At exactly 9.35 AM on Day 1 of my trip to London, the easyJet airplane was taxiing down the Schiphol Amsterdam Airport runway. I am on my way to London for a few days off, followed by three days of Northern European meetings with ManpowerGroup colleagues on Social Media and Digital Strategy.
Why I am flying easyJet? It was the cheapest fare. I typed my destination in on www.skyscanner.nl and the white/orange carrier topped the list. And that is exactly the competitive playing field most airlines are in today: be on the first page of any air tickets list or you are gone. Flying from A to B is such a homogenous product, that price is almost the only differentiator for most people. And yes, of course I prefer a comfortable seat and leg room. A hot coffee included and a short movie would also be nice. But if it increases the ticket price? No, it’s just not worth it then. Both on private trip as well as business trips.
It reminded me of a Finnair presentation I attended recently. Finnair did not make it to the first page of many ticket selling websites. Main reason was their ‘all inclusive’ pricing. Travelers were allowed an extra piece of hand luggage, could pick a seat and have a newspaper on board. Competitors like easyJet, Ryanair and Norwegian stripped all this, offer a low price, land on the first page and get more sales. Do these low-cost carriers offer less? Well, not necessarily, they just offer a basic price to get from A to B. And additional services come at a premium. Airliners call this ‘Ancillary Revenue’. The ticket price is the basis and makes the sale. Ancillary services are the real money makers. Once a tourist trip has started, people are more willing to draw their wallet. And the best thing for a company? High margins and hardly any competition in this stage of the sales-cycle. The customer is already ‘hooked in’ and the moment of ticket purchase forgotten.
In the top 60 of airline ancillary revenues, easyJet takes ninth place, with ancillaries taking
account of 19,2% of the airlines’ total revenue.
So how does that compare to the staffing industry, where our biggest brand - Manpower - is in? Traditionally we tend to charge our customers one price for all staffing services: a markup on the hourly wage of our flex workers. The staffing product is quite homogenous as well price plays an important role in decision making. Our industry is adopting the Airlines model. Start with a basic pricing and offer additional services at a premium.
And while the plane was descending for London Stansted, I thought of how I coped with easyJet's business model. Well… With my plans to do some running in the morning, my hand luggage was completely stuffed. So I had to take my laptop bag with charger, iPad, etc. as a second piece. EasyJet charged me € 30 extra for it. That is 20% of the ticket price. And I paid it without a problem, happy that I was able to take two bags on board now. Together with a coffee during the flight of € 3, I contributed € 33 to easyJets ancillary sales.
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