Unbundling Spirit Airlines | TravelResearchOnline

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Unbundling Spirit Airlines

Everyone’s talking about Spirit Airlines and their carry-on fees these days.  The so-called “Unbundling” of fares has become the fodder for experts, pundits and bloggers alike.  Of course, I thought it only right that I weigh in with my own two cents.  Well, at least I wanted to weigh in with two cents, but I had to go to the bathroom on Ryanair and they took one of them.  So now I’m left with only one cent to give you.

Spirit Airlines have just released a statement saying their sales are up 50% since announcing this new carry-on fee policy, stating that this proves it is a success.  As my Grandmother was fond of saying, they’re counting their chickens well before they’ve hatched.  I believe they are going to be in for a whole world of trouble in the next few months and there’s a lesson for all of us in the reason why.

The companies doing the unbundling all have the same theory.  They claim they are lowering the upfront fare for everyone and only charging the extra fees to those who choose to utilize the extra service.  Spirit Airlines’ CEO Ben Baldanza has stated that they have reduced fares “at least as much, or even more, than the carry-on fee.”  Thus, they will sell more than the competition.

Although I’ve been a Travel Agent for a number of years now, my education is in sales and marketing and there are a few things that have stuck with me from those days.  The period in the buying process called Buyers Remorse is one of the most important.  If you sell travel, it’s vital that you understand it.  Obviously, Spirit Airlines doesn’t.

Behavioral scientists have discovered that after every non-routine purchase we make, we go through what is best described as a “reckoning” process.  Basically, we are reconciling within ourselves whether the purchase we made was the best use of the funds we paid.  This process is normally accompanied by a high level of anxiety.  The severity and length of the anxiety period tends to increase based on the price of the purchase and infrequency in which we purchase it

Last time I checked, Travel is both a major purchase as well as one that is relatively infrequent.  In other words, travel is a prime candidate for Buyers Remorse

The good news is that after a short period of time, we reconcile within ourselves what we have paid and can go on living our regular happy life. 

So, how does Buyers’ Remorse apply to Spirit Airlines?  I’ll try and keep it simple so even Mr. Baldanza can follow along.  Picture this:

Jim , his wife Mary and their two kids have been saving up for years for their first cross country family trip this summer.  Spirit Airlines seems to be about $30 cheaper per person than any other airline, so they go ahead and book with them.  Does Jim notice that they will be charged extra for carry-on bags?  Maybe he does, or maybe he doesn’t.   Either way, he definitely doesn’t tell Mary, who is in charge of the packing. 

Jim and Mary spend the next couple of days mulling over whether purchasing the tickets was the best decision.  “Maybe we should have driven.”  “Maybe we should have waited to see if a sale came up.”  “Maybe we should have waited until next year. “  All standard Buyers Remorse questions.  After a few days, though, they come to agree that this was the best decision for the family.

Summer finally comes and Jim, Mary and the kids show up for their flight, all with full size carry-on luggage.  “What do you mean we have to pay $45 for every bag!?!” Jim growls at the Spirit Check-in counter agent.   His blood is beginning to boil as he sees a $180 price tag.

The poor Spirit agent, who has no choice in the matter but to enforce the policy, has heard this many times today already.  “You don’t have to carry these bags on board, and besides, it was clearly written on the website at the time you booked” she says. 

Was she being short with Jim, or did he just perceive that she was?  It doesn’t really matter, the effect is the same:  Jim and Mary are now fuming.  They will never book on Spirit Airlines again. 

Is that the end?  Of course not.  Jim and Mary will go on to complain about this experience to every person they meet.  Oh, did I mention that Mary runs a blog with 5000 followers?   Her followers will read about her opinions of Spirit Airlines for months.

This story illustrates the danger of ignoring Buyer’s Remorse and a lack of understanding of the natural buying process.  Once we pass through the Buyers’ Remorse stage, we mark the decision “done” and file it away.  Jim and Mary had come to grip with what they paid for their trip.  Which airline was the cheapest, which had the best time, what services each offered – all of these decisions had long been forgotten.

When they arrived at the airport and were told about the new fees, it was a completely brand new transaction for them.  Very few people will think back in time to when they purchased the original cheaper fare.  When they see that Spirit is charging extra for something they normally receive for free, they feel like they are getting ripped off.

Whether it’s with an airline, a cruise line, or a hotel chain, the unbundling of fares makes logical sense.  Their customers pay less up front and only get charged extra for what they use later.  The problem with that theory is that major purchases (like travel) are largely an emotional experience.  And as any married man can tell you, logic has very little to do with emotions. 

Spirit justifies this policy by saying that the reason they made the sale in the first place is because they were the cheapest. That’s why they’ve increased their sales by 50%.

And in the end, isn’t making the sale always the most important thing? 

Let me be clear: making the sale is NOT the most important thing.  Making one sale is not worth losing a client over.  It’s not worth a client telling everyone they know how about their bad experience.  It’s not worth risking your reputation on.  Spirit Airlines can laugh now, but I’ll be interested to hear their story once these new travelers start arriving at the airport on Aug 1 st when the new policy kicks in.

What should Spirit Airlines do?  Charge a few more dollars up front.  Their customers will pass through their Buyers’ Remorse process long before they arrive at the airport. Then, when they come to check in for their flights, they will be free to enjoy the experience. 

Focus on the entire experience from beginning to end, not just on making the sale.  That’s the only way that leads to long term success in the travel business.

Dean Horvath is a true believer in the dawning of a new era in selling travel.  The next generation of travel agents will be viewed as professionals, no different than lawyers and accounts.   They won’t compete with the Internet, they will take advantage of it.  They will use technology to help personalize their relationship with their clients, not automate it.  And they will be infinitely more successful doing it.    He’s the owner and President of Mason Horvath Inc (www.masonhorvath.com), a travel agency based in Vancouver, Canada. 

  2 thoughts on “Unbundling Spirit Airlines

  1. Dean Horvath says:

    UPDATE: Since I wrote this article last week, Spirit Airlines has announced that they will be swapping their seating to non-reclining chairs in order to jam more seats onto the plane. Great job Spirit. So now when your customers are already mad about the fee you just charged them, they are going to sit in a chair that doesn’t recline? Are you going to drop the price even more to compensate for lousy seating? Then, are you going to have to cut costs even more to cover the lower fares? Do you see the downward spiral you are on?

  2. Mary Peters says:

    Well, well, well. Spirit and the likes are “low cost airlines”, according to their advertising and the industry labels them. This brings the public to believe they are “always”less money, no matter what. Well, we know different and they know different but lt’s not waste our brain power trying to advise the flying public. Just sell someone else from your desk, let them go on line and learn the hard way, be available to “rescue” those stranded when the snow fallls, their limited number of flights do not operate and no other airline will take their stock and “what are the rules” for this situation. There are more and more things the/all airlines want us to do for nothing already and I do not think that is going to be any different with any airlines that I know about today. We certainly do give them a lot of time,brain power and support for no monitary return as our clients have to get where they are going to meet whatever tour or cruise, we are trying to make money off of. Nothing new, just a few thoughts for late on a Monday…M.

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