Lessons From Ryanair: How Do Your Clients Want To Pay?

During the first three months of 2007, Ryanair boosted its profits to £93.6M (roughly $187M)—a more than 15% increase over the first quarter of 2006. That seems astronomical for an airline carrier that offers flights between European cities as low as £1 to £10. So, where does Ryanair make all its money?

Besides some of the cost-cutting techniques that have become commonplace for most carriers, including online booking and ticketless travel, Ryanair has taken its penny-pinching to a different level:

  • Forgoing air bridges: Opting for customers to walk the tarmac to their flights saves a few dollars

  • Flying to outer-lying airports: Often as far as 100km outside a major city, Ryanair has been able to achieve impressive discounts on landing fees. Some airports have even paid Ryanair for bringing additional routes.

  • Sales commissions for flight attendants: Along with traditional a-la-carte meal and drink items, Ryanair flights also offer duty free goods, scratch cards and even bingo. There is also talk about their attempts to get gambling licenses for their flights.

  • Overweight baggage charges: This is not unique to Ryanair. What is unique are their baggage weight limits; 10kg for a carry-on and 15kg for a checked bag (which carries a £5 charge, plus £5.50 per kg over 15kg).

  • Revenue sharing agreements: Ryanair takes a piece of car hires, bus transportation and hotel bookings.

  • Advertisements in and on the plane: Advertisements inside in-flight magazines are commonplace, but Ryanair’s use of the side of their plane for advertisements is unique in the industry.

Despite their cost-cutting and their efforts to “nickel and dime” their customers, Ryanair continues to be one of the most profitable airlines in the world. They offer less and make more than most of their competitors because they have figured out how their clients prefer to pay: not one ticket price which includes the cost of many services, but incrementally for the services they actually use.

It seems to me that there are similar opportunities for service providers in industries where consumers are paying large sums of dollars for commoditized services. Can you say Redfin? Redfin has exploited a niche in the market for consumers who are willing to sacrifice service for savings.

Where do you stand? If you know your customers, how do they prefer to pay?
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