Customer Relationship Management in Airlines
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Customer Relationship Management in Airlines A Revenue Management Perspective. Shankar Mishra. AGIFORS RYM Study Group, Bangkok 2001. Outline. CRM Definition & Evolution CRM Opportunity in Airline Industry Current Revenue Management View ABCs of CRM Revenue Management & ABCs of CRM

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Customer relationship management in airlines a revenue management perspective

Customer Relationship Management in Airlines

A Revenue Management Perspective

Shankar Mishra

AGIFORS RYM Study Group, Bangkok 2001


Outline

Outline

  • CRM Definition & Evolution

  • CRM Opportunity in Airline Industry

  • Current Revenue Management View

  • ABCs of CRM

  • Revenue Management & ABCs of CRM

  • The Integrated 3600 View

  • CRM Goals

  • Conclusion


Crm definition

CRM Definition

  • CRM is the adoption of customer focusedSales, Marketing and Service Processes

  • Integration of people, processes, and technologies in a collective effort to:

    • ACQUIREnew customers through effective marketing campaigns and analytics

    • BUILDcustomer value over time by understanding their travel needs enough to retain them and enhance the relationship with cross-sell, up-sell opportunity

    • CARE translates into customer retention. Must be based on informational infrastructure built on business intelligence


Crm evolution

CRM Evolution

  • First Generation - Web Presence

    • One-way relationship

    • Mostly stand-alone systems

    • Real-time flight information

    • Schedule information

  • Second Generation - Site Integration (Business Intelligence)

    • Integration with business processes & back-end systems

    • Feedback from customer profile & history


Crm evolution1

Direct Mail

~ Vendor CRM Products ~ Sabre Appl ~ Vendor non-CRM Products ~ Customer Appl ~

Enterprise Application Integration

Channels

E-Mail

Kiosk

Chat

Customer

QIK/RES

Wireless

(EAI)

CRM Evolution

  • Third Generation

    • Customer-centric models


Crm opportunities are spread across the entire travel value chain

CRM opportunities are spread across the entire travel value chain.

initiation

reservation

embarkation

conclusion

1

Idea

2

Arrangement

3

Pre-Trip

4

Experience

5

Post-Trip


Airline passenger key touchpoints

Airline/Passenger Key Touchpoints

  • Idea/ Need - Research potential destinations, travel options, travel packages

  • Arrangement - Perform shopping, booking and ticketing for travel

  • Pre-Trip - Prepare, organize and make final arrangements

  • Experience - Travel which encompasses air and ground services

  • Post-Trip - Contact to resolve issues and explore future needs


A few of the crm opportunities being provided include

A few of the CRM opportunities being provided include...

initiation

reservation

embarkation

conclusion

1

Idea

2

Arrangement

3

Pre-Trip

4

Experience

5

Post-Trip

  • Response management

  • Baggage Handling

  • Thank You campaigns

  • Traveler feedback and satisfaction

  • Event notification services

  • Flight disruption notification & re-accommodation

  • Agent Customer Handling

  • Check-in processing

  • E-mail campaigns

  • Direct Mail

  • Smart Search Technology

  • Integrated banner advertising

  • Sign-in Messages

  • Recommendation engine

  • E-mail delivery of itineraries


Crm components are classified by what part of the customer experience they touch

CRM components are classified by what part of the customer experience they touch.

Source: Gartner Group


Crm components passenger

Call Management

Personalization

Campaign Management

E-Service

E-Sales

Data Mart

Arrangement

Pre-Trip

Experience

Post-Trip

Idea

Proactive & reactive customer interactions

  • E-mail

  • Direct Mail

  • Media Ad

  • Banner Ad

  • FQTV Insert

  • Smart Search Technology

  • Res. Center

  • Web Selling

  • Agent Sign-in Messages

  • Campaigns based on market and route

  • E-mail delivery of itineraries

  • Integrated banner advertising

  • Event notification

  • E-mail campaigns

  • Event notification services

  • Flight disruption notification & re-accommodation

  • Airport Services

  • Baggage Handling

  • Agent Cust Handling

  • Web check-in

  • Response management

  • FQTV account statement

  • Baggage Handling

CRM Components & Passenger


Crm enhancing travel experience

Customer

Management

Customer

CRM Enhancing Travel Experience

Agency makes

aneducated offer

based upon traveler’s

history

Airline suggests

additional options via Sales Manager

Airline partners suggest

additional options

through Sales

Manager

Agency or traveler

checks custom inventory

Proactive

demand

stimulation

Traveler can have the

inquiry saved for later

Traveler

enters

profile

info

Traveler

buys

Traveler has

multiple,

convenient ways

to refine

process

Next trip - all

previously-learned data is

used to aid their future planning

Inventory is

updated, Sales

Manager history

updated

Traveler travels

and is

motivated to

provide feedback via Virtually There Online

Online ITIN, destination information via Virtually There Online,

traveler profile

is updated

Airline partneradjusts car pickup time for MVTs on delayed flight

Filtered travel and destination suppliers make custom offers via Virtually There Online.

Airline proactively accommodates traveler before delayed connecting flight arrives


Current revenue management view

Current Revenue Management View

  • Maximize total revenue for given capacity

  • Best estimate of revenue - O&D, Fare-Class, POS based, netted down by commissions/overrides

  • Majority of revenue management systems are still flight based

    • Further approximation of revenue used in inventory control

  • Almost all revenue management business processes are still leg-based

  • Current inventory control view is still focused on a seat in plane

    • Vendor-Centric View


Current revenue management view1

Current Revenue Management View

  • Three Scenarios

    • A Million-mile person books a seat using miles

    • A corporate booking, using corporate discount, booked in the highest valued inventory unit

    • A Leisure booking, part of a group, from a tour operator

  • How Revenue Management would value each person today?

  • What would be CRM view?

    • Cost of losing each one of these in future?


Need for crm why now

Need for CRM - Why Now?

Emerging technologies are making the management of customer relationships based on value more practical, feasible and cost effective


Crm maximizing passenger value

CRM: Maximizing Passenger Value

  • ABCs of Customer Relationship Management


Maximizing passenger value acquire

Maximizing Passenger Value: Acquire

  • Targeting (“Recency & Frequency”)

    • High Valued Passengers - “not flying”

    • Business Passengers for Leisure markets

    • Pushing Distressed Inventory in a targeted manner to acquire

      • RM decides what to sell and who to sell

    • Use of Dynamic Pricing to target a market (passenger) segment

      • Pricing and RM decision to target a particular segment

    • Target cross-segment migration

    • Potential for Cross-selling & Up-Selling

      • Partnerships - Affiliate Networking

  • Business Process

    • RM in the background of Passenger touch points


Maximizing passenger value build

Maximizing Passenger Value: Build

  • Most Analytical Layer

  • Customer Segmentation - Identify Acquisition & Retention candidate segments

    • Target passenger segments to push Distressed Inventory

    • Target for Dynamic Pricing (both acquire & retain)

    • Predicting Churn targets

    • Pax Revenue Vs Profitability

      • Risk and Cost associated with revenue

    • Spread across multiple distribution channels

  • Customer Profile Database, PNR Database, Clickstream Data, Passenger DNA

    • Data mining the combination


Maximizing passenger value build data analysis

Maximizing Passenger Value: Build - Data Analysis

  • Interaction Analysis

    • Comparing two segment models - risk to recency

  • Dependency Analysis

    • Nesting of one pax segment within other segment

    • Clustering may be needed to identify dependency

    • Frequent fliers who haven’t traveled recently

      • Clustering by corporate accounts/travel agencies

  • Cross-Segment Migration

    • High valued passengers have moved down

      • Clusters by corporate accounts/agencies

  • Cross-Time Migration

  • Product Package Analysis


Maximizing passenger value build valuation

Maximizing Passenger Value: Build - Valuation

  • What if one airline could buy passengers from other airlines?

    • Who to buy and at what price?

  • Using passenger profitability to guide marketing

    • Revenue Management in the background of pax touch points


Maximizing passenger value build inventory control

Maximizing Passenger Value: Build - Inventory Control

  • Forecasting by passenger segment

    • Origin, Destination, POS, Value, Loyalty Level, Product Packages, Distribution Channel etc.

  • Passenger State Space

    • Acquisition (multiple levels possible), Retention, Each Frequent Flier Level etc.

    • Probability of moving from one state to another

  • Expected Life Time Value of passenger

    • Real time Business Intelligence Modules

  • Airline Resources - capacity at flight/leg/cabin level

  • Bid Price based inventory control

    • Availability for each passenger segment


Maximizing passenger value build 1 1 revenue management

Maximizing Passenger Value: Build - 1:1 Revenue Management

  • Customized Inventory Control & Pricing

    • Availability bias based on Bid Prices & Passenger expected LTV

  • Targeted sales promotions

    • Pushing distressed inventory

    • Up-Sell & Cross-Sell promotions

    • The product package view thru partnerships

      • Hotel, Car Rentals, Golf, Ski etc.

  • Corporate Promotions

    • Deals linked to hedging risk

  • Objective is to consistently increase passenger utility


Maximizing customer value care

Maximizing Customer Value: Care

  • Passenger touch point - building loyalty

  • Predicting and Preventing Churn

  • Tracking Success Metrics

    • Tracking response to “Acquire” and “Build” efforts

    • Tracking movements in segment membership

  • Closed Loop Solution

    • Changes to Passenger utility

      • Track and include in optimization (“Build”)

    • Communication between RM and Operations

      • Identification of “high-valued” flights

      • Pre-removal and Re-accommodation on overbooked flights

      • DOD Monitoring - Dynamic response to Cancellation and Overbooking


Crm revenue management role

CRM: Revenue Management Role

  • Acquire

    • Targeted Promotion Sales - passenger segment and markets

    • Up-Sell and Cross-Sell among Active Loyal

    • acquisition/stimulation offers for Passive Loyal

  • Build

    • Customer Segmentation and related forecasts

    • Cross-Segment migration probability

    • Passenger Utility Metrics

    • Inventory Controls

  • Care

    • Tracking performance metrics to refine analytics

    • Closed Loop solution

      • Incorporate value created by CRM in PYM decisions


Crm revenue management view

CRM: Revenue Management View

  • Customer-Centric View

    • Passenger Itinerary & Profitability

    • Passenger Value to Airline

  • Distribution Channel Management

    • Matching channel with profile

    • Airline websites had 26% increase in traffic year over year compared to 7% for online travel agencies

    • Availability Conflict, Channel Stealing

  • Revenue Management Data Support

    • Schedule

    • Inventory

    • Fare Database

    • PNR Database

  • Customer Profile Database

  • Clickstream Data

  • Business Intelligence Module

3600 View of Passenger


Crm the integrated view

Customer

Management

Customer

CRM: The Integrated View

Custom Pricing (Acquire/Build)

Airline suggests additional options (Build) via Sales Manager

Airline partners suggest

additional options

through Sales

Manager

Custom Inventory Offer (Acquire/Build)

Target Identification (Acquire)

Traveler can have the

inquiry saved for later

Traveler

enters

profile

info

Traveler

buys

Traveler has

multiple,

convenient ways

to refine

process

Next trip - all

previously-learned data is

used to aid their future planning (Build)

Analytics updated

Sales Manager history updated

(Care)

Traveler travels

and is motivated to

provide feedback via Virtually There Online (Care)

Online ITIN, destination information via Virtually There Online,

traveler profile is updated (Care)

Filtered travel and destination suppliers make custom offers via Virtually There Online. (Build)

Airline proactively accommodates traveler before delayed connecting flight arrives (Care)

Airline partneradjusts car pickup time for MVTs on delayed flight (Care)


Crm what s available today

CRM: What’s available today

  • Broadcasting software for marketing promos

    • Cross-Selling Capability, Feedback provision Bid Prices based on O&D, POS, Fare-Class

  • Data Warehousing and Data Mining

    • Different customer segmentation software based on variety of techniques - Clustering, Decision Trees, Neural Networks etc.

  • Business Intelligence modules

    • Distressed Inventory, Dynamic Pricing

  • Integration with a CRM perspective is needed!!


Crm short term goals

CRM: Short Term Goals

  • Targeted Promotions & Campaigns

  • Leverage existing modules (Distressed Inventory, Dynamic Pricing) for Acquisition & Retention

  • Availability Bias based on existing Revenue Management System

  • Performance measures to provide feedback

  • Link to Operations - pre-removal & Re-accommodation for overbooked flights


Crm long term goals

CRM: Long Term Goals

  • Business Intelligence Module to provide passenger valuation

  • Revenue Management Optimization models to consider maximizing expected “Value”

    • Nonlinear Programming problem with modified objective function

    • Stochastic Dynamic Programming problem (probability of moving from one state to another)

  • Tracking Passenger Utility

    • Pricing and Inventory control decisions should consider changes to passenger utility

  • An Integrated 3600 View


Conclusion

Conclusion

  • A shift from “Vendor-centric” view to “Customer-centric” view is essential for survival

  • Effective Customer Relationship Management (ABC) is needed to support this view

  • Revenue Management is the backbone of ABC (Acquire, Build & Care)

  • From maximizing “revenue” to maximizing “value”

  • Linking all pax touch-points in an integrated view through Revenue Management

  • Performance Measures (e.g. pax utility) to provide feedback - Closed Loop Solution


Customer relationship management in airlines a revenue management perspective

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