Wednesday, July 16, 2008

This is what happens when you compete on price.

American Airlines and Delta Air Lines have just announced quarterly losses of one billion dollars. This isn't because of unions, or health care costs, or fuel costs or depreciation of rolling stock.

The whole industry is dead or dying because each airline has killed their brand and given consumers no reason to choose one carrier over another other than price. Naturally competition drives prices down to the point where you can't succeed.

It's happening to airlines. It's happening to the domestic auto industry. Will it happen in advertising? What does your agency stand for--procurement?

1 comment:

Tore Claesson said...

Once there were two identical cars built built in America. On the same chassis, the same platform. Everything in the cars were the same.
No material quality differences.
The same engine. Only a different name on the engine top. Same interior, just a different emblem on the steering wheel. Different grills.
One car demanded several thousand dollars more at the dealers. The more expensive one nevertheless outsold the cheaper one to about 2 to 1.
This was all about perceived differences between the cars. A fantasy product in people's heads. It's called branding.
One had a Japanese name, the other was American. Guess which one sold more?