Real value – a lesson on hidden costs from SAA
In business we often think that the numbers tell us everything – that what we see in Rands and cents is reality, and nothing else matters. The truth is that there are very real costs that are not always measured in monetary terms. Unfortunately a lot of decision makers don’t believe this.
Guess what – it sure is real!
Justin Hartman’s recent experience with SAA is a prime example. As Justin wrote recently, he had a very bad experience where SAA refused to refund the airline fees portion of his bill when he found mistake on a ticket he bought from them. Frustrated by much fighting without getting anywhere, Justin has set up SAAsucks.com as a response of last resort [can't say I blame him. I haven't had the same experience, but if I had I would be very upset too].
So while this was an expensive learning experience for him, I think in time it will be SAA that considers it to be a costly learning experience.
Why do I say this?
Looking at the numbers game [aka "bean-counting"]:
- Based only on the numbers, SAA is up in cash after charging a double airline fee for just one seat on their ‘plane. Well done! [pat on the back]
- Net result – happiness for SAA ["Hey guys, if we print every ticket with a mistake on it, we can actually show huge growth this year!"]
I’m sure you can see the fault in this logic already…..
Looking at value [aka "reality"]
- SAA has gained some cash on the back of this interesting application of policy, but they must now endure substantial poor publicity as well – not just through word of mouth but now also via this website. This publicity has resulted in brand value destruction in proportions that I certainly can’t measure, and I doubt whether they can either.
- Net result – in cash terms, yes they’re up around R1,000. What’s the cost of the bad publicity? Your guess is as good as mine. After this I will think three times before going with SAA, so they’ve lost one potential sale – say R3,000. Now multiply by how many other people feel the same….. yip, you guessed it, the cost is going to be pretty high. If only 10 people decide to use another airline – they already have lost R30,000 in reality, while they think [according to the numbers] that they’re R1,000 up. Quite a swing when you take that into account, not so?
And keep in mind that this example uses small numbers – one airline fee, a few people, etc. What happens when value is detroyed on a larger scale by similar decisions to maximise “short-term profit” rather than “long-term value”?
The scary thought is that it would not have cost them anything [okay, maybe a little bit of administrative time] to replace the ticket – it’s not like replacing a damaged vehicle costing hundreds of thousands of Rand. What does this say about their attitude to customers?
Fair enough – hindsight is 20/20. Hopefully we can all learn from SAA’s example here and make sure that we consider the real cost of our decisions [those little qualitative things that we often don't think about], and not just the obvious monetary value.
Do you think this is right, or is chasing short-term profit always the best decision?
Other posts you might enjoy
If you enjoyed this post, make sure you subscribe to my RSS feed!
Email this post to a friend
