LAKE BUENA VISTA, FL–“Our goal this year is we want to make a buck. We want to make a dollar.”
Don't take Kelly Cook's words literally, but it's understandable given the industry she's in: airlines. Director of customer technologies at Continental Airlines, Cook was in this Orlando suburb to stress the data warehouse's role in recognizing and meeting customer needs.
“Integrated data is the foundation for our new successes with customers and profitability,” Cook told attendees yesterday at the 2005 Annual Teradata Partners User Group Conference and Expo.
The Houston-based executive recommended extending the role of technology in the customer relationship using cross-organizational data. She also offered tips on how to use data to drive business.
Her first case study was based on value-based customer recognition. In the old process for Continental's OnePass loyalty program, customer information was stored in 45 separate data marts. Customer communication and service were aligned to volume-based, not value-based, metrics. Not surprisingly, the airline was unable to measure OnePass' benefits.
Using Teradata's data warehouse, Continental's new process hinged its value on mathematical models. Data were integrated from marketing, revenue and operational sources. Customer communications and loyalty improved as a result. The company also added the ability to test and measure successes and failures.
Cook cited three key results from this changed approach. Continental's premium revenue now is 113.5 percent of the industry. The company posts an attrition rate of only 2 percent of its customers, mostly losing those passengers to a relocation or job loss. And bringing such database marketing functions inhouse cut $2 million in outsourcing costs.
“Understand a customer's value from a variety of perspectives,” Cook said.
For an airline, for instance, the measure should not simply be how many miles a customer flies.
Under the old system, Continental didn't know who its best customers were. The assumption was simple. Elite levels — platinum versus gold or silver in the OnePass program — correlate to value. Quite simply, a platinum member got the best treatment, regardless of factors other than miles flown.
But a value-based integrated decision support approach changed that.
Now the criteria are based on average yield per revenue generate by the customer. Continental's yardstick is revenue per available seat model.
In fact, Continental was shocked when the new system was implemented.
In many cases, it found that silver OnePass members held the first and second customer ranks by average yield. Gold members came in third and fifth, and platinum only fourth and sixth.
Cook's second case study touted the benefits of a value-based service recovery approach.
The old process was based on fragmented customer compensation. Continental made many compensation payments for a single service event that resulted in an unhappy customer. The squeaky wheel law was in effect: low-value customers lead to high compensation. And the compensation paid was $300 per incident.
A switch to real-time service event knowledge made a world of difference.
The company set compensation rules commensurate with value. Front-line executives like flight attendants gained valuable knowledge about fliers. Data shared included name, elite level in OnePass, model score, last service incident and value indicator. Access to information was made instantaneous.
A major change in strategy was to communicate with customers when meaningful — 48 hours — and not three months later, as many organizations do.
The payoff was huge. Compensation paid was down more than a third. There was an 8 percent increase in spend with customers receiving regular and proactive communications. And the take rate on Presidents Club membership offers was 30 percent. Continental ran a 36-month test to test its proactive communications theory. One group of customers received a letter 48 hours after an incident occurred that made the Continental flying experience less satisfactory. Inside was a Presidents Club pass, some other incentive or simply an apology note.
“All we want is to let the customers know we care,” Cook said. The other group in the test didn't get the same treatment. So when Continental asked them about their perceptions of how the airline treated them, the answer was obvious. Those with the letter were happier than those without.
“Customers responded to proactive service recovery,” Cook said. Her third case dwelled on value-based service, particularly right-time in field. Continental previously interacted with customers based on limited insight. This was because of the lack of relevant information in the field. So, under the old order, service was based on fare value at the time of travel instead of the customer's history with Continental. Also, the airline found customers were frustrated with the inconsistent service delivered.
Customer interaction improved with the new process. New measures were created based on the customer's history and given to airline executives dealing directly with them. The complete net and gross yield and contribution by customer are known. Moreover, the airline now can modify marketing programs based on different value segments and events. The new service standard was based on customer value. Perhaps most important was the improved customer loyalty through a “They know me” emotional bond.
As a result, there was a service “roll down” to all customers. And elite and partner revenue jumped 15 percent.
Cook's example about the emotional bond via the service recovery is an idea waiting for industry-wide adoption. A well-informed Continental employee found out that a highly loyal customer was on board a particular flight. Unfortunately, the airline had misplaced her bag on a flight in the previous year. So the enterprising employee went inside the belly of the plane and checked for the bag. He then informed the passenger that her bag was on the flight. Imagine her delight.
But that emotional tying of customer to brand was only possible because Continental fed key data to its front-line staff. Again, an integrated data warehouse brought this amazing fact to life: 40 percent of customers who were most valuable to Continental were not members of its OnePass loyalty program. So its product differentiation was not commensurate with a customer's value.
The next task was to expand product differentiation. Both elite members and non-OnePass high-yield customers were targeted. Continental offered differentiated products to selected key customers.
Data to guide actions at airports led to offer best customers priority access via check-in, screening, boarding and upgrades, if seats were open.
Listening to employees was the subject of Cook's next case study. Continental has a name for it: value-based operations. “Employees are a wealth of information as to how to make things happen,” Cook said.
Continental was trying to figure out how to cater to the drink preferences of its passengers without extra paperwork on the plane or elsewhere. This issue was raised with some employees. Up went one hand.
A flight attendant in the first-class section knew his passengers' preferences, especially if they were in the Presidents Club. So all Continental had to do was to mine its loyalty program database for customer drinking preferences.
Continental's Teradata warehouse stores 85 percent of all its data, Cook said. Plugged in on the one side are airport services, reservations, customer care, inflight, operations, and marketing and sales. Also feeding in are distribution and planning, alliances, pricing and revenue management, planning and scheduling, flight profitability and revenue accounting. Linked to that data warehouse are technology and the operational data store.
But it all boils down to how that data is used. For example, Continental generates a daily report that informs its airport staff about any high-value customers flying on a given day. This way the front-line employees are aware of the customer's previous experiences with the airline and take actions in that context.
Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters . Mickey Alam Khan is a guest of Teradata at the conference.