the wall and the smile she has when she came down that will keep me coming back, not losing another cap (and I like the cap!)

[gxchan]

Originally Posted by cruiseknots

After losing most of my Diamond level benefits and our fiasco on the Swine flu cruise in April aboard the Marnier in which Princess, Carnival and Holland America gave future cruise credits to those impacted, we are looking forward to our first cruise aboard Princess. This is money we would have happily spent on RCI.

Over a decade ago I decided I wouldn't do business with Bank of America ever again. I realized when I made the decision that BofA wouldn't miss me but I would feel better never giving them another penny of my money. The bank I changed to continues to make efforts to keep my business, at least most of the time. As for BofA, well, you've read the stories Sometimes change is good.

Happy cruising.

[cruiseknots]

I agree that the employee morale doesn't really apply to RCI. RCI has done very well to keep it's employee's happy which shows in their attentiveness.

[cruiseknots]

Originally Posted by PhoenixDawgCruising

I understand that you are comparing United's problems to some recent choices made by RCCL, but let me tell you something...if you want to remind yourself of all the wonderful things you love about sailing with Royal, just go sail on Carnival....

I've sailed Carnival 12 times. What's your point?

I am simply stating that at a time when people appear to more careful about how they spend their money, taking away perks and benefits might have unintendend consequences.

[MAZANDSTEVE]

They need to concentrate on improving the food in MDR before giving back the perks, its not great and it should be.

[EBFURR]

Originally Posted by cruiseknots

I've sailed Carnival 12 times. What's your point?

I am simply stating that at a time when people appear to more careful about how they spend their money, taking away perks and benefits might have unintendend consequences.

If you notice, the poster's most recent cruise and "Next Up" cruises are both on Carnival. Kind of odd given the content of the post....

I think the OP's post is very relevant to RCI. We have cruised with them for 15 years and have another coming up, but the quality is sliding downhill while the prices are going uphill and that is a fact. If that offends the blind loyalists out there, so be it.

We love our children, but do not consder them to be beyond reproach. When they do something that is not very wise or appropriate, we tell them so. Believe it or not, we can do that wthout ex-communicating them from the family. (For those who do not "get" this, it is called an analogy).

RCI has made some really bad choices in the past year or so and it would be good for them to realize that and get back on track before it is too late.

[grand isle joe]

Just one question comes to mind. Why would anyone choose Princess to cruise because of the fact that countless disgruntled RCCL passengers are now supposidy cruising with Princess? Or so I remember from the boards when RCCL first reworked the benefits. It sounds like a happy crowd to be with on a ship for a week.

[cruiseknots]

Originally Posted by grand isle joe

Just one question comes to mind. Why would anyone choose Princess to cruise because of the fact that countless disgruntled RCCL passengers are now supposidy cruising with Princess? Or so I remember from the boards when RCCL first reworked the benefits. It sounds like a happy crowd to be with on a ship for a week.

I know there are many on RCI that were disgruntled Carnival at one time. I guess I wouldn't want to be on an RCI cruise with those folks either.

[cruiseknots]

Originally Posted by grand isle joe

Once was enough on NCL for me. Would not cruise NCL again if you gave it too me free.IMO.

Applying the same principle here...why would anyone want to be on an RCI cruise with a disgruntled NCL person?

[OrdieJ]

Originally Posted by hmsdos

Wonder if CC will have to erase this thread... because of "copy" laws... hope some rccl "suit" gets a chance to read.. or already knows about this article... think it is verrry interesting!

Also the fact that this has nothing to do with RCI!

[cruiseknots]

Originally Posted by OrdieJ

Also the fact that this has nothing to do with RCI!

I don't believe this violates any "copy" law as it shows the author and publisher. I am not taking any credit for or selling this article.

Although you may not think it has anything to do with RCI, others might.

We can all agree that RCI has made several cost cutting decisions over the past year and some of them have been very unpopular with RCI's most loyal guests. This article illustrates that taking perks and other benefits might save a few dollars on paper, but could have a much more costly impact on the product and quality of service provided and force your loyal customers to look elsewhere.