According to a company regulatory filing a few weeks ago, Southwest Airlines reported an estimated $825 million, or 4% of their current market cap, in losses stemming from their mass service disruption over the holidays. U.S. Transportation Secretary Pete Buttigieg said the airline “failed its customers.”
How did this happen?
When frigid temperatures swept across the Northeast in December, it wasn’t surprising to see many major airlines experiencing delays and cancellations. But if you happened to open Twitter between the 22nd and 31st, or opened any other breaking news publication during that span, you probably noticed Southwest Airlines catching A LOT of heat from frustrated customers.
More than 15,000 Southwest flights were canceled starting on Dec. 22, including more than 2,300 canceled the week after Christmas – almost a week after the storm had passed. This was due to an archaic scheduling software problem, which has been an open secret at Southwest for quite some time. Longtime Southwest pilot, Larry Lonero, said, “The frontline employees have been watching this meltdown coming like a slow motion trainwreck for sometime…and we’ve been begging our leadership to make much-needed changes in order to avoid it.”
What can marketers learn from this?
By failing to take the necessary steps to transform a critical piece of company infrastructure, something like this was inevitable. It reminded me of when the super in my midtown loft apartment used cheap plywood to patch up our floor anytime there was a plumbing problem – What ensued was…well…I’ll leave it to the reader’s imagination.
So, what can marketers learn from this? In our world, we often talk about the importance of digital transformation in enabling brands to use data more intelligently to create the best possible experiences for their customers. So, while Southwest’s issue was related to an archaic scheduling technology, much of the same logic can be applied to outdated marketing systems (think legacy marketing clouds, on-prem databases, and “home-built” email systems).
Many businesses have accepted the reality that to succeed in today’s economy, they need to build a modern technology infrastructure that can support modern business practices. There’s a reason why Snowflake has a $45 billion market cap. Marketers need tooling that’ll allow them to be responsive to their customer needs and demands.
Ultimately, brands that fail to treat data as a first-class citizen in their business end up a) losing market share from their progressive-minded competitors, b) spending way too much time cutting data in excel for basic marketing asks and c) delivering cringe-worthy experiences to customers, that’s simply unacceptable this day in age, like below:
The Bottom Line:
Your customers deserve better. Especially during this seemingly never-ending period of economic uncertainty and unpredictable shopping behaviors. Finding ways to monetize existing customer bases and growing LTV will be paramount.
Brands can no longer afford to let outdated technology impede their ability to execute at a high level. They need to adapt.