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Ok, moving on…

It’s been a stressful time in the news, and if you’ve hopped on a plane recently, you might’ve had a bit of extra stress about the possibility of a door flying off. With all this news in the media about Boeing’s manufacturing flaws, we figured we’d take the contrarian view and learn about one of the airline industry’s often-overlooked business model wins.

Today, we are going to focus on differentiating your simple product through value-added services. Plane tickets are pretty much commodity products at this point, so how do airlines win market share and compete with one another? All will be revealed below.

LAST THING! As we wrap up this month’s theme on selling replicable products, we’d love to hear your feedback on our recent articles. Your input goes a long way, so let us know your thoughts here!

With no further ado, let’s get into it! 🔥

News

Tools + Productivity

Strategy

Why would you take a Jet Blue flight instead of a Southwest flight? Or a Spirit vs. a Frontier flight?

For some people, it might be a matter of price and price alone. If one airline is offering a comparable ticket at $5 cheaper, then of course you’d choose that one.

But, for frequent flyers, there are more considerations to be considered, and this is by design.

Airlines want to keep their most profitable customers captive by giving them reasons to come back. By developing customers with higher loyalty, the airline can earn higher lifetime value from each customer.

So, how do they do it?

Miles, Points, and Reward Currencies
If you’ve never booked a flight, “miles” can be though of as points for frequent flyers. Generally speaking, you earn miles for flying with an airline, and you redeem those miles for free flights, upgrades, or other purchases

If you fly exclusively with one particular airline, it will take fewer trips to cash in on your rewards than if your money has been spread across multiple different airlines.

Within the aviation industry, to our surprise, Alaska Airlines is widely regarded as the best reward program available.

This is because they stay true to the frequent flyer rewards program business model: if you fly more, then you will earn high quality awards more quickly.

Other larger carriers have made mileage points a function of how much you spend rather than how much distance you travel. Furthermore, they make their “elite” status harder to achieve by adding more criteria to earn than mere distance flown.

Although Alaska Airlines offers the best value for its reward programs, there’s a reason we don’t all fly with them on every trip: value-added services aren’t limited to just mileage points.

Premium Services
When you think of your air travel experience, imagine all of the segments where you are absolutely miserable…

I’m sure you can name a few, but allow us to help you out: flight got delayed, the line at security is an hour long, there’s no space in the overhead bin, can’t charge your phone on the plane.

Although the opportunity to fly from point A to point B is offered by a number of different airlines, the experience they offer is different because of their value-added services.

For example:

If you want to make sure there is space for your bag in the overhead bin, you can pay to board the plane first.

If your flight is delayed, you may still be late to your meeting, but you can pay to spend those hours in the lounge instead of at the gate.

If you’re worried about being stuck in a metal box with no service for hours, you can often pay to connect to the wifi.

Frequently, these services aren’t offered as add-ons, but instead, they are baked into the price of a ticket. The reason Spirit’s tickets are often cheaper than competitors is because their ticket doesn’t offer any of the value added services of other airlines: in-flight meals, entertainment, extra legroom, overhead bin space.

Jet Blue, on the other hand, likely has a higher price because they do offer these services.

The core product is the same, but when you add all of these bells and whistles as services, then you can charge a premium on your sale.

Back To You
When thinking about your business, it’s likely very different from the airline industry, but your primary focus should be on how you can provide value-added services to a relatively simple product.

Let’s look at some examples of services offered at a premium in other industries:

• Amazon offers free shipping with a Prime subscription

• Best Buy offers extended warranties on appliances

• Home Depot offers installation and delivery on its products

If the service is valuable enough, you can charge a premium for it. Just look at how much Amazon has increased its prices for Prime over the years.

When selling your products, you can’t always find a way to make the item itself different than your competitor’s.

But, by finding creative ways to deliver the service in an optimal way, you can justify charging a higher price for the product and boost your revenue with small tactical changes.

Looking Ahead
As we wrap up this month, we hope you’ve taken some important lessons with you about how to effectively sell replicable products. In most industries that profit off of commodity products, there is still competition despite the fact that all products are essentially the same. Take a page out of the air travel playbook and find ways to upcharge for the way the service is delivered.

If you’ve enjoyed this month’s newsletters, let us know in the surveys below! And like always, as we head into next month, we’d love to hear from you about what you think our next theme should be - let us know right here.

For an overview of the month’s topics, check below:

Week 1: Target Niche Markets
Week 2: Emphasize Brand Values
Week 3: Provide Exceptional Customer Service
Week 4: Competitive Pricing & Value-Added Services (this week)

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