On a recent trip to South Africa, I had a very ‘customerized’ travelling experience. Instead of going to a travel agent, I surfed the web and found a site that provided an overview of all the airlines, their routing, and the schedules. This is, of course, what a travel agent would have done for me. Having selected a specific airline, British Airways in this case for ease of connections and the directness of the routing (only three flights in each direction), I surfed to their website to compare prices – again, a service previously provided by the travel agent. I then booked my tickets on-line, paid on-line and was sent an email that contained my electronic ‘eTicket’.

I then rang the travel agent and asked for their best price for the same route and found that it was exactly the same – I had, therefore, done all the work and received no financial benefit whatsoever. The airline, on the other hand, had received a benefit in that they did not now have to pay a commission to the travel agent.

Just under 24 hours before departure, I ‘checked in’ on-line and was able to print off my boarding pass for the first leg. I also ‘checked’ my luggage. On arrival at the airport, I had to deliver my bag to a special, but conveniently located, counter at which I came across my first human. Interestingly, she needed my eTicket and from that she was able to produce my long-haul boarding pass and the short-haul for Jo’berg to Port Elizabeth. So far so good. From my point of view, I had not been inconvenienced in any way and I had avoided the check in queue – all benefits to me that I valued.

At Jo’berg, I was reunited with my bag but then had to take it myself to a different part of the terminal to re-check it for the domestic flight. I felt I was doing what in early times the airline would have done for me as the bag was ‘checked’ all the way through to Port Elizabeth. This frustrated me until it was explained that the South African Customers and Immigration services did not man the Port Elizabeth airport and thus I had had to ‘enter’ the country in Jo’berg. All right, I could live with that easily enough.

There was a similar set of experiences on my return with the only major difference being that I was re-united with my bag in Belgium.

What is different about the airline’s ‘customerization’ in comparison to that initially offered by the petrol companies and the banks (see the two previous blogs), is that they overtly sought to change the customer’s travelling expectations by making it clear that by using the on-line services to do the work the customer had reduced hassle, reduced queuing, and this would make the whole ‘terminal-based’ experience a little bit better. They offered no financial benefit but travel has become such a hassle-filled experience the customer’s perceived benefit and changed expectations have allowed them to make the change to doing the work themselves without complaint. This is helped, of course, by the airlines coming much later to this and having learned from the experience of others – they also started their ‘customerization’ after people had become used to, even expected or preferred to use, on-line services. They also provided experienced and competent service personnel at convenient points.

So, what do the airlines get out of this – they certainly wouldn’t be doing it if there were no benefit to them? The most obvious company benefit is that they received their money far faster and far earlier than they would have had I booked through a travel agent – if every one of their thousands of passengers each day did the same, then they would be generating large in-flows of cash with which to support their cashflow requirements or even to utilise on the overnight bank lending market and thus generate large additional revenue for little effort or risk. The second obvious benefit to the airline is the reduced ground staff requirements – by my calculation, the reduction is around 20% and that will make a very significant impact on their staffing costs – possibly saving millions of pounds, dollars and euros each year.

There are some who conflate ‘customerization’ and reduced airfares and feel that the first should not happen without the second. This is to confuse the issue: the ‘cheap flight’ model (for example, Ryan Air or Easy Jet and there are many more around the world) requires customers to forgo certain services and to do things themselves so that the airline can offer cheap tickets – the cheap flight model is based on running a bus service rather than a travel experience.

All in all ‘customerization’, if positioned correctly and if the perceived benefits to the customer are valued by the customer, is good for the customer and for the business but it really does need careful handling and should never be an instant response to rising operating costs and the need to reduce overheads.

The ubiquitous ‘hole-in-the-wall’ cash machine – or, more correctly, the automated teller machine or ATM – is a product of the 1960s with the first machines appearing on the high street in the mid to late 1960s. The raison d’être for their existence was the idea that customers could be given 24/7 access to their cash deposits through the use of networked computerised machines that would read a magnetic card and allow the user to withdrawn money. In theory, this is an excellent idea and a genuine benefit to the customer at a time when there was more money around and being spent and banking hours were, to put it mildly, restrictive.

Like most things in the ‘customerization’ field, the idea was not conceived as a benefit to the customer but as a benefit to the bank. Traditionally, banks had ‘tellers’ who sat behind glass screens or metal grills and manually checked customers’ balances and then cashed their cheques so that they could withdraw money. Given that this was the only way of withdrawing money at the time, banks had to employ growing numbers of tellers (or cashiers as they were known in the USA) to cope with the lengthening queues of customers wishing to make withdrawals. The efficiency experts watched and checked these queues and the estimated waiting time – they also checked the speed with which the teller could conduct the transaction (estimated at 90 seconds to 2.5 minutes) and thus how many they could process in an hour (usually around 30). With banking hours restricted to 09h30 – 16h00, a total of six and half hours, it soon became obvious that one teller could deal with a maximum of 195 customers in a day providing each only wanted to conduct one cash withdrawal transaction.

Given that the 1960s saw a huge increase in the number of people establishing and using bank accounts and, in many countries. the payment salaries and state benefits going direct to the bank, the banks themselves came under severe pressure as waiting times increased and people found getting access to their cash more and more difficult. The ATM was thus seen as a way of (a) moving the customers out of the bank itself and onto the street, (b) making the customer do the work of the teller, and (c) allowing the banks to reduce the number of tellers and replace them and their space with financial sales processes. Of course, the charges banks levied for running accounts did not go down and the customer was charged for using the ATM. The ATM was, therefore, perceived by the banks as a way of making more money from their existing buildings, of reducing costs, and of making less account errors – and their customers saw them the same way!

The result was almost comically self-evident: the initial customer reaction was to ignore the new-fangled machine, especially if the weather was bad, and to continue to use the tellers in the bank. The rather obvious benefits to the customer of 24/7 access to their cash was not perceived as a benefit simply because the banks had failed to present it as such. It took nearly a decade of investment in ATMs, making ATMs usable by all card holders (rather than restricting their use to the customers of a particular bank), and hard-sell advertising before customers began to use the ATM in the way they do now.

But the banks were slow to learn from their mistake over the ATM and when they next ventured into extensive customerization with ‘self-banking’ (and then online banking) they were again unable to find it within themselves to sell the service as a BENEFIT to the customer rather than a simple cost saving approach to the unprofitable personal accounts that they were being forced to provide.

There are many banks that quite simply find it impossible to make money on personal accounts, especially those that are maintained ‘in credit’, and they would dearly love to abandon their provision. By transferring the transactional activity to the customer, the bank can free up their staff for revenue generating activities and transfer the entire cost of the transactions to the customer while still charging the customer the right to have an account at the bank. Self-banking and online banking are a simple win-win strategy for the banks. Unfortunately, their underlying self-interest has led them once again to fail to sell the benefits to the customers and so the services take-up has been slow, frustrating and painful and the expected positive impact on the revenue of the bank has been very slow in materialising.

If the banks, instead of charging customers for the right to have an account at the bank, were to reward the customer for conducting self-banking or online banking (i.e. for saving the banks money), the take-up would be faster and more profound but as it is, banks pursue profits even when it is evidently in their own enlightened self-interest to reward the customer for doing their work for them.

Customerization is now spreading and in my next blog on this subject I’ll look at how the airlines are getting in on the act – and making exactly the same mistakes!

Close on 50 years ago, my father, then working for Mobil, was project manager for the development and subsequent opening of the very first 24-hour self-service petrol station in the UK somewhere near Southampton. Today, just about every petrol station/service station is self-service but back then this was a radical shift in the operating model for retailing petrol.

The logic behind the move was impeccable as far as the company was concerned. The margin on petrol sales was minute, often as low as pennies per gallon, and the government saw it as an easy target for taxation which meant that there was adequate cash-flow but very little operating margin with which to develop the services on offer and to pay the staff of attendants who, until then, had filled the cars (‘pumped gas’), cleaned windscreens, checked the oil and water and generally provided a useful service to the customer. Now that was about to change – the attendants were to be no more, the customer himself or herself would now have to get out of the car in all weathers and fill their own tanks, clean their own windscreens, check their own oil and so on whilst still paying exactly the same price for their fuel as they did in pre-self-service days. The retail margins were simply too small for price discounting.

The self-service petrol station was not well received by the car driving public, as they derived no value-added benefit from the change such as a price reduction. On the contrary, the customer was now faced with major negatives (they had to get cold, wet, dirty, etc.). The petrol companies were not slow to respond and petrol stations started offering ‘a shopping experience’ and 24-hour access to fuel, but very little else. The car driving public were not particularly enamoured of these supposed ‘benefits’ and were very slow to change to using self-service. With this failure to convince the customer of the benefit of getting themselves cold, wet, dirty and smelling of petrol, the companies were faced with a huge marketing challenge – while the consumption of fuel was growing as car ownership expanded, the margins were still wafer-thin, and the only retail petrol outlets that could make money and still offer an attendant service were the ones which subsidised the forecourt from other activities such as car repairs, car sales, shopping facilities, etc. The traditional operating model of the retail petrol sector needed to change in a dramatic way.

It slowly dawned on the petrol companies that simply changing the model in a way that suited themselves but was disadvantageous to the customer was not wise and, despite offering all the additional ‘retail experiences’, they had got it wrong. The simple truth finally dawned on them – customers went to a petrol station to buy petrol and that they only bought other things on an impulse basis. The pumps still accounted for 95%+ of sales although the accessories and other retail products generally accounted for 25% of operating margin. This meant that the self-service petrol station had to attract the customer away from the car/pump interface and into the store and if you have wondered why, at most places, you can’t pay for your fuel at the pump or at a drive-by cash desk – now you know the reason.

This approach still didn’t make the self-service fuel-buying experience any more attractive and the petrol companies finally acknowledged that a major change was needed in the entire model – retail fuel outlets would have to be owned and operated by the companies themselves unless they were attached to other retail experiences that could subsidise the cost of running the pumps and forecourt. Fortunately, they found willing partners in the form of the out-of-town shopping complexes and the larger food retailers who were happy enough to add another high-volume low-margin product to their mix – and the need to purchase food and have the opportunity to fill the car at the same location while collecting discount loyalty bonuses which they could utilise in the store all made sense to the customers.

The conversion of the public to the use of self-service petrol stations was long and slow and required multiple changes to the operating mix before the customers could be persuaded to carry out an activity themselves that had previously been provided by the company. The lack of clear benefit to the customer for carrying out the company’s transactional activities for them was the main issue.

In the next blog, I will take a look at another example of a business seeking the ‘customerization’ their activities – the banks.