Singapore Airlines- Refusing to Unbundle

A major airline that had made superior service as its differentiation is Singapore Airlines. It was recently featured in a Harvard Business School case study. Professor Rohit Deshpande, the case author, was recently interviewed by Harvard podcast team. Deshpande argued that customer service is a better stragety that trying to generate more revenue from what customers might feel as nickel and diming. Singapore airlines is not making superior service its goal for all classes of passengers.

Singapore is not making its service offering the prime focus for all its customer segments. It has clearly identified the business class passengers, those who are not paying with other people's money or in the Richistan segment. The first group does not care about high price for the bundle and the second does not care about its spending.

Clearly unbundling is not the right strategy when marketing to segments that have a high Reservation Price (RP) and does not want to be bothered with evaluating the value of component options. When the consumers do not know and want to be bothered with value of components and demand a high level of service at a high RP, they should be offered just that. Unbundling is not recommended for this segment.

On the other hand, the coach class passengers are still the higher percentage by numbers. Singapore Airlines has about 300 coach passesngers in its long-haul fights. The people in this class are either paying with their own money or working with expense account limits. Unbundling is an attractive option to this segment because their RP for the different components vary significantly. For example, non-business travelers will value checkedin baggage handling more than inflight service compared with business travelers. Bundling the services will lead to offering middle of the road service that does not fully serve any one sub-segment's needs and does not capture value from those with high RP.

Unbundling the service will allow the airline to deliver high quality service to each sub-segment on dimensions that they desire. For example, no queue check-in, Internet connection and better food service to business travellers and free baggage check-in and no or reduced inflight service for price conscious travelers.

In summary bundling and unbundling is not a strategy that can be applied uniformly in all segments. The strategies have their application in each segment as long as the customers self-select.