Quality of Service Continues to Erode

I recently read about a passenger’s experience with American Airlines.  A six-hour flight from Newark to San Francisco had evolved to a 53-hour trip.  Due to several cancellations, American had suggested that the passenger buy a second ticket.  He waited and eventually made it – two days later.  Airlines ticket prices and fees continue to increase.  Revenues and profits are key.  The airlines continue to pretend that passenger service matters.  Despite nice words, they do not care.  Their central competitive competency is exploitation.

A colleague recently told me about experiences with Direct TV. They had spent 3 hours on hold trying to reschedule a botched installation.  The company charged them for the installation that never happened and the installation that had yet to occur.  For this horrible service, monthly fees continue to rise.  This company is clearly exploiting customers, hoping to increase revenues and profits while providing less service.  They are hoping to leverage their incumbent position with customers, but avoid the frequent wrath of customers disgusted with their terrible service.

My recent experiences with TIAA-CREF fit into this pattern.  It took me ten phone calls over two weeks to schedule a money transfer from one retirement account to another.   I received very inconsistent advice across many different advisors.   I filled in and submitted numerous forms judged to be unacceptable.   All the advisors were quite pleasant, doing their best to be helpful, and heading me down various blind allies.  With persistence, I worked it out – well, at least for today.

What do these three examples portray? Quite simply, quality of service continues to erode, while the revenues and profits of service providers continue to increase.  These companies can get away with this because consumers whimper and accept this travesty.  This is not how markets are supposed to work.

So, what should be done?  Service providers could take the lead and compensate consumers when their time is wasted.  Each passenger might receive one American Airlines dollar for every minute a flight is late more than 15 minutes, e.g., 3,000 airline dollars for 100 passengers delayed 45 minutes.  Direct TV might provide one dollar of service credit for every minute on hold beyond 5 minutes.  My colleague would have been credited $175, so about a month of service free.  TIAA-CREF could provide service credits of some form.

There could be fines for poor performance.  This would be easy for the government to implement for airlines where arrival and departures times are all tracked.  Excessive delays in online services would be more difficult, although that data may be tracked by companies who could be required to submit it.  Given the enormous amount of waiting people do, such fines could provide a windfall for government coffers.

Another approach is organized market protests.  Protestors could be recruited via crowdsourcing.   If a critical mass of consumers agrees to boycott American Airlines or Direct TV, these companies could experience significant decreases of passengers or subscribers.  This might cause these companies to adopt consumer compensation schemes such as suggested above.  This is how markets should work.

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