Southwest's "Credit Cards Only" Policy Increases Sales By 8%
Here's the real reason for an airline to switch to credit-card-only sales on board its flights: people spend more. Southwest Airlines' customer service veep, Daryl Krause, told the Dallas Morning News that "since Southwest began accept credit cards (and no longer taking cash) on Sept. 9, its drink sales are up about 8 percent." Since in general "the goal was one more drink sale per flight," we wonder whether that wasn't the real reason for going cashless all along.
"One more drink per flight = $4 million a year" [Airline Biz Blog | Dallas Morning News] (Thanks to Paul!)
(Photo: skyfaller)
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This is a classic case of return on investment.
Until now, the expense of having credit card readers in every single flight outweighed the money it would save from the flight attendants pocketing money, and having to actually account for the money.
Now, things are cheaper, and they will be able to earn more money since the cost of the credit card machines are cheaper.
plus the fact the flight attendants don't have to transport and collect the cash at the end of each flight.
Cash=work.
Cash has to be kept in a safe location.
Money must be counted over and over again each time it changes hands; people have to fill out silly reports to guarantee chain of custody.
No body likes to make deposits.
Money isn't useful until it can be converted into a checking account balance.
I own a restaurant. If we can go cashless, it would save gobs of time and expense.
As casinos learned long ago, the more you abstract the cash, the more people spend. That's what somewhat irked me about those Visa Debit card ads that made consumers look stoopid for using horse-n-buggy, dirty moolah.
Horse-n-buggy, dirty moolah that you actually thought twice about as you slide it out of your wallet.
(Gawds: are my grandkids going to snicker at me for not using the holographic money cubes of the future?)
Makes sense. We live in a time where fewer and fewer people cary cash and people that use credit/debit cards generaly not to think as much about what they spend then people who pay with cash.
I fly fairly regularly. The vast majority of it is on united who only takes cash. I think I've gotten one drink ever on United. Jet Blue on the other hand only takes CC like SW and I probably get at least one if not two drinks everytime I fly with them.
Its for the exact reasons I started with. I don't carry a lot of cash and if I were to have cash with me on a United flight I'd probably look in the wallet, realize its my last fiver and just get a coke. JetBlue doesn't even charge me at the time, they wait for the end of the flight. That adds to it because that $5 beer that I didn't really have to think about paying for since I just put it on a card make the idea of a second $5 beer all the more acceptable (and even appealing).
i spend way more now on flights then I used to... probably because I fly for business from time to time now, and my wife isn't there to tell me I cannot have another drink nor do I need to watch another episode of Flight of the Conchords...
Another reason, I'm sure, is that the airlines usually require exact change for the onboard services. If I don't have the exact change, I wouldn't buy what they're offering. With a credit card, that wouldn't be an issue.
@Trai_Dep: Exactly, which is why video arcades used tokens when I was young (Showbiz Pizza-FTW!) and have recently switched to cards/points at adult arcades like Dave and Busters.
A credit card is an adult arcade token meant to abstract the fact that you're spending cash.
I spend less now. No way am I handing over my card info to a portable machine. That's just trouble waiting to happen.
Southwest Airlines...another force fueling the American credit crunch.
They're not the only ones. Earlier this summer, Alaska Airlines made a similar move by going credit card only with inflight drinks, but they also offered 10-1 mileage if you pay with their airline credit card. I think it's a brilliant move, and it's already persuaded me to buy a drink when I wouldn't have before.
@jonworld: Not if you are doing it for convenience and pay off the bill in full. I am all for the free use of someone else's money.
@reighvin: That would be reason #2, after reducing the expense of having to actually handle, store, count, and re-count cash. And then count it again.
Am I the only silly person that believes that the writing on Federal Reserve notes that states "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE" still actually means something?
Duh,
I travel on my works credit card. My cash is mine. I usually can't be bother to fill out an expense report for a $2.00 drink in cash, nor do I wish to part with my cash for a $2.00 coke.
I'm with others, people who hold cash watch their spending and (in general) don't when using credit.
Yay! Make people buy stuff they don't need on credit, and business will be booming! Our economy will be saved!
Oh, wait...
@reighvin: Yup, by going to a cashless sytem, they are able to better keep control over drink inventory, as well as income. They can match up drinks to credit card slips (and any free southwest drink passes, if they do those).
No flight attendants pocketing cash or giving away free booze.
I can understand why they would want to accept only credit cards, but I don't think they're allowed to... cash is legal tender, read it.
Liquor is one thing, but what about the food?
I didn't think Southwest sold food. I thought buy on board was for alcohol/premium drinks only.
@graceless: "Legal tender for all debts", not necessarily as pre-payment. You could try taking a drink and then paying for it which makes it a debt, but that's also not legal.
@ironchef: When your restaurant does go cashless, I look forward to be the first customer to charge only a $3 drink on my World Elite Mastercard
*nefarious laugh*
Just kidding. I'm not that evil... yet.
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Agreed. Also, I think it's more of a pleasant surprise to Southwest that people are spending more, since they don't see cash physically fleeing their hands.
This only decreases theft of cash from the company and will increase risk of credit card fraud...
Besides, they said sales were up, not profits. Each credit card transaction costs them money.
Credit cards also means fewer requests for change. I swear every flight I'm on with Southwest there's a request for change of a twenty. FOrtunately, it's just one request...
Seems fairly logical since customers won't be searching all over their wallets and purses for money. When you charge your card, it's more tempting to just go for that extra drink. You get the buyers remorse after you get your bill when it's too late.
Handling cash is a lot of work; purchasing with credit cards is much easier, and more convenient. I'm surprised it's only 8%.
But there's nothing nefarious here about credit cards. It's just convenience.
Credit card transactions likely cost them, at most, 2-3% of revenue (probably less). If they're taking in $100 in cash per flight (just a guess, probably high), and spending 5 minutes of a $20/hr flight attendant to count and log it (which is only part of the cost, in addition to having the interest costs of floating cash for change, securing the cash, etc), that's $2-3 in credit card costs vs. $3.33 in time spent counting, just for the FA.
@azntg: 30% of the checks are cash. So it's a reality to keep the cash train going.
But it is sure a royal pain to maintain a safe for night deposits every night and do cash reports.
@headhot: Ding, ding, ding! This is it for me, too. I feel like a cheapass putting a $5 cash expenditure on my expense report, but if I charge it, it's there automatically.
@Trai_Dep:
I think this depends on the person. I'm the opposite way. I use my credit card for nearly everything, and I check the balance online regularly, and know that the amount on the total line is going to be coming out of my checking account come bill time.
Cash, on the other hand, I don't really track or account for when I look at how much money I have. I tend to keep a few hundred bucks on hand for auctions, yard sales, ect where I can't use a credit card, but I don't really think about how much I have, so I don't feel as bad spending it.
I said this in the comments to the original story - the only reason to switch to all plastic is that people will spend more.
@DrJimmy: While using credit cards does mean less handling of cash, those credit card slips have to be accounted for also.
SW knows that people spend more when using plastic.
I don't drink on flights.
@jamar0303: That's not the answer as to why the airline is allowed to only take CCs. The answer is here: [www.ustreas.gov]
Basically, the rule is that cash can be used to pay all debts, but there is no rule that says that a business must accept cash only.
I don't see how they made an increase, every flight I've been on they come by once with the drink try and then it's impossible to find anyone to bring you a drink after that and if you hit the call button they act like you're a burden
Or how about the flight attendants can't pocket some of the cash for themselves, meaning they are getting all the money they were supposed to be getting in the first place.