BLOG: Is BA learning a lesson in Bad Profits?

Interesting to see that BA has attributed its nosediving fortunes of late to the rising fuel prices. Those of us with longer memories might possibly be tempted to add that, what has become universally known as ‘The T5 Fiasco’ could have had something to do with it too. Particularly when you contrast these stats with EasyJets’s news that their passenger stats have risen by 20% to 4.1m.

It will be a bitter pill to swallow for BA, particularly for those directors that just a few months ago were toasting boosted annual profits and big fat bonuses. The trouble is that there are good profits and bad profits – and BA are starting to see the difference. Bad profits are measures to create additional profit to the detriment of long term shareholder value. Bad profit means you get a customer on a plane, but you neglect to worry about that customer’s impression of the brand. It is all about expectation management; if you charge a premium for service you have to deliver it. You can’t give a Ryanair service and charge a lot more. You have to remember that customers have a choice and in a recession, where we all have less money to spend, we expect more.

A national institution like BA should place far more stock in the mood of the public and bonuses should be dealt out in the context of customer service scores – not the FD’s. They should pick up bonuses if the net promoter score of the business has increased. The net promoter score of a business measures how much customers would recommend the business to other people on a scale of 1 to 10. A score of 9 or 10 makes them positive promoters. We did some recent research within the travel industry Emirates and P&O provide the most highly recommended experience to travellers, with a net promoter score of 32.

And BA? Well, last year, BA flew in for 9th position with a NPS of just 11.

It really is simple, if your customers are happy and recommend you – you make profits (and your planes don’t take off half empty). This could be the crucial difference between Easyjet and BA. Put customers first and the rest will follow.

by Neville Upton, Jul 08 2008, 05:03 PM