Oh no, Iberia, you just screwed up again. Do you hate premium customers?

IB broken value proposition

Iberia just broke its basic value proposition for premium customers by introducing LCC-like fare unbundling, in the form of an extra charge for using credit cards. Click on the image to to visualize how absurd Iberia's desperation for short term cash has become.

UPDATE: Iberia just responded that they included this into their list of potential improvements. That’s a good first step! Hopefully the good intentions will become a reality soon. We’ll follow up within 30 days. Here is the original post:
I am trying to like Iberia. Really! But this time they badly slapped their best customers straight in the face by applying credit card fees also to their Iberia Plus Gold and Platinum members, even on big-ticket business class tickets. In one second all the trust built up over the last months with important service improvements has been ruined.

I am not here to lecture anybody on what to do with their businesses (at least not for free ;-) ), but this one is well worth a case study: it is the case of a legacy airline, so nervous from losses inflicted by low-cost competitors that it starts applying the LCC hassles also to their premium customers! Amazing.

So, let’s start with the ABC of customer experience management (CEM) for beginners:

A)   segment your customers adequately, by lifestyle, needs (JTBD) and (last in this list!) income

B)   analyze the different service touch points and determine the value generation opportunities for every segment without losing the strategic context

C)   create the corresponding value propositions along the value chain to design an integrated or unbundled product that optimizes the income potential from every segment.

Iberia has not applied this basic common sense of service management to its most valuable asset, the frequent flyers.

I have worked with many customers on CEM and segmented value generation strategy, but it still puzzles me how big company, frequently very full of themselves, claiming to know everything about customer experience, still behave like first graders when it comes to get the concrete value propositions right, which particularly hurts when this alienates their high revenue customers.

Iberia’s decision to apply low cost techniques to customers, who already bring in a lot of business and at much better margins than the low-cost deal hunter, destroys both long term customer equity and, paradoxically, even short term cash flow. Premium customers want elegant, no-hassle relationships and they react very adversely to any kind type of penny pinching and unnecessary inconvenience. You just can’t treat an Amex Platinum holding elite tier frequent flyer as if he or she were a student living on a scarcely funded debit card.

For sure, best practice among competitors is to NOT letting the low fare product unbundling frenzy spill over to their premium segments. Other airlines do exempt their elite-tier customers from credit card charges, which are perfectly legitimate when it comes to compete with LCCs for the low-revenue-end of the market (which easily represents 90% for many carriers, which means that the income upside from premium customers is irrelevant, but the downside significant).

Other consistent premium service process failures

Unfortunately this is not the only sign of lack of passion for customer experience leadership at Iberia’s senior management team. Although Iberia’s flight attendants very recently finally learnt to greet their long haul business class customers by name, Iberia’s premium product experience on the ground continues to fail, as we reported in previous occasions:

  • priority boarding requires typically fighting your way through the middle of angrily looking crowds
  • priority-tagged baggage routinely appear among the last pieces on the carousel (probably some kind of friendly revenge from unionized workers)
  • passengers with critical connections caused by delays of incoming IB flights are only randomly escorted to connecting flights by Iberia personnel while attempts to beg for an Express Connection tag at the connection desk are frequently unsuccessful (we can help you on this one: click on the image above to download and print your own DIY long security check line buster when in a hurry)
  • the employees at the Madrid connection desks love to attend a massive single queue – consistently allowing it to form at the place marked as “Business Class / Oneworld Emerald-Sapphire only”.

It is a revealing observation that all those processes actually work perfectly well at Iberia’s international destinations. Why? The (Oneworld) processes do actually exist and third party handling service providers do respect Iberia’s SLAs. But it lost (or never had) control over its own Iberia Handling unit, which is good at scaring away premium customers at its Spanish airports, particularly Madrid. Perhaps they should just sell off that division if they are unable to make their employees respect their own rules and recognize the importance of premium business.

But back to our starting point, the credit-card-fee-for-premium-customers anomaly. Iberia’s decision smells like coming from a headless commission of middle managers disconnected from real (customer) life and under pressure to find additional sources of some quick income, but under no clear leadership helping them to take decisions in an adequate strategic context… So, is there anybody in command at Iberia? Any customer listening going on?

For more stories about Iberia on this blog please click here

 Click here to sign up for our free newsletter! (never more than 1-2 emails per month)

IB Express Connection
When connecting short in Madrid from a delayed intercontinental to a European domestic flight and no Iberia personnel is at the gate to assist you, go to the (hopefully not crowded) connection desk and ask for one of these cards (interestingly not IB but Oneworld branded). It can cut crucial minutes out of the internal security control process. If they don’t want to give you one, INSIST. They have them under their desk. But don’t wave your Oneworld Sapphire card. Iberia Handling employees will make sure that you will feel like a pretentious, self-important enemy of the low-cost-loving mankind…
This entry was posted in Leadership, Worst practice and tagged , , , , , , , , . Bookmark the permalink.

One Response to Oh no, Iberia, you just screwed up again. Do you hate premium customers?

  1. Kieran Daly says:

    It’s not just the big spenders they irritate. BA from London to MAD last week and return on IB. Hot breakfast outbound, only paid food inbound (€10 for coffee and sandwich – actually more expensive than EZY.)

Comments are closed.