Putting the cart before the horse

This morning, I experienced my annual visit to the optometrist. The wait was 30 minutes, but that is not what I wanted to address. At the optometrist, they have a fancy machine that takes a picture of your eye. I’ll call it the eyephoto. This is an expensive machine and insurance does not cover it. If you want to have the eyephoto, you have to pay $35 out of your pocket.

In order to see if you want the eyephoto, they give you a piece of paper when you walk in that has a paragraph description of the eyephoto and a place to check a box and sign if you want it done. I decided to keep my $35.

In the exam room, while waiting for the doctor, there was not much for me to do, so I was watching the screensaver on the office computer. What was it showing? It was a commercial showcasing the benefits of the eyephoto. As I watched the commercial, it occurred to me that paying the $35 might not be such a bad deal. The commercial changed my mind.

Here is an example of a badly sequenced process that does not get the customer information when the customer can use it to make a purchasing decision in your favor. It is putting the cart before the horse. I wonder what the rate of use is for the eyephoto at the optometrist. I bet it is pretty low. Wouldn’t it be higher if they reversed the sequence? If I had walked into a lobby with a giant flat screen TV showing non-stop eyephoto commercials and THEN been presented with the election form, I bet I would have signed up.

Most Lean we see addresses the movement of product before or after purchase, but in this example, an appreciation of Flow creates the potential for increased revenues. There is a huge amount of value to be gained by using Lean to ensure the purchase of product.

United Adds $25 Fee for 2nd Bag

I saw this story about United Airlines charging customers to check a SECOND bag. Not the fifth or sixth bag, but NUMBER TWO!

This reminded me of a training slide that we have in our Lean education program. There are three ways to cut costs. You can cut costs across the board by reducing all budgets a fixed percentage. This is the lazy path. You can cut costs by cutting services. This is the stupid path. Finally, you can cut waste. The smart path.

This extra fee strikes me as part of the stupid path because it cuts a core service and makes customers pay extra for something they get “free” from other airlines. According to the article, United expects it to generate $100 million in revenue and cost savings a year. Does this mean that United’s tickets will be consistently cheaper than companies that do not charge a per bag tax? I highly doubt it as the article shares that this is but one small part of a larger plan to charge more for less, a clear violation of the Profit=Price-Cost rule:

Airlines want to charge more for not only checked baggage but assigned seats and other services. Investors have urged airlines to pass on the higher costs of fuel to passengers through ticket-price increases or similar surcharges.

If United is planning to save money by flying fewer people, they might be able to claim savings because I don’t think their scheme will end up with them making any more revenue. We’re likely to see United lose revenue to the benefit of airlines that are more responsive to real flying customers, not day traders.

********UPDATE 2/26/2008**********

It appears that US Air is going to charge $25 for a second bag.

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