american airlines’ brand equity overdraft

Today American Airlines experienced a huge baggage handling problem at JFK — LA Times’ coverage is just the first of many stories we can expect to see about the hundreds of irate customers and the company’s feeble attempts to “re-accommodate” them. Ironically, just 2 months ago American became the first airlines to charge passengers for checked baggage ($15 a pop).

The company was already in dire straights — this latest snafu has the potential to push them over the edge. While their financial problems are widely acknowledged, their brand issues are just as bad. The problem: not enough brand equity. Brand equity is the tangible value a company derives from its brand — that value can be a price premium, positive word of mouth, or even vendor leverage.

Every time a company fails to deliver a satisfying experience, or even simply to meet customers’ expectations, it’s as if they have taken a withdrawal from their brand equity bank — and if over time they take too many withdrawals and don’t make enough corresponding deposits (customer rewards, inspirational advertising, and breakthrough products are just a few examples of deposits), the brand ends up in overdraft. Jet Blue was able to bounce back fairly quickly last year after it angered passengers by holding them hostage on a runway because it had stored up enough brand equity previously through the delivery of a superior customer experience.

The American Airlines brand, however, appears to be in overdraft. After withdrawals in the form of declining customer service, canceled routes, and extra charges, this latest mess of theirs may be the check that bounces. I don’t think American has anymore equity left in their brand bank to balance themselves out. And once brand equity runs out, business failure usually soon follows. While I would hate to see the company go under (I’m bound by their Platinum handcuffs, after all), I fear there’s no more hope.

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