As the 24/7 news cycle turns away from the recent United Airlines issue everyone is probably sick of discussing, a new topic is beginning to permeate the back-page headlines. The regulation of customer service in the airline industry.
Regulation of customer experience is nothing new to highly regulated industries, just ask anyone in Energy and Utilities. However, there are some key differences between the airlines and utilities. For now, utility customers do not have a material choice in utility service providers. In 16 states customers can select their energy provider and can have limited generation options but energy delivery is still provided by their local utility. In the end, the clear majority deal with their local utility and that is all the choice they have. In this scenario, it seems reasonable for the government to step in on behalf of the consumer when choices are this limited.
The airline industry provides many choices. There are options for budget travelers, business travelers, and casual travelers. A flyer has many options and therefore can choose how they would like to be treated. Therefore, in my opinion the customer experience should not be regulated. Let the free markets decide how travelers want to be treated. Forcing customer experience will drive up cost which for some travelers that need a discount airline will be prohibitive. If something should be regulated it should be the collusion of providing poor service the same way pricing collusion is regulated. Additionally, I’d rather see industries that have limited choices such as Internet Service Providers (ISP), be regulated for customer experience.
In the end, customer experience is the clear differentiator in business. If a consumer has a choice, let the businesses live and die by their customer experience investments. The research is clear, firms that invest in providing good customer experience outperform those that do not. If a consumer does not have a choice, regulate basic levels of service. Of course, if you’re in an industry that does not provide a choice, you’re ripe for disruption.