No industry today faces a greater challenge in the area of fostering lasting, profitable customer relationships than the airline industry.
Its traditional business model is built upon selling a fixed inventory source — airline seats. Seasonal and economic fluctuations have traditionally driven passenger demand, capital requirements and fuel costs. Recent concerns over security and a loss of consumer confidence not only add a new dimension to forecasting demand, but are pushing the airlines to change their business model to survive.
The economic engine of an airline is its reservation system. Using customer relationship management systems and managed services, this critical revenue engine can be transformed from an internally focused, product-based system to a customer-centric, service-based system.
By focusing on the complete customer life cycle (engage, transact, fulfill and service) or “total customer experience” and by implementing CRM strategies across customer touch points enterprise-wide, airlines will gain a comprehensive view of their customers and be able to deliver innovative, differentiated and personalized services. Through a highly secure, interoperable environment, taking a CRM approach will result in increased customer acquisition, retention, lifetime value and operational efficiency.
Critical Need for Enterprise CRM
Following the unprecedented three-day shutdown of the national air transportation system after the terrorist attacks Sept. 11, and last month's airliner crash in Queens, New York, the nation's airlines are suffering through drastically reduced capacity. Most airlines require greater than 70 percent load factors to break even. As a result of these tragedies, airlines have reduced capacity by almost 20 percent with airline load factors running from 30 percent to 50 percent. Airlines based outside the United States also are feeling the effect and are reacting accordingly.
One of the few positive current economic factors preventing an overall collapse is the relatively cheap cost of crude oil, which has helped some airline stocks rebound recently. As business and leisure passengers weigh the pros and cons of traveling, resulting in shrinking demand, there is a critical need for enterprise CRM to provide the airlines with a 360-degree view of their most valuable customers, both current and future.
According to most industry analysts, today's airline systems are functionally siloed and do not allow or enable a single, enterprise-wide view of their customers. This has resulted in lackluster sales, marketing and service delivery results. Airlines are notorious for their poor tracking of customer patterns, such as trips to the airline lounge or frequent traveler buying patterns. Personalization efforts typically are designed around their services, not around customer needs. Opportunities exist to synchronize between multiple channels, reduce cycle times and integrate knowledge management systems.
Moving Toward an Integrated Framework
Enterprise CRM enables the movement from today's siloed, technology-constrained systems into a technology-enabled, integrated, enterprise system. This transformation, based on the total customer experience, involves integrating sales, marketing, fulfillment and customer service systems across all customer interaction points and across the sales process. Serviced by an integrated, robust data warehouse, the result will be a relative transparency between an airline's CRM system and its reservation system — an “intelligent agent” system.
The benefits of this approach to managing airline customer relationships include:
· Seamless integration of customer touch points across the airline.
· A comprehensive view of customers, their travel purchasing patterns, history and preferences, regardless of interaction channel.
· Lower operating expenses by reducing the cost of customer interaction channels and increased organization effectiveness.
· Enhancement, integration and automation of manual and/or disparate front-office and back-office processes, generating operational efficiencies.
· A transformation of the traditional cost center into a revenue generating center through service cross-sell and upsell.
· Increased customer acquisition, retention and lifetime value through an expanded revenue base and improved customer loyalty.
Looking toward the future, airline reservation systems, passenger security systems and data security systems will be integrated and consolidated to enable universal passenger identification. The ability to quickly identify, assess and disseminate passenger information will drive the future of airline security and also will drive expanded travel services.
This data will be integrated with customer buying patterns and personalized service offers to provide a differentiated customer travel experience. Digital workflow systems will enable seamless interoperability across the customer experience value chain, linking marketing, distribution, travel and reconciliation business processes between airline segments and service providers.
Carriers that can mobilize their assets and resources, and partner effectively, will seize market-leading positions. Industry consolidation is inevitable, and the surviving airlines will emerge stronger, with leaner organizations and fewer assets, and demonstrate a willingness to invest strategically to recapture their market positions.