In 1999, my first assignment at JPMorgan was to develop a “soft-dollar” system and deploy it in their New York office. It was a one-man-army project. During my interaction with our client, I cracked a joke as well: how could a dollar become hard or soft? My customer patiently explained the difference between soft dollar and hard dollar!
Suppose a fund manager regularly gives J.P. Morgan a large trading business. J.P. Morgan earns brokerage commission when it executes those trades. In addition to execution, J.P. Morgan may provide the fund manager with useful services, such as equity research and analyst reports. The fund manager does not write a separate cheque for those research services. Their value is effectively supported through the brokerage commissions generated by the trading relationship. That is the soft-dollar concept.
If I have to relate this to our daily life, imagine that you regularly buy groceries from one store. As a large customer, you also receive free home delivery and access to special offers. You are paying for groceries, but some additional services are included in the overall relationship.
Groceries = Trade execution (Service)
Store payment = Brokerage commission (Hard dollar)
Free delivery/special benefits = Research and market information (Soft dollar)
Today, why am I suddenly talking about this?
BLR Airport is trying to move from “we operate an airport” to “we manage your complete travel experience.” Ideally, it is Business Model Innovation or Service Innovation.
Traditional model: Home → Taxi → Airport → Check-in → Security → Lounge → Gate
Proposed model: Wake-up → Pickup → Baggage → Check-in → Transport → Airport Assistance → Food/Lounge → Gate → Arrival Baggage Pick-up → Assist you till you move to another car at the destination.
Interesting, right?
However, my question to BLR Airport is: how much is offered in hard dollars and how much in soft dollars?
To date, we have seen the airport as a place where flights depart! BLR Airport is transforming from an airport into a platform managing the passenger’s complete journey!
One proposal to bring the soft-dollar concept to BLR Airport could be as follows:
Traditional Loyalty Program: Spend → Points → Free Flight
You could have: Economic relationship → Soft-dollar/service credits → Frictionless journey
which covers: Home → Car → Baggage → Terminal → Security → Food → Lounge → Gate → Destination
Interestingly, one of my startup-founder friends, Sree Sirugudi, founded Libero Health. They wanted to bring a similar concept to BLR Airport into Health Services in Andhra! Problem validation is now done for them!!
In India, we have been running commission-agent systems for ages without terming them as soft-dollar systems, but we never marketed and packaged them well.
Time to popularize our old concepts with new marketing philosophies!
Ravi Saripalle
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