As organisations focus on cost-cutting and price-based competition, what are the pitfalls of digital-centric experience and service, and why does customer experience matter at lower price points? Caroline Cook, from Capgemini Australia’s Marketing, Sales and Service practice, looks at what this means for those who compete purely on price and what the implications are for everyone else.

One of my favourite Sydney haunts is a small and always crowded sushi bar tucked away in the corner of a China Town street. With the exception of a permanent and lengthy queue, it appears unremarkable: tiny plates of rice and fish rotating around an enormous conveyor while (non-Japanese) patrons make a mess with their chopsticks and chefs skilfully turn ordinary ingredients into tiny (albeit delicious) works of art. Unremarkable, that is, until you receive your bill. This place is cheap.

Despite many visits to other sushi bars in the city I’m yet to find one better – and by “better” I do not mean “cheaper”. Even when you remove price from the equation, this particular sushi bar does everything right: it’s a perfect example of great experience at a fantastic price which, sadly, is not all that common. Contrary to the popular saying, “cheap” does not always mean “cheerful”.

Generally speaking, low prices mean cost cutting and, in one way or another, this often impacts customer experience. Amongst other things we have come to expect longer queues, telephone software that has you shouting “yes” at regular intervals (completely inexplicably to any bystander) or technical support delivered through a labyrinth-like web site rather than by a human being. While these ‘features’ are not unique to any organisation or industry, one company above all others takes low to the extreme: Ryanair.

Michael O’Leary’s Irish carrier (self-styled as the ‘Low Fares Airline’) does not prioritise customer service; yet its business model has proven to be extremely successful – with many global low fares carriers looking to replicate its approach. When Skytrax last rated Ryanair, the airline received on average 2 out of 5 for  the majority of service-related criteria, yet by passenger numbers it is the 2nd largest airline in Europe and in 2009 it posted profits of almost €137m – in the same year British Airways lost £401m.

Ryanair delivers its sales and service capabilities almost entirely via the web; using the internet as a platform to reduce cost and, through advertising, raise revenue. As their focus is to project an image of rock-bottom prices, it’s not surprising that their site is as stripped down as a ‘no frills’ flight. Problems using Ryanair’s site arise when a customer has a special requirement, or circumstances dictate that they must step outside the prescribed (and most common) process. When not booking a flight, checking-in or reading FAQs, it is very hard to contact Ryanair or to find the service required outside of dialling a premium number. Everything they do, from  web-only service to plans to introduce standing room onboard and charging passengers to use the bathrooms is carefully designed to cement the idea in the customer’s mind that the cost of the fares could not possibly be any lower

Ryanair’s methods are particularly relevant for businesses that seek to cut costs via digital channels, yet don’t differentiate themselves by price alone. There is an important difference between ‘mandating’ and ‘encouraging’ customers to use the web or a particular channel to save cost, especially when this is not the channel over which the end product or service is delivered. In Ryanair’s case it works – yet for most other organisations it won’t: if customers can’t find what they want quickly and easily they’ll simply go elsewhere. Unless a customer can make a clear link between cost-reducing measures and the price they pay at the till or checkout, sub-par experience and service will not be tolerated.

This is not to say that web-only models don’t work: Amazon and eBay are entirely web-based, yet their customer service is also delivered via the internet and is specifically designed to be comprehensive and accessible. If you’re going to drive customers to use the web, the key is to ensure that the customer doesn’t notice the difference. Make sure that they can escape the process when they need to and reach the outcome that they’re looking for. If they feel that they’ve no choice – that they’re forced to use a channel which won’t meet their needs – you’ve lost. If the ‘web only’ route must be taken, plan for every eventuality and get it right first time. Amazon and eBay regularly offer low prices, but their respective unique selling points are based on providing ‘best of breed’ online platforms and experiences.

So what does this have to do with the Sydney sushi place?  Irrespective of how they’re achieved, low prices provide an opportunity to delight customers when the customer experience is good, and to blow them away when the experience is fantastic. Unless you’re a premium brand or a Ryanair, price is simply an aspect of a larger customer experience mix, and cost reductions should not put any other elements at risk. Organisations that can reduce costs and prices while delivering excellent experience and service will thrive and customers will return time and time again.