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Flying the (Not-So) Friendly Skies

  • September 03 1999, 1:00am EDT
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Putting CRM on the in-flight menu would put a sweet taste in my mouth - and give an airline a larger share of my wallet.

Last month we talked about a company that had poor customer relationships and how a database marketing system focused on proactively extending customer relationships would have been beneficial. Three components were key to our suggested solution:

  1. Data hygiene software to identify individual customers and groups of customers;
  2. Integrated customer database to provide a complete view of the customer: integration between the analytical and operational systems, and;
  3. Campaign management to turn analysis into promotions and offers.

Today's Flight Plan and Disclaimer

Now we'll take a look at these issues again in an industry that is typically not considered customer-centric: the airline industry. We'll look at how to use information technology and business processes to improve airline-passenger relationships. And we'll focus specifically on how the airline industry could better serve business travelers. But before I get started, I want to make this point very clear: I am not an airline industry expert or analyst, I am just a customer. These are simply some of my perceptions and experiences as a traveler. I don't know anything about FCC regulations, air traffic control or pricing guidelines. Basically, I am using the airline industry to show how consumer perception affects customer loyalty and how technology may be used to help. These principles apply whether or not my examples are under the airlines' control.

Profiling My Travel Habits

Let's sketch out my travel profile and then discuss how the airlines currently meet (or don't meet) my needs. Here are some of my attributes:

  • I'm a typical traveler (although I happen to be a little shorter than average)
  • Married (happily)
  • Business traveler (not always as happy)
  • Technology enabled
  • Chicago home address
  • Chicago business address
  • Member of several frequent flier programs.

Now let's look at some of my transactional data. This data sketches out my purchasing behavior and gives insight into how I use airlines for my business trips.

  • Most flights originate from Chicago and end in another Midwestern city. Other occasional destinations include Rhode Island, Orlando, Tampa Bay and San Francisco.
  • Typically, there are multiple flights a week.
  • Flights are frequently delayed, rescheduled, canceled or changed.
  • In many circumstances, a day trip is scheduled. At most, a one-night stay.
  • Many reservations are made only one or two days before the flight.
  • The majority of flights are scheduled via the Internet with a small percentage booked through a travel agent.
  • During flights home, multiple drink coupons are utilized whenever possible.

From this analysis, we can understand who I am and what kind of services I am using. Combining the data and behavior analysis will tell us why I am using these services. In this example, we will try to link airline business functions to the data described above. In many cases, this exercise allows us to see the gaps in the service offerings of an organization.

Basically, we're looking for behavior by the customer that is not directly supported by a business process or product/service offering of the company. These gaps define new systems and services that could be tailored to the specific needs and wants of their customers. Tailored services lead to customer loyalty. Let's look at how my personal attributes map to the characteristics our friends at the airlines are targeting.

More About Me

As a business traveler, on-time flights are of the utmost importance to me. I routinely need to meet with clients, prospects, business partners, recruits and employees. These meetings are usually difficult to schedule. The last thing I want to do is to try to reschedule meetings with a busy executive; missing a meeting with the vice president of marketing is not an option.

The small percentage of on-time flights are probably the basis for most bad relationships between airlines and business travelers. Southwest Airlines, however, consistently markets itself as the leader in on-time flights and this fact is supported by my experience. I tend to chuckle when the flight attendants emphatically apologize for occasionally taking off a whopping 10 minutes late. The typical reward for such delinquency is free beer. Smart move, Southwest!

Other airlines' on-time percentage is not nearly as stable. Using a different airline, I recently missed two meetings with prospective clients. One of these clients used my tardiness to their advantage by squeezing in an interview with one of my competitors. I was late and my competition benefited. Bad move, different airline.

Now when I use this "other" airline, I always fly the night before to assure my timely attendance to meetings. As a business consultant, time not spent at a client site or in the office is wasted time and money. Flying to my destination the night before increases my sales cost and company expenses and decreases my productivity. (As a married individual, this keeps me on the road and away from home.) Bad, bad airline.

An Airline's Unwillingness to be Flexible

Last minute flight reservations and flexible itineraries are necessary in business today, but the price is lofty. For most of the major airlines, a last-minute flight reservation (last minute defined as "less than two weeks in advance") is much more expensive than the regular fare. Most business trips do not include a weekend stay, so the fares are even higher. What if you need to make a change to the itinerary? Forget it. Most airlines have a penalty for the change and if there were any discounts on the original ticket, they are now forfeited to a full price fare.

When a client calls and wants to talk about a serious issue face-to- face, I am on a plane immediately. If I'm in the middle of a trip, I'll make changes to meet the needs of my customers - no matter the cost. I'm doing everything I can for my customer. I only wish the airlines would do the same for me.

Do They Have Me Where They Want Me?

The key is that the airline industry has me. I'm not going to drive to my business appointments. I end up paying high prices and praying that the flight touches down on time. But the question is: which airline has me? The answer is: none of them. Sure, it's better for me to fly one of my frequent flier member airlines, but I won't overpay for the privilege. Our CFO won't accept any excuse for racking up enormous expenses, whether or not I am working toward a free frequent-flier trip to Hawaii.

Playing Games at 30,000 Feet

The end result is that "relationships" between airlines and their customers really don't exist. It's more of an adversarial game: Can the business traveler break the rules and get to their destination without robbing the bank? I frequently find myself comparing flying strategies with my fellow passengers, learning about newly discovered loopholes and asking my neighbor in seat 12D if he can break a $20 because the flight attendant is demanding exact change for beverages.

The Solution?

CRM as Co- Pilot

The idea of customer relationship management (CRM) is to identify customers' needs and tailor services and products to them. Like most CRM initiatives, the first stop for the airlines should be customer research - learning in detail how and why customers behave the way they do. The goal is to increase customer loyalty by becoming a business partner, not an adversary.

An Airline How-To Guide

To define customer behavior into segments, an airline marketing analyst needs a robust database that provides a single view of the customer. This database can be used to:

  • Identify the business traveler. This may take some creative work. I know when I book a flight, I divulge no information on the reason for my travel - and most airlines don't even ask. Statistical tools may help profile and separate business and leisure trips. Certain enhancements to Web sites may increase the amount of information a passenger will divulge about his travel plans.
  • Segment the business traveler by behavior. Some travelers may have an ad hoc schedule with limited stay in their destination. Some may repeatedly go to the same place and stay for the same number of days. Some may travel once a week, while others may travel more often. Each type of traveler will respond differently to incentives.
  • Develop flying loyalty information. Through purchased data or surveys, the database needs to provide a ballpark on the share of wallet they may have with each customer. How many times do they use a different airline and why? This information may also be captured on Web sites or maybe at the gate.

  • Enterprise the business traveler. Enterprising is analogous to householding for consumers. Enterprising helps analysts understand how organizations are using their service as well as the individual. It's possible that individually each employee of a company may not rank as an outstanding customer, but as a firm, the compounded effect may be an incredibly good (i.e., profitable) customer. Imagine locking in an entire organization as a loyal customer instead of just a few scattered individuals; this task is the role of data hygiene software.
  • Build a lifetime value model based on the current status of the customer. Add a simulation application that shows how the lifetime value improves with a larger share of wallet. Models can simulate the effect of loyalty and certain customers should be more profitable over time with the right incentives.

Keeping Customers

Once customers are segmented and the lifetime value calculated, develop a campaign management application that shows customers they are special travelers by providing them with offers they can't refuse. How do these sound?

  1. As points, round trips or miles accumulate, a customer earns the right to:
    - buy last minute tickets at the two-week advance price.
    - buy daily or one night trips at the Saturday stay over price.
    - change itineraries without penalty.
    - buy refundable tickets at non-refundable prices.
  2. Partnerships with parking, ground transportation services and lodging to help with the cost of the entire trip. This offer would be especially advantageous to the traveler who repeatedly makes the same trip.
  3. If my flight is canceled or delayed, automatically e-mail my co-workers involved with my trip. This list could be created at reservation time. If I repeatedly go to the same place, this list could be saved for future reference.
  4. Credits or receiving more of the above for delayed flights.
  5. Offer these programs at the firm-wide level as well as at the individual level.

The Effect on the Consumer

These types of programs would create an incentive for me to partner with specific airlines. I know that travelers like myself would take time out to teach the airline companies about ourselves in exchange for these kinds of programs. I would gladly share my preferences on parking, hotel, business vs. leisure destinations or ground transportation requirements in exchange for some of the offers mentioned above.

Not Unique to the Airlines

Unfortunately, this situation is not specific to the airline industry. It just hits home for me. The inability to understand customer behavior is prevalent in all industries, be it business-to-business or business- to-consumer. Once organizations gather the information and do the analysis, many discover that they are not treating their high-value customers as well as they should be. In turn, their share of wallet for that customer is far lower than the overall potential. These organizations should then turn to some form of lifetime value analysis to understand how short-term deals (less current revenue) increase long-term potential of certain customer segments (if it's not too late). This is the power of customer loyalty.

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