Tuesday, November 10, 2009 at 4:00PM Can one broken guitar really hurt United Airlines?
It's been making the eMail rounds now for a long time--the "United breaks guitars" video. If you're not familiar, it's the story of a musician who made a trip on United Airlines and was compelled to "check" his Taylor guitar as baggage--which is how UA came to be vulnerable to the charge that, in the handling of it, they damaged the instrument.
When asked to make it right--to pay for fixing it--UA declined and thus led to Dave Carroll making a ballad about the experience and posting it on YOUTUBE and the internet. A lot of people have viewed this clip; it's catchy and tells the story in an amusing way; people have sent it to their friends...and friends have sent it to their friends, which has led, now, to almost 6M people taking it in!
[If you are one of the few people connected to the internet who hasn't see the clip, here's the link to the song that started it all and a CBS report that tells the story of what happen when UA finally woke up to the need to take corrective action, leading, apparently to their finally deciding to pay for the guitar's repair!]
All of this raises the interesting question: Was UA smart to ignore this issue in the first place? In other words, did they they really "save" the expense of $1200 it would have taken to fix the guitar in the first place?
As it turns out, it seems clear that UA might have been very short-sighted. If you "do the numbers" like I have, you can come to the conclusion that UA may have paid a much higher price than they originally estimated--specifically $1200! The table below shows at various percent levels how much money might have been--still being?!!--lost by UA from people seeing the YOUTUBE clip, only to be influenced by it to decide against patronizing UA for one of its competitors; also shown is the percent of this revenue against UA's total sales in 2008.
|
Estimates based on 6 million viewers of YOUTUBE video |
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|
Number of $500 trips NOT taken in a year |
Percent of viewers who were influenced |
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|
|
1% |
2% |
5% |
10% |
|
1 Trip |
$30,000,000 |
$60,000,000 |
$150,000,000 |
$300,000,000 |
|
% '08 |
0.15 |
0.31 |
0.78 |
1.56 |
|
2 Trips |
$60,000,000 |
$120,000,000 |
$300,000,000 |
$600,000,000 |
|
% '08 |
0.31 |
0.63 |
1.56 |
3.13 |
What the calculations show is very compelling. If only 1% of those who learned of the broken Taylor guitar were affected by the story, then UA lost only somewhere between $30M and $60M; however, if more were negatively influenced by the information, then UA could arguably have forgone over as much as half a billion dollars, or about 3% of their annual sales! In any case, all of these figures stand in stark contrast to only $1,200 asked for my Mr. Carroll in the first place!
Here's a guy who had the talent to create a compelling story that could be posted to YOUTUBE and seen around the world, in effect, shaming UA in the process--which, of course, was the point in the first place! How many of us can do this? Well, only a few of us.
However, this gets us to the real point of the story. If UA has a flawed system to handle--and then to remedy--customer complaints...in other words, if UA has all kinds of customer service "issues" that produce unsatisfactory results for customers--then they pay a very high price indeed, for the average person tells about 10 people about the bad brand experience--all of which has a chilling effect on patronage by those who are told such tales of woe!
Look at it this way: to produce the same financial impact on UA [or any other airline for that matter] at the 2% level shown above--$60M--the firm needs only have about 250 incidents occur in their world-wide system--and be mis-handled--each day and with as few as half of the people told by abused customers deciding to opt-out of flying UA in a defined period.
All of which goes to show the huge impact of failure to pay attention to customer complaints and service system problems. Can one little broken Taylor guitar--and all the other little deal failures each day--affect a mammoth company like United Airlines--you bet. And the same is true for your firm as well--it's not even a close call!
Reader Comments (1)
i say, it must've (will) cost us more than 30 mil -- the lower side of your estimate. the airline industry is not a fun place to be in these days, and this is not a good news for ua.