Sunday, 1 November 2009

Meeting customer needs – Learning from Kell Ryan

The story behind the huge success of Ryanair – which has grown from a small Irish airline with 5000 passengers to an international carrier with 200+ planes, 900 routes, profits and with 58m+ passengers is a lesson to us all.
How have they done this?
A clear vision that is easy to articulate seems to be the starting point – A low cost airline! This vision is then applied with a mix of innovation and inventiveness on one side a hardnosed approach to cost control on the other. The benefit of this simplicity is that customers understand the offer very clearly.
The next point is to hire talented staff and get their buy-in with shared rewards (options schemes) and to train them into the way that the airline wants to run. The staff is mainly young – in their late 20s and they bring with them their energy. They are located in some 30 centres across Europe, so they incur no hotel costs, all returning home every night.
With this mix of vision and operational simplicity, the airline has met two of the most important needs of the customer – anon time airline that provides the lowest fares. There are no frills and everything beyond the basic service of a “bus with wings” is charged extra. This results in some 20% of the revenue coming from ancillary charges.
What else does the airline do to meet the needs of customers? Actually the focus is very clear – it is to bring down the cost of international travel – that is it. The response to any further questions on this matter are simply to see that most other airlines that try and provide full service offers do not make money and that the number of airlines that lose money is high. Ryanair is one of the few airlines in the world that makes money.
In addition to ensuring staff retention strategies, the airline has also taken steps to retain common sense and kept a continuous watch on costs. So staff helps to clean the aircraft, load the passengers and run the cabin services. Seats are locked in place to reduce maintenance charges. There are no sacred cows – so if something needs to be reduced, charged for or changed the airline will do it.
For example – they got rid of lemons from gin and tonic. This saved on time and cost and the passengers did not miss it. They have introduced on-line boarding now – so that takes away queues from airports and reduces costs further. The charge for luggage is now being copied by other airlines.
The management and the teams stay focused on costs and ensuring they do everything they can to be the lowest cost airline. But having said that – their staff are not badly paid – so it is not in this where they make savings – recognising that cabin staff do need to be rewarded and to find the right quality of pilots also takes money.

One of the breakthroughs for the airline was the rapid growth of the internet. This has enabled the airline to innovate in all manner of ways from on-line sales, ancillary bookings of car hire, hotels etc., through to now online check-in. The senior team were creative in the way they arranged to buy the website developers. They had had two professional quotations, one from a Dublin firm and another from a London firm. Both were thought to be too expensive. So they turned to a group of 4 high school students (doing their A levels) and paid them in free tickets, some cash and subsequently for two of them - jobs in the company!
In summary – the business is run on a “keep it simple and straightforward” basis – where all the staff and the passengers know that the basic offer is to fly from point to point at the lowest cost. This simplicity has turned Europe into a single continent, connecting 500m+ people at affordable prices. Through this, people are taking weekend holidays, jobs and buying second homes.
Throughout the growth of the airline - one of the other qualities they have shown is the courage of their conviction. Without hesitation they absorbed the Southwestern airline model, pushed for second tier airports as way of cutting down on airport costs and ensuring better time keeping (keeping away from busy airports, went for 100% web based transactions, charged for luggage, have now gone for 100% web based check-in and so forth. They were bold to go with A level students to develop such an important part of their business.

In meeting the core need of their customers they have shown the focus on staff retention, inventiveness in reducing costs, focus on the core offer has kept them from being complacent and are important lessons for how one delivers strong marketing programmes.
This message of simplicity and boldness is a very powerful one in entrepreneurship and management and therefore I will keep away from the frequent times in which the airline courts controversy.

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