20500198 entry #12

I thought of Nudge when I read about the newest sortie in the airlines’ ongoing war against their customers: American Airlines’ decision to charge passengers $15 if they have the temerity to check a suitcase. Now, I understand the reasoning. Checked bags add to the weight of a flight at a time when fuel’s price is higher than sky-high; baggage handling is expensive, too; etc. There are costs associated with checked luggage and the airlines are bleeding, as usual. (The net profit in the entire history of passenger aviation is approximately zero.) But if this cat needs skinning, might there be better ways to do it?
My daughter has been visiting from Ann Arbor, Michigan, where, she says, the water company offers a discount for customers who pay early. That got us thinking. If airlines want passengers to pack light, why not create incentives for the behavior they like rather than penalties for behavior they don’t? An airline could, for example, raise fares a little across the board, then offer a $15 rebate to people who check in without bags, simply by programming computers to post that amount to the credit card account associated with the ticket. A great horseman named Wayne Carroll regularly offered this advice to his students: “When you want a horse to do something, don’t tell him what not to do. Tell him what to do.”
That, of course, would require an attitude toward customer service found at places like Zappos but rarely associated with U.S. airlines. You can find it on Southwest; there’s a flight attendant on the US Airways Shuttle who’s so customer-friendly that it’s alarming until you realize he means it; and United recently got the smart idea of sending flight attendants back into coach with leftover wine from first or business class, which would otherwise go to waste. But such treatment is rare; more often you receive not just disregard, but active hostility—and it seems to be company policy (vide the baggage charge).
Why do companies declare war on customers? When the music industry was faced with file sharing, it ran around suing customers it should have wooing, for example. Marketing expert Phil Kotler and I once wondered about that in a conversation. I suspect it happens when firms get into a panic about profits, and make crazy grabs at the nearest group of people with money, or blame the messenger -- in this case, the messengers who are leaving. The impulse to punish -- rather than reward -- the people who make business possible usually fades quickly. But some industries seem to need more than a nudge.

My thought
Here is the important principle of business strategy. Incentive is better than punish. It said the case of Airline customer service. When they use punish to customer to reduce the cost of baggage delivering, it doesn't work well. But when the water company use incentives to customer, it works. I think when we make the strategy about cutting cost, customer service etc, we should use the incentives than punish. Incentives are the more sweet and also more effective one to customer and in the business field.

sources: http://discussionleader.hbsp.com/hbreditors/2008/05/the_war_on_customers.html