Case Study Texas JetPremium Pricing for Premium Service

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LEAD WITH SERVICE AND TURN TIME INTO AN ASSET

Texas Jet is a gas station for airplanes. However, owner Reed Pigman doesnt use todays gas station as a model for thinking about his business. He uses the Ritz Carlton Hotel chain as his guide. Reed says, The people who fly and ride in private planes are the same people who stay at a Ritz Carlton or other luxury hotels. That means they dont compare us to the corner gas station, they compare us to the luxury service they get when they travel.

Reeds business operates 13 hangars totaling more than 225,000 square feet and supplies two-thirds of the fuel at Meacham Field, located in Fort Worth, Texas. Private aircraft depend upon a network of fueling stations that are called fixed-base operations (FBO), and Texas Jet is one of the best in the world, according toProfessional Pilotmagazine andAviation International News.

In 2009 and 2010, Texas Jet was named the number one FBO by the pilots surveyed.Professional Pilotnamed Texas Jet number one because Texas Jet is a place the pilots enjoy while they are waiting for their customers to return. More significantly, the pilots customer is given the red-carpet treatment.

There is a very demanding supply chain within these operations, with high levels of expectations regarding customer service. The pilot is the customer of Texas Jet, and the passengers are the customers of the pilot. Although a few pilots own their planes, most are the full-time employees of the companies that owns the planes, and often the passengers are their key executives. Passengers could also be individuals who have a fractional ownership in a private airplane, who have chartered an airplane, or who are just paying for an empty leg. Everyone is a choice customer and all expect top-quality customer care and attention to detail.

Texas Jet sells jet fuel and support services for the private airplanes. When the pilots prepare a flight plan, the destination FBO is part of the plan. They have to buy fuel and there are choices with respect to which FBO they select. Whereas the pilots may spend extended time at the FBOs facility, the passengers generally spend very little time there. However, the few minutes the passenger does spend there are critical to the pilots success.

I saw Texas Jet employees literally throwing out a red carpet for the passengers to step on. This is going on while the pilot is checking gauges and shutting things down. The pilot chose Texas Jet and gets the credit for the red-carpet treatment, while taking care of matters in the cockpit. It is a special touch, and excellent service. Reed says, The pilots want to know when they pull up on our ramp that we will take care of the boss in the back of the airplane. We will handle every request with a smile.

Texas Jet arranges for the ground transportation to pick passengers up right at plane side and, if they need food on the airplane, that is handled too. While the passengers are taking care of business or social obligations in Fort Worth, the pilots have a place at Texas Jet to sleep, work out, eat, relax, visit with other pilots, watch TV, send e-mails, check the weather, and work on flight plans.

The day I was there, it was cold outside, but the pilots received a warm welcome. There were freshly baked cookies and hot apple cider in the lobby to make them feel at home. Did your mother ever have cookies for you when you came home from school? When you opened the door, did you smell the sweetness in the air before you saw the cookies? Reed understands that pilots have to spend a lot of time away from their families and his goal is to make Texas Jet an extended family for every pilot who buys fuel from him.

Also, there are always fresh apples in a bowl at Texas Jet. They look good, they smell good, they taste good, and they are good for you. This brings up the old adage that my mom used to repeat, An apple a day keeps the doctor away. There is a little child inside all of us and, without smothering, great companies find ways to mother their customers. At Texas Jet, employees ask the pilots simple questions like, How is your day going? By being genuinely interested in their customers as people, not just as pilots who buy fuel, the Texas Jet team turns their customers into friends and family.

PRICE IT HIGH

Excellence pays. Reed charges more for fuel than his competitors, and at the same time he sells two-thirds of all the fuel purchased in his market. Texas Jet recognizes what many small business owners learn the hard way, that having the lowest price and building a stable, long-lasting company can be opposing goals. Reed says, It took me a while to realize that Ive got to charge a fair price for the fuel I sell. I stopped letting myself get beat up by people that would say, Boy, I got fuel just the other day thats 30 cents cheaper than what youre selling it. Ive got to make a margin so I can keep the best people here and so I can reinvest in the business.

In addition to the red carpet, apples, hot apple cider, and cookies, Texas Jet provides covered parking, crew cars, so the pilots dont have to rent a car if they want to leave Meacham Field, air-conditioning units to keep the inside of the planes cool while they are on the ground in the hot Texas sun, the snooze room, the TV room, work-out equipment with showers, and an office with Internet access. All of these facilities and services increase the costs for Texas Jet, but they also justify the higher cost of fuel and provide reasons for the customers to return. They provide competitive advantages that increase the value of Texas Jets products and services.

There are 4000 fixed-base operators in the United States, and Texas Jet has been in the top 10 over and over again. Reed is too humble to say that he cant learn from others who run FBOs, but when you are the best in your own field, you have to go outside of it for inspiration. Reed now looks to the hospitality industry for service-improvement ideas. He wants to know how a five-star hotel and a white-tablecloth restaurant take care of customers. He has learned that getting to the top was hard, but staying at the top is the greater challenge.

Case Analysis

1. What is an FBO and who are its customers?

2. What makes Texas Jet special?

3. Why has Texas Jet won so much recognition?

4. What is the Texas Jet pricing strategy?

5. Does Texas Jet think of itself as a fueling station?

Case prepared by Hattie Bryant, creator ofSmall Business School, the television series made for PBS and Voice of America, http://SmallBusinessSchool.org.

Lab Exercise

Instructions

Read the case study

Case StudyTexas JetPremium Pricing for Premium Service

LEAD WITH SERVICE AND TURN TIME INTO AN ASSET

found in Chapter 8, pages 206 and 207 of your textbook, and answer the five (5) Case Analysis questions.

Case Analysis

1.What is an FBO and who are its customers?

2.What makes Texas Jet special?

3.Why has Texas Jet won so much recognition?

4.What is the Texas Jet pricing strategy?

5.Does Texas Jet think of itself as a fueling station?