Customers shouldn’t be punished for the failure of a business (Part 1)

The recent events that have happened surrounding United Airlines have made me continue writing a thought I had started drafting a while back about a friend’s experience with one of the airlines from the Middle East regarding their terrible customer service and failed refund policy in response to the recent travel bans.  So I’ll break this piece into two parts, but both with the same fundamental theme: a customer shouldn’t be punished for the failure of a business.

Just a note:
 I’m not going to name the airline, as it might have been a failure in communication for the airline to react to the emergency scenario presented to them.  Hopefully they can learn from it and enhance their customer experience; this post is more to illustrate the point how companies can innovate to solve problems that arise and have a dynamic responsive mechanism in place.

Company Refund Policies

Companies that do not have flexibility in how they respond to crisis scenarios, such as refund policies under extraordinary circumstances (e.g. the Passenger Travel Bans to the U.S. in February) can serve as an indicator of how outdated their practices and operations must be.  The fundamental business reasons for not offering refunds is due to the ‘opportunity cost’ to a business, i.e.  the cost on the business if it was not able to re-sell that original ticket/space.  Which by today’s best business practices is antiquated reasoning, but unfortunately common for legacy businesses and oligopolies.  That being said, a business’ failure to re-sell that booking, has nothing to do with the customer who has a valid reason to cancel their booking.  In this case and point, not actually being able to enter the destination country due to a ban.  

Why is it that the winners in today’s world tend to offer refunds until about the very last 24-48 hours?  Because they have faith in their ability to rebook and their popularity will always ensure demand and if not that, they know that the customer’s experience matters and a customer might not always acknowledge a pleasant experience but a terrible experience leaves a mark.  In conversations (digital and physical) that brand’s name represents a disdain and depending on how egregious the companies actions, it can have wide ranging effects.

For businesses that have incurred a cost for the sale, they have valid concerns with full blanket refunds, such as custom manufacturing or products already shipped/delivered.  However for industries such as airlines where if they had efficient mechanisms in place they could offset that cost by selling that empty seat or utilizing that empty space in another more innovative manner  (Free Trips as part of Social Media Campaigns / Corporate Sponsorship or sell the empty load through their cargo partnerships).  

There are many potential courses of action, just depends what experience they want potential customers to perceive the company as providing.

Backstory

This friend of mine was affected by the initial travel ban and had planned to travel to the U.S. from 3 months prior to the ban and had the unfortunate luck of having their travel date fall during the ban period. The airlines response initially was vague about what options they had (took 2 days for an official response despite their PR response across various regional media was they were offering refunds & rebookings).  They later responded by offering a rebooking to the same destination at a future date, this was at the time the passenger and airline assumed the ban would still be in place / let alone passenger mentioning their Entry Visa was expiring the following month, well before the ban’s expiration date.

After over 5 days of uncertainty and vague responses from all their customer service agents based out of their East Asian call center, a member from their U.K. team contacted apologizing and instantly offering a refund, which is exactly what the company should have done those first 5 days.  Uncertainty under already stressful times does not help, and whether the airline couldn’t see the other stress and repercussions the ban had on the passenger, the failure in their response has forever marked my friend and all those who have heard the ordeal to stay away from that unfriendly airline.  Despite the final refund by their U.K. customer support side, the damage was done and probably most of us would not fly that airline ever again.

Just as another fact, every other business that was affected by the ban, from hotel bookings to entertainment show tickets, some which had a Strict No-Refund policy, quickly fully refunded, no additional questions asked when they realized it truly was beyond the customer’s control.

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About Me

I write a blog here, deliver presentations on the subject of 'future impact of innovation', host workshops for local talent, consult & advise startups and entrepreneurs, serve on the board of multiple startups, launch ideas into startups and sometimes gift them to other talented people to execute.

This blog is a space to share my thoughts about future trends and consolidate the latest news I find interesting to share. Alternatively my Facebook page has the same objective.

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