Is cheap good? Ryanair, Uber and the profession

Who's waiting for accountancy's version of Uber?
iStock_Uber car_Michael Krinke

Love them or hate them, conglomerates undercutting the market has been the rage of late. However, the last week has seen two companies in the revolutionary vanguard challenged.

Sometimes it feels as if there has been a massive bifurcation in British society, which is reflecting much of civilised society.

At one end of the scale, luxury brands are increasing prices to impress their exclusive clientele. At the other, whether it is supermarkets, travel companies or operators in most other sectors, price is all.

The odds are that almost everybody reading this column will have taken a flight with Ryanair or used a taxi run under the auspices of Uber because accountants know a bargain when they see one.

In the last week though, both of these companies have come a cropper. I doubt that many readers will be distressed to hear that Ryanair is facing a backlash from angry customers after cancelling a large number of flights.

It is bad enough to discover that your holiday has been ruined at the last minute, that the chance of getting a later flight is non-existent and you are only entitled to meagre compensation. However, to find out that the company has no plans to refund subsidiary costs such as the price of hotel rooms that can no longer be used or additional journeys necessitated by its incompetence is like a slap in the face.

Many might feel that if Ryanair treats customers like this it deserves to go the same way as Bell Pottinger, effectively outlawed and then destroyed by the market. That may be a little harsh but those that spent the whole lives cutting corners might eventually fall off a cliff edge.

The story with Uber is rather different. For those that really have an interest in the truth, a friend pointed me towards a fascinating article that contains far more detail than most of the headlines in the wake of a spectacular row.

Transport for London, apparently with support from the Mayor, has decided that the company is not operating in accordance with the requirements needed to maintain a transport licence in the city. As a result, that licences to be withdrawn.

This has led to outrage from the public, fired up by Uber’s executives. In no time at all, half a million people had signed a petition demanding that the company’s operation continue, with the risk that otherwise 40,000 people will be out of work. Who are they kidding? Minicab drivers are minicab drivers and if they cannot work for one company they will transfer to another overnight.

It might be hard to sell the concept to our clients, but cheap is not always good. Some of us would like to believe that we are the equivalent to those luxury brands and can charge what we like. Regrettably, that is not always the case, although good service is often rewarded well. On the other hand, do we really want to deliver a cheap and nasty product in an effort to bring in the kind of clients that we have probably spent our careers trying to avoid?

It will be fascinating to see how these two stories develop and also whether other purveyors of “tat”, to quote from a man who sank his own business, might also begin to struggle as punters begin to recognise the need to pay for at least a modicum of quality.

About Philip Fisher

Replies

Please login or register to join the discussion.

avatar
By rawa363
06th Oct 2017 13:43

I flew Ryanair once, didn't like it and have always used other carriers since. Michael O'leary seems to be following the sentiments of Tom Petty in his song the Last DJ where he says '........all the boys upstairs want to see is how much you'll pay for what you used to get for free.' However people by how they spend their money show they want low prices and will put up with much to get them. Some products and services are aspirational like an exotic holiday, a Ferrari and people will pay a lot for them. Other products or services are really commodities so why pay more than you need? Why pay more for electricity from one supplier when it is cheaper elsewhere? Electricity is electricity, paying more wont mean your bread toasts more evenly or tastes better.
Same in accounting services, as long as the providers are competent then why pay more? A tax return or tax calculation will be the same whichever accountant does it so why pay over the odds? As will the balance sheet and P&L, so why pay more for compliance services? Accounting services are really commodities so the customer will want them at the lowest price. A very small number will want so called 'added value services' such as FD services and will pay for it. AI will however create great opportunities for the commodity accounting services to be automated and for the accountants offering them to create profitable businesses with the right business model and right marketing. It will be volume based but done right could make a great business and charges will be a fraction of today's.

Thanks (0)
avatar
to rawa363
09th Oct 2017 10:14

Yes; a better question is "Is expensive good?" I'd say not most the time, as 90% of what expensive firms do can be done by much cheaper firms just as well if not better. For example, the best description for Big 4 accounting firms I heard (having worked at 2) by a partner there is that they do "an average job well". They can also do the 10% of specialist things cheap firms cannot do, but that's no reason to employ them to do the other 90% of stuff at a multiple of the price of a cheap firm nor even the 10% of specialist stuff, as that can be done much better than average at specialist firms. People tend to use the large expensive firms purely for their name/brand in my experience (or the audit etc. is simply too big for a smaller firm).

Thanks (0)