Carl Reader, author of The Start Up Coach, co-owner of dennisandturnbull.com
Ryanair have hit the headlines big style recently, with tens of thousands of would-be passengers caught up in the carnage of last-minute cancellations. There are many lessons businesses of all sizes can learn from this.
Let’s start by talking about Ryanair’s positioning.
Ryanair’s position is – very firmly – a low cost airline. They have embraced it, and they wore it well. With Ryanair, clients know what they’re getting.
You know that you’re going to pay a tenner for your flight, but then you’ll have to pay twenty quid on taxes, £10 to use the toilets, another ten for a coffee and so on. That comes as standard, and it’s expected, and regardless, they are still one of the biggest airlines out there.
Despite this, Ryanair still have customers, because people know that’s what they’re going to get.It’s understood that Ryanair are a cost leader in the airline industry. They are not,and have never tried to be, a premium product – and that’s absolutely fine.
There will always be a place in the market for that; for another example just look at the popularity of Aldi and Lidl in the supermarket sector. You can always find someone who is willing to do it cheaper or quicker, and there’s nothing wrong with that.
What IS wrong, however, is when a cost leader doesn’t deliver the product or service that they’re supposed to deliver.
So, for example, a few years back when the horse meat scandal hit, with people eating horse meat in their budget burgers instead of beef, customers were – quite rightly – furious. Besides the obvious public health risks, let’s also look at the facts. You bought beef, but you got horse instead. You’ve been let down – and this situation had consequences reaching far further than the supermarket shelves.
The same can be said for Ryanair’s recent debacle.
They’ve got one job to do – to fly you from A to B at a designated time – and that job should be done properly.
Yes, you might have to pay more for up-sells during the flight – so be it; that’s Ryanair’s way, and paying customers accept this. However, they haven’t stuck to their foundations here. They’ve failed at their number one task: delivering the basic offer of flying you from one place to another.
Looking at it from this perspective, I think small business owners can learn a lot from the Ryanair model of having a low cost offering, if that’s the way they want to be.
There’s no problem with being a low-cost business.
If a business is heavily automated, or offering a commodity, then cost leadership is almost certainly a direction a business might need to consider– and that’s fine.
It’s very different from running a value business. Many people believe value businesses are the only way to go – but they absolutely aren’t. If you are running a cost leadership business, then your focus, first and foremost, needs to beset on providing your key product or service, and ensuring effective up-sells.
However, be sure not to let your cost leadership be an excuse for you not to deliver the bread and butter. If you don’t deliver what you say you’re going to deliver, you will let clients down. And while your scandal might not be on the publicity scale of Ryanair’s, it could still be the end of your business.
Put simply, if your business doesn’t provide what it promises, it isn’t much of a business at all.
A final thought: consider the situation of Gerald Ratner, who many, many years ago slagged off his products publicly, essentially committing commercial suicide. Within a couple of years, his business was no more.
Don’t use the excuse of cheap as a reason to look down on the core services that you offer. If you do, that’s unfortunately your business over.