Customer Relationship Management Drives Airline Biz

<B> Customer Relationship Management Drives Airline Biz</B>

As airline executives focus on establishing strategic alliances, marketing executives are redesigning their customer relationship management (CRM) tools and programs. They are faced not only with the challenge of melding the two cultures of the airlines into a seamless journey for their passenger, but also the challenge of empowering their staff with the training and information required to ensure passenger satisfaction. It used to be that we could measure marketing's success by just counting how many passengers were on a flight, what share of the market they had captured, total enrollment in the frequent flyer program or the number of frequent flyer program members who qualified for 'executive' status. But today, in the new environment where passenger value matters most, these numbers fall short of the mark.

The airline industry has long argued that safety record, image, price and flight convenience have driven passenger behavior. Many had attempted, and some were even briefly successful, in distinguishing their airline from another. Many are slowing relearning what they already knew but regrettably had forgotten: The passenger's experience at the point of interface regardless of the distribution channel is the ultimate determining factor. The shifting models of reservation sales traffic, airport point-of-sale ticketing terminals, travel agency consolidation, frequent flyer programs, discount airlines, corporate travel policies, Internet Web sites and now Internet travel auction sites have all helped to obscure this truth.

United Airlines did not forget what drives its passenger's behavior. In 1982, each of United's 8,400 management employees participated in 'Adopt a Premier Executive Traveler.' The Premier Executive Travelers are the members of United's frequent traveler program who have logged significant miles with the carrier. United had calculated that its Premier Executive frequent travelers accounted for $2 billion in annual revenue.

Each employee telephoned his or her assigned customer, introduced himself or herself, thanked him or her for choosing United and explained that the employees of United Airlines appreciated his or her business. The message was simple, "We will continue to work hard for your business."

On the opposite end of the spectrum is the experience we more often hear travelers tell: "When I made my reservation, I had an aisle seat, when I checked in at the gate they gave me a center seat!" Or how about, "I wait in line for 30 minutes and the agent tells me I lost my seat because I should have checked in 10 minutes ago." My favorite is, "We waited at the gate for 30 minutes past the scheduled departure time until they made an announcement. Meanwhile, I lost the opportunity to get on another flight. Now, the next available flight is not until this afternoon."

The reason so many airlines struggle with CRM metrics is confusing. Airlines collect name, address and often other valuable personal information from each and every passenger. Recorded in their passenger name record is where they are flying to and how much they were willing to pay to get there. This information is stored in sophisticated computer systems, yet often the information is not analyzed properly to assess the true value of the passenger. The airline is sophisticated enough to capture the data but it is often used for internal planning only. If used to focus marketing efforts, few dollars would be wasted on trying to attract a low-value passenger, and the proper amount would be spent on the retention and attraction of valuable passengers. It is painfully obvious that few airlines use this captured data to empower those who have direct contact with the passenger.

Air travel is a repeat-purchase service. The frequency and city-pair market demanded by any single passenger can vary considerably. Yet each passenger on a flight has the potential to be a very valuable passenger to the airline. Some are very valuable passengers and yet they often are treated no differently than the occasional traveler. Others, although frequent travelers, may no longer have an interest in the markets an airline serves. How do airport agents or inflight staff tell the difference?


<B>Caution: Perishable Commodity</B>

Air travel is a commodity product--a highly perishable commodity, for once the door closes and the flight leaves the gate, there is no opportunity to sell the remaining seats on that flight for any price. As a commodity product, it is very difficult to rely entirely on product or service differentiation to get customers to prefer one airline seat over another. As a commodity, attracting and retaining valuable passengers is not just a lofty goal but rather a key to survival. How valuable is that frequent flyer? How much should one spend to get repeat business?

Many organizations often believe it will take massive changes to their information systems to begin gathering such measurements, but routinely the technology already exists and the raw data is gathered easily. Often it is configured for supporting a marketing planning function and typically there is a data expert on staff eagerly available to extract and compile the data. The key, however, is the application of the proper tools to put that data to work.

And it is not enough for management to begin managing according to these new employee behavior measures and their impact on passenger behavior. Many of the reporting systems installed today, redesigned to provide better, more immediate information, could be an invaluable source of feedback for employees. Feedback must be expanded, however, from a process of simply reporting results to reporting employee activity as well. The reporting should allow employees to "look in the mirror" and determine how well they are doing and where they can improve.

Here is the challenge for most airlines: information is power, and letting passenger service agents see information before management has the chance to view it is not a common practice. Imagine employees with customer contact, equipped with enough information to make behavioral changes that will bring the desired results. It would include metrics on how efficiently an employee's time is being spent, which passengers have traveled on which city pairs and what are the stated or implied needs of particular passengers. Imagine the value of having information like this at a reservation agent's terminal. Imagine the coaching opportunities. Imagine the efficiency improvements. Imagine how much better the organization would see its resources allocated against the best passenger potential. Imagine the profitability potential.

It's the airline's passenger service representatives who can best judge how to serve the call into the reservation office or the passengers who stand before them in the airport.

The access to accurate, relevant information allows employees with customer contact to use their time better, one of the most valuable assets of any airline. Remember airline passengers are demanding. Many have limited tolerance for dealing with airline reservation or airport agents who are unable to answer their questions. The more information employees can access to shape the substance and quality of a passenger contact, the better the chances for a successful and profitable relationship. Employees can focus on the right passengers and, instead of giving away time, allocate it where it creates the most value.

Unfortunately, many airlines face a contradiction here. They say they want their agents to understand the importance of profit to the airline, but when it comes down to it, they are unwilling to trust those employees--the ones who best can build the right relationships and deliver real value within them--with basic passenger information. And when they do arm them with the information there is usually a lack of consistency in the way the information is used.

A few airlines are using the following metrics to enable themselves to assign values to employee skills and to how skills influence passenger value:

<B>Targeting:</B> A key metric is how well employees target the critical passenger needs in their markets. This data can be gathered through existing reporting systems, including those that keep tabs on employee-passenger interactions.

<B>Tactics:</B> How many opportunities employees create to maximize the value of passenger interactions is another key metric. How is the passenger approached, in terms of time, place, manner and distribution channel? How effective is the Web site? Which passengers go through a travel agent and why? How effective is the opening of a new market? How many new passengers attended? How many of these new passengers are now members of the frequent traveler program?

<B>Professional Development:</B> Human resources systems are a useful source and often can be configured to keep tabs on training, seminars and continuing education units absorbed by each employee. As the target and tactic metrics reveal gaps, management can identify specific professional development needs.

<B>Routines:</B> These are best measured in terms of an employee's use of time, especially time spent with passengers. Many of the tracking systems in place in the airline reservation systems today can be accommodated to measure the quality and sophistication of employee routines.

<B>Rewards:</B> Likewise, incentive and reward systems can be adapted to reward activities that drive value, not just volume. Reducing the cost of servicing low-value passengers. The metrics should include both the leading and lagging indicators.

If front-line employees have the right information and skills, they will become committed to bringing value. And if the airline is committed to sustaining passenger relationships, it is creating measurement that identifies changes in passenger value over time, ensuring the continued value of those relationships. The linkage between front-line employees and passenger profitability is clear.

<I>Debbie St. Germain is vice president of travel and transportation markets for ActionSystems in Dallas, Texas.