Arvind Singhal: Managing consumer expectations

MARKETMIND

For air-travellers across many cities in India, the last two weeks have been more chaotic than ever. The root of the problem lies in an annual feature""fog""in Delhi and a few other cities, leading to massive disruptions in flight schedules, which cascade across the entire network of various airlines. This year, though, the magnitude of the chaos was multiplied manifold on account of a substantial expansion of the domestic air travel market by various low-cost carriers. OB vans of various TV channels had a field day beaming pictures of disgruntled passengers at Delhi and some other airports. Surprisingly, the worst ire was reserved for the low-cost carriers like Air Deccan for their failing to maintain back-up options for cancelled flights and for their inability to provide food/accommodation to the stranded passengers.

Business travellers in India have been considering themselves lucky even to find a room in up-market hotels in metros and mini-metros. This is on top of the fact that most hotels have increased their room rates by as much as 40 per cent in the last 12 months.

India is seeing a proliferation of service businesses""retailing, food services, banking and other financial products, healthcare, insurance, travel, hospitality, leisure and entertainment, etc. The business models for these cover the entire gamut of consumers""from the very mass market or the so-called lower tiers of the pyramid, to the very top end. Typically, the strategic options that service businesses can work with include competing on the platform of low price or superior service or better assortment/product innovation or ease of access/availability. Most successful service sector businesses end up building up a dominant position in any one single attribute, and then try to achieve "comparable to industry average" or marginally "better than the industry average" position on the other attributes. Such successful businesses put a lot of effort in communicating their dominant value proposition very clearly to their targeted customer groups so that the customers know what to expect when they select their chosen service provider. In the airline sector, Singapore Airlines competes successfully on the dominant platform of "superior service" while British Airways has managed a dominant position on the platform of "product innovation" and Southwest on "value priced basic efficiency". In the hotel industry, Four Seasons competes on the platform of superior service while IndiOne in India is trying to make its mark on "value priced basic efficiency".

Where are many Indian service businesses like airlines, star hotel chains, and retail and food service chains going wrong? Many of them are trying to compete on more than one dominant platform. Low-cost air carriers are fighting shy of communicating to their customers up front that for a Rs 500 ticket, they can expect only what they are paying for""no more and no less! Inadvertently, therefore, many passengers expect the Rs 500 product to be similar to a Rs 5,000 product being offered by a full-service airline like Indian Airlines or Jet Airways. Five-star hotels, on the other hand, are downgrading their service offer to make even more money while jacking up the room tariffs every few months. I have been using a particular hotel in South Mumbai for some years and have seen steady reduction/downgrading/elimination of room amenities in the last 9-10 months since a change in its operating management from an Indian hotel group to an international one. The hotel does not even offer high-speed wireless internet in many of its rooms, including suites, or make any effort to make its frequent guests like me feel welcome every week when I check in there for a night! None of my simple requests like having all financial newspapers delivered to my room each morning or having an iron (that works) and an ironing board (that is of international standards) is ever paid heed to each time that I have checked in during these last few months. Inadvertently, the management is missing the point that premium hotels compete largely on superior product/service! The anomaly is visible across other service businesses all across the country""luxury/premium product retail stores not focusing on service, and mass market businesses not focusing on "price dominant value" or basic efficiency.

What should be done? To start with, service businesses must carefully reflect on what their core value proposition is, and on what attribute they would like to really compete on (from product assortment or innovation, price, ease of access/availability/delivery or superior service). Having selected any one of these four attributes to build their competitive position on, they must then engineer the organisation's operating systems/processes to be able to deliver consistently on that chosen position. Once they are confident that their organisation can deliver on the promised attribute""consistently ""they need to go to their targeted consumers with a very clear message on what to expect and, equally importantly, what not to expect! Failing to appropriately set and then manage customer expectations can only hurt service businesses in the long term and hence due attention has to be given by those who are managing such businesses.

arvind@ksa-technopak.com