The pulse of Alexander Interactive

The online-offline impact of user experience is vital in today’s economy, and nowhere is it more apparent than in the travel industry. I experienced the best and worst of it on a recent business trip, and the learnings I encountered were enlightening.

Airlines, like many other businesses, have become accustomed to controlling the information flow. Curious about gates, seats, flight times, or other details? They’ll tell you when they’re ready to tell you. But the Internet has changed that, and continuing improvements in ease-of-use and access have forever changed the game.

Organizations today need to be as aware as their consumers of data streams and information sources. They need to be proactive and accommodating. Consumers want their needs addressed by people who are as informed as they are. The alternative–the old way–can be galling.

My Story

Here’s what happened to me: I had a trip planned from New York to San Francisco, originating at JFK on a 6 p.m. flight. My departure day was filled with weather-related delays. Morning flights were taking off more than three hours late, although they were pushing out from the gate on time, leading to “on time departure” proclamations by the airlines.

When I checked my flight status around 2 p.m. my airline’s website declared my flight was on time. Skeptical, I checked the condition of JFK on faa.gov, which revealed five-hour ground delays due to weather. But the airline’s website begged to differ, so I called the airline directly.

On the phone, the customer service representative repeated the flight’s on-time status. I asked her to investigate the difference between the airline’s estimates and the FAA’s. She put me on an extended hold. While waiting, I checked my flight status on the airline’s website again, and discovered my flight had been canceled!

When the rep returned to the line, I asked for alternate arrangements. She told me the airline was filled to capacity and couldn’t honor my Monday ticket until Wednesday, which would ruin my trip. The rep referred me back to the airline’s website to edit my plans, but the site declared my flight ineligible for a weather-related refund. At the same time, the rep on the phone put me back on hold to look for other options, and wound up disconnecting my call. The airline had stranded me in two different communication paths.

I ultimately booked a flight on another airline for the next day (at more than twice the price). An hour or so later, I was able to get a refund from the original airline’s website.

Nearly two hours after I discovered my flight delay, and 90 minutes after I rebooked my flight, I received an automated message on my home phone advising me of the canceled flight. I almost screamed in frustration.

The game has changed

An airline’s only real differentiator is service. JetBlue stands out for its leather seats and TVs; Virgin for its hip, knowing accoutrements; Southwest for its easygoing, cheeky demeanor. But every airline has the same base concerns: comfortable flights, timely service and good communication.

What does my recent experience say about my first airline’s service orientation? Aside from the obvious–that the airline has some serious internal issues to resolve–I spotted several lessons that can be applied to all businesses, not just the airlines.

• Businesses no longer control information flow. A smart company will accept this and learn to work with it. Whether it’s me looking at faa.gov or consumers Twittering issues amongst themselves, news and facts about a company’s offerings are no longer dictated solely by the public relations staff. Companies that insist on rigid lines of communication will find themselves outsmarted by savvy consumers and disparaged by uninformed ones.
• Nimble trumps rigid. My airline couldn’t put me on an alternate flight within two days of my original plans, and it never considered putting me on another airline and sharing my revenue. My company’s travel service couldn’t find a replacement in its system for under $1000. Yet I booked myself on Virgin Atlantic, via its website, within minutes for far less. The folks looking to me as a customer could not help me spend my money with them, because their basic systems didn’t allow flexible thinking.
• Responsiveness is everything. Two hours to inform me about a canceled flight is unacceptable. Losing my customer service phone call and not calling me back is, in this circumstance, unacceptable. The airline’s website not acknowledging my canceled flight? Unacceptable. Discerning consumers will avoid companies that make these kinds of mistakes. Firms that get communication right–on time, proactive, and helpful–will win.

Commercial airlines are in a unique industry with unique problems, but their customer service concerns are universal. Any business that communicates with its customers–which is every business–can find clever ways to improve by watching the airlines manage a crisis.

I’ve spent the morning fascinated by Swoopo, a new (to the US, at least) online auction site, which is both more and less innovative than its peers–and a great business model case study.

The site turns eBay’s successful auction model on its ear. eBay uses fixed-duration auctions, free bids, and sellers’ fees for revenue. Swoopo, in contrast, sells bids to buyers, who then bid in 15-cent increments on products. If an item gets a bid in the final 15 seconds, the end time is extended, giving other bidders a chance to dive back in.

This is at once radically different–from eBay–yet more similar to the traditional auction business. In the real world, auctions don’t stop short at 10:13:32; they go until the high bidder has outlasted the competition. Swoopo allows this to happen.

Placing the operating-cost burden on buyers is a shift as well. With bids costing 75 cents each, buyer aggressiveness is artifically limited; the multiple bids required to win a typical auction raise the final cost to the winning bidder. Interestingly, competing (losing) bids help subsidize the winning buyer, which may deflate prices.

The open-ended auction timing is what fascinates me most. I watched a Playstation 3 controller auction on the Swoopo home page ratchet up from $23 to nearly $41, all in 15-cent increments, for several minutes before the auction ended. Sniping is eliminated, and in its place is a tense few minutes and frequent page refreshes. And, most likely, a handful of additional bids, each adding 75 cents to Swoopo’s bottom line.

Swoopo has a remarkably clever (or truly wicked) business concept. It’s also beautifully timed. As eBay evolves away from auctions, the market is probably ready for a savvy competitor to nibble away at market share.

Expect several Swoopo (and eBay) competitors to appear in the next year or two, all with new twists on the auction model. And keep a watchful eye on eBay, which may or may not realize that its auctions, while slowing in growth, are the make-or-break business proposition of its flagship.

Update: this write-up of Swoopo is worth reading, as it notes the clever (if insidious) model behind the business, and also exposes some of Swoopo’s questionable business practices, which I hadn’t caught on first observation. “It’s not clear that Swoopo even has the items they auction; they appear to sell first, then use the money they gain from the completed auction to buy and ship the item. Furthermore, they have a clause in their Help under Delivery and Shipping that lets them ship ‘equivalent’ items.” The post later calls Swoopo “pure, distilled evil,” which may be pushing it a bit, but point well taken.

The latest news from the world of ecommerce is that the weekend was much better online than it was elsewhere. Sales rose 13% on ComScore’s Black Friday-through-Cyber Monday annual index–not a huge number in online terms, but strikingly robust when compared with the overall 4% retail decline in November.

Some tips for ecommerce sites looking to maintain the pace through Christmas:

Compete on price. Ugly, and the last thing I usually recommend, but when the New York Times is running 1000-word articles on coupons, penny-saving is a mainstream fact. Use discounts and promo codes to make customers comfortable with your price points.

Accommodate. Comfort levels are always a differentiator: extended return policies, prepaid shipping labels, and custom order requests will make people feel good about buying from you.

Don’t run scared. In this environment, customers are getting skeptical of sites with continual “Buy today!” come-ons. Maintain a consistent voice and use promotions in the typical manner, so people aren’t spooked away from completing a transaction.

As mentioned previously, a successful, happy purchase now can lead to low-cost repeat business leads in 2009. Despite today’s challenges, retailers must avoid sacrificing the future.

Barry Libert’s “We and Me” presentation at Web 2.0 was certainly enthusiastic. In reviewing my notes, I’m noticing that if you combine his concepts with Chris Fahey’s session on seduction, you’ve really got something….

Businesses are not good listeners. The good news is that Web 2.0 allows them to create conversational websites that lure customers in (Barry). To do this, the sites need to dazzle, amuse, and deliver with flair (Chris). Forget about “what I can tell you” (Barry). Flatter them, tempt them, create mystery (Chris).

Be rewarding–use contests and givebacks combined with open communication (Barry). Plan for delight, and evaluate the results with psychology and emotion (Chris). Seduce (Chris). Converse (Barry). And see your sales and satisfaction levels rise.

AT&T has officially detailed its 3G iPhone pricing, and it’s actually a bit worse than I noted last month.

The cost of data has gone up $10/month, as previously discussed. What I forgot to include was the loss of free text messaging–current owners get 200 SMS messages included in their $20 data plan. Now those 200 texts cost an extra five bucks.

Redoing the comparison, what I had outlined as

Old: 399 + (24 x 20) = $879
versus
New: 199 + (24 x 30) = $919

is, for users interested in the same level of access, actually

New: 199 + (24 x (30 + 5)) = $1039

Sure, the price increase includes the upgrade to 3G service, which can rightly be considered a premium. But the pricing strategy feels almost bait-and-switch-esque in its execution. They’re trumpeting a $200 savings in the price of the phone, yet users are paying $160 more for usage.

Ironically, what is classified as a win for the mobile phone industry–Apple’s moving to a subsidy model to make its prices more attractive–ultimately leaves AT&T with a horrible jack-up-the-prices publicity nightmare on its hands.

See you when the third-gen comes out in ’09.

Update: AT&T is not raising data rates on original iPhones with new activations, suggesting that the 3G network is the justification of the price bump. Well, that and the fact that they already made their money on the profit split of the initial iPhone sale.

Why do some business make such smart decisions with technology, and some are so helpless? What’s the difference between a business that leverages technology to grow its business, increase its profit margin and out-maneuver the competition, and one that sinks a lot of money down a useless, costly, black hole project?

I’d suggest that alongside intelligence (IQ) and emotional intelligence (EQ) that businesses also sport technology intelligence (TQ). A business’ TQ governs its effective use of technology, which in turn has a substantial impact on its effectiveness as a whole.

Here’s how I see the five levels of TQ in business:

1. Business Problem: The first step a company takes towards TQ is when they acquire the knowledge to address a specific business problem with technology. This could be hiring developers or an external vendor to write a custom application, or it could simply be the purchase of a system to meet a specific need.

2. Tech Strategy: The second level is where a company stops looking at individual business problems in isolation, and develops a comprehensive tech strategy. At this level, the application of technology to individual business problems is evaluated within the context of the overall strategy.

3. Tech Ecosystem: At the third level, the company is aware of its tech strategy in a larger eco-system of always changing technical trends. The company is sensitive to how the “tech landscape” will affect its internal strategy, whether through availability and cost of personnel, the continuance of particular tech platforms or the development of new ideas and paradigms.

4. Tech Vision: Once aware of the “tech landscape”, a company begins to have the opportunity to make strategic decisions based on an understanding of where things are going. A company can purposefully choose where it wants to live on the adoption curve, and then monitor new developments as they work their way down the curve. At this level a company starts to be able to anticipate movement in the landscape before it happens, and can position to get ready for change, and to avoid destructive disruptions.

5. Tech Leadership: At the very highest level of TQ, the company can make change happen in the tech landscape. This very sophisticated understanding involves identifying unfulfilled needs beyond the company that intersect with the company’s business, and applying technological solutions to meet them.