Cost cutting and efficiency programs are critical for driving down prices and optimizing load factors. Yet have airlines lost sight of the customer?
Many airlines have pursued efficiency measures rigorously. But is it now time to reflect on the basics of better understanding customers?
In customers’ eyes, air travel is becoming a commodity. Customers base decisions on service, schedule and price. It’s particularly true with shopping engines and third party distribution.
The fifth ‘P’
To their credit, airlines creatively package their wares – bundling, unbundling, generating ancillary services and differentiating themselves in a host of ways as they break away from commoditization.
They’ve clearly exploited Marketing 1:01’s classic four ‘p’s’ of- product, promotion, price and place. The question is, what about the fifth ‘p’ –perception?
When it comes to controlling customer perception, few industries face the same degree of challenges as air transport. Air travel is sold via myriad points of distribution. Numerous variables impinge on the customer journey – such as airport and onboard conditions, delays, lost bags, security, and weather.
Other factors come into play too, like airline partners, outsourced ground handlers and even other passengers. They all feature prominently in the ‘moments of truth’ along the customer journey, where the brand promise can fail, often beyond the airline’s immediate control.
Perception = Loyalty
Good perception translates into loyalty and repeat purchase. Yet do airlines too often see loyalty as a bolt-on frequent flyer product, a profit centered adjunct to the main operation?
That would certainly help explain why savvy passengers become loyal to multiple airlines offering frequent flyer points that represent free money.
But forward thinking airlines are beginning to see loyalty as central to their mission, as a core philosophy woven into each and every facet of airline operations.
Loyalty comes from creating customer satisfaction – building an enduring relationship beyond a single sale. To earn it, airlines need to know their customers. And based on this knowledge, they need to recognize customers as individuals.
It’s a cost thing too
There’s compelling cost logic to a focus on loyalty as well. Acquiring a customer costs: estimates put it between four and ten times the cost of retaining a customer.
So it makes bottom line sense to recognize that happy customers provide the greatest potential for airline revenue generation initiatives.
Customer focus is more than just a mindset. It’s an operating standard embedded in every airline system and process. Different systems support many customer relationship activities. Those systems have varying degrees of integration and inter-operability.
Take the frequent flyer program. While it may hold valuable data, not all flyers are members. And tier level status should not be the only criteria used to drive customer-related actions.
Effective customer programs focus on a raft of criteria, such as lifetime value, profitability, frequency, social influence, past incidents and many more.
IT departments and airline passenger systems have a huge role to play in getting the know customers better. They must support enterprise needs by making passenger data and insights available across the entire business. This intelligence is the lifeblood of the systems and processes that drive customer-centric behavior.
If airlines are going to use data to respond to customer needs, they must capture and store that data, enable access to it, and make sure it’s easily usable in manual and automated processes.
That demands the integration and exchange of data between multiple systems supporting airline passenger management.
Why the hold up?
However, it’s well known that airlines’ underlying systems often hamper customer knowledge and recognition. Developed to align with organizational structures – rather than the end-to-end customer journey processing – they impose costly constraints.
For those who’ve adapted existing passenger systems to modern day requirements, the end result is disparate data sources and middleware solutions, compensating for legacy system limitations.
That means fragmented customer data across multiple systems: in the reservations profile and booking record, for example, as well as in the loyalty system and off-board profiles, such as those maintained in e-commerce platforms.
Compounding that fragmentation, marketing, sales and customer relationship management systems may well present other views of the customer’s profile and behavior.
The outcome? A disconnected view of the customer. So customer service decisions are based on limited information that’s already stale in the operating environment. Worse still, it’s available only to a limited range of airline users.
Next generation passenger systems must be designed to address the issues. Some key IT imperatives must be adhered to.
For one thing, data mustn’t be trapped. Data models need to support the golden principle of single source and holistic data shared across all systems and users that need it.
Such is the case with SITA’s own next generation Horizon passenger system – founded on making more agile use of data than was possible with siloed legacy systems.
One critical imperative among key data sets is a Customer Profile. This provides the foundation for an all-important customer affinity framework – basically a rich repository of data about each individual customer.
The profile must offer an easy, quick and secure way of creating, storing and distributing customer data throughout the entire passenger management system. And it must update from external data sources.
Typical customer data includes:
- Contact, passports and preferences as well as payment information.
- Loyalty membership data with entitlements and customer service indicators.
- Attributes, such as VIP status and relationship data – family, online social, corporate and travel agency relationships, for instance.
- Other interests pertinent to destinations and activities and potentially of value to customer service and marketing teams.
What mustn’t be overlooked is a record of customer interactions. This can include manual notes on incidents and customer communications as well as a log of automated processes. It must link with any loyalty solution and other external loyalty applications for profiling and purchase data maintained in those systems.
The ability to evaluate customer value is another imperative. In short, what’s the probability of profitability from a passenger? As with Horizon’s own Customer Value, this can provide a single figure that’s used to drive airline system processes, based on:
- The loyalty tier – taking into account past booking value stored in the loyalty system and linked to the customer profile.
- Booking history, for those customers not in a loyalty program, based on past records linked from the customer profile. It includes the current trip’s value.
- Other attributes, such as VIP status and relationships to VIPs, social influence and more. All indicators must be managed in the customer profile.
In accordance with their policies and service culture, airlines must be given the flexibility to customize customer values, with all scores stored in the customer’s profile and available to any user, system, interface or process that needs it.
This would enable, for example, the airline to recognize frequent business travelers even when they’re using discounted tickets for leisure trips.
Then there’s the imperative to share the customer profile and value data across all touchpoints, such as agent desktop, e-commerce, check-in, and mobile applications as well as other processes that need data.
It needs to be readily available for analytical and other purposes too, such as marketing. Again, Horizon’s Customer Profile follows the imperatives.
A customer profile is built for all airline passengers, not just those in the loyalty program. If airlines can associate passengers with their records – using various data fields in Customer Profile – they can build histories of non-loyalty program customers as well, including customers referred by third parties, such as airline partners and travel agencies.
That 'extra touch'
What if there’s a scenario that needs action and a front line employee needs guidance? The imperative here is for passenger systems to use ‘recommendations’ – so called because they are prompts that guide airline system users to appropriate courses of action.
This makes certain that front line staff understand airline service policies, ensuring consistency across each point of service.
So in the event of a ‘disservice’ to a highly-valued customer, what’s that ‘extra touch’ you can make to offer compensation and retain loyalty?
Recommendations must be based on business rules managed in the passenger system.
In practice, reservations or check-in agents will have access to customer information in their desktop application, including loyalty tier status and travel history.
A prompt might be triggered on the desktop as a result of past incidents or a change in status such as loyalty tier level, or other factors derived from customer data, such as a birthday, name change and new address.
A recommendation might then direct agents to compensate in line with the customer’s value. In the case of a lost bag, for instance, the system recommendation to front line staff could suggest manually issuing a voucher or upgrade. It empowers airline employees in their interactions with customers.
It works for automated processes too. A flight delay could generate a message to a mobile device or a kiosk, with advice and flight alternatives for a passenger.
The impact is profound. Processes like waitlist clearance and passenger re-accommodation can use customer value to prioritize actions among passengers, perhaps by clearing highest value customers first.
In every case, the process takes into account not only the customer’s loyalty system tier level, but also factors that contribute to customers’ overall value to the airline.
Better customer knowledge enables greater precision in offering ancillary services. Agents can be prompted to offer ground transportation to a customer flying to a given destination, for instance.
Records are maintained related to each recommendation and offer, enabling the airline to know what works best and where changes need to be made, and also to prevent making redundant offers.
Customer recognition is experienced by the traveler as personalized attention and feeling valued by the airline.
Behind the scenes, however, the design of the passenger management system plays a key role in making this happen consistently, at every interaction with the customer. SITA provides the necessary foundation for airlines to generate affinity among their customers and increase satisfaction and repeat purchase.
What's IT worth?
Despite numerous studies into the question of customer acquisition versus retention, it’s obvious that customers who feel valued by an airline will return value to the airline. But the benefits of customer knowledge and recognition go deeper, providing:
- Insights to improve the service experience and the ability to build customer relationships.
- Repeat purchasing and increased customer lifetime value, thanks to good retention levels.
- Increased yields through better segmentation in revenue management processes.
- Targeting of offers, reducing wasted efforts and improving uptake.
- Decision-making support using data analysis.
- A more consistent brand experience across various airline channels.
- Increased automation efficiency.
- The ability for airlines to better understand how to allocate resources. How many places needed on the next flight after a cancellation, for example?
- Improved merchandising by proving an understanding of how to make offers and to whom.
How important is improving the passenger experience in IT decisions?
- A high priority for 88% airlines; a low priority for only 3% airlines.
Where will airlines be applying their IT resources in the next three years?
- Customer Relationship Management (CRM) and personalization – 60% airlines; 3% had no plans.
- Personalizing the service offer in the direct channel by 2015 – 89% airlines.