Thoughts on the KPMG report “CRM and the Global Travel Industry”.

Paul Miner
Managing Director – MEC Services Ltd. – November 2001 (© MEC Services Ltd 2003)

a) CRM and E-Initiatives

KPMG suggest that the travel industry is moving from e-initiatives towards CRM because e-
initiatives have not in general lead to a large increase in customer numbers. This ‘failure’ of
e-initiatives may be linked to a misunderstanding of the role of e-commerce - it is more than
just a front-end transactional web site linked to legacy systems to gain customers. E-
commerce involves all parts of the business incorporating techniques such as CRM to
understand the customer, Supply Chain Management to handle the relationship with
suppliers of holiday components, and the management of internal relationships through
initiatives like Knowledge Management.

All these techniques need to be linked together so they work in tandem, but this requires a
re-engineering of business processes using e-technology as the common thread to meet the
defined business objectives. E-initiatives are not a destination - a quick fix for gaining
customers - they are on-going processes that reach into every aspect of the business.

Simply replacing e-initiatives by CRM may produce the same disappointing results if an
increase in customers is the sole metric for success. As a purely internal approach, CRM will
help provide a view of the characteristics of existing customers for existing product; this
allows the business target its marketing initiatives but it is unlikely it will in itself lead to
more customers.

b) CRM and loyalty

If the mid-tier companies are intending to use CRM to retain existing customers and create
customer loyalty then it is essential that all parts of the business be involved. As KPMG
mentions in the report, CRM is about the points at which the customer’s interact with the
business. This covers a multitude of areas e.g.: travel agents for selling, brochures for
marketing, and the service components taking place at many stages including:

- before departure - brochures and pre-departure documentation

- during the holiday - the aircraft, hotel, transfer, optional excursions
- after the holidays - customer survey forms, complaints, follow up of loyalty initiatives

The business needs to consider how they intend to relate to customers at every one of these
‘moments of truth’ and how perceptions and expectations are to be managed. Understanding
the customer allows each point of contact to be designed into the product / service offering.
Gaining loyalty is about the business creating something at one of these moments that
supplies some added value for each customer that makes him or her want to travel with the
same company again.

For example, research shows (See Note 1) that most holidays are taken to get away from it
all i.e. to do something different away from the hassles of everyday life. The business needs
a detailed understanding of each individual customer to know which customer wants a
specific type of holiday and what particular hassle they wish to avoid. Take two particular
customers; one customer has little spare time; the business can help them to the search for
the right holiday easier by sending them a brochure tailored to their individual need.
However, for the second, it may be they do not like coach journeys and want to avoid the
hassle of a long transfer by bus in resort. In these examples, the first will involve a change to
the marketing process the second the design of the holiday elements. CRM should allow the
business to identify which customer is which, and once the customers can rely on the
particular operator to really know and understand their personal needs, and all other things
being equal – especially price – then brand loyalty can result.

c) CRM and the Software Supplier

The KPMG research shows that travel companies do not believe that CRM software vendors
understand the workings of the travel industry. In our experience every industry sees itself as
different and do not believe a package solution can address their needs. However, it could be
one customer on the same day that buys a tin of beans, a new car, and a holiday with the
common motive being to satisfy their particular needs. CRM is not about vendors
understanding the industry it is about travel companies understanding their customers, their
needs and how the business can improve their “share of wallet” and create loyalty. CRM
systems may be able to get the information – the important thing is what you do with it.

The business needs to decide in what respects they need to understand the customer better
and then put this in the form of an ‘Invitation to Tender’ (ITT), with set success metrics, that
they can supply to the CRM system provider. The creation of this document may provide the
opportunity for the company to really think through what they are looking for and help the
software vendor understand the business drivers and therefore supply the appropriate
product. It should also help the company identify those internal areas where changes will be
needed.

The business needs to research the possible suppliers before submitting the ITT to them,
with the more expensive packages costing upwards of £5,000 per user (just for the software)
CRM is not a cheap option. There are cheaper packages available or the business can do it
themselves using existing systems and employing data mining / business intelligence tools or
even build a specific CRM system.

Some companies may already have a CRM system but do not recognise it. The simplest is to
create a notes page that can be attached to each booking in your reservation system. These
notes can be allocated standard codes for each aspect of the customer that needs to be
reviewed. Reports by code can then be pulled off. The philosophy of the organisation will
need to be that everyone has access to the notes page and are encouraged to add / read details
at any time. It might be worth adopting this approach as a pilot scheme because, if people are
unwilling to do this then there is a danger that they will not put information into a new CRM
system.

Many CRM systems act as integrators in that they get the information from other systems
through an overnight batch process or using messaging technologies such as XML, so it may
not be necessary for any additional information to be input if it is already present in existing
systems. (However, for a full CRM system this is unlikely!)

d) Implementing CRM

Like many, tools if used properly, CRM can be extremely valuable to the organisation. To
quote some findings from Bain and Co.’s latest survey (See Note 2). In terms of satisfaction
with various other management tools CRM did fairly well with a satisfaction rating of 3.67
out of 5.

Strategic Planning 4.06

TQM 3.91
Strategic Alliances 3.74
CRM 3.67

However, in the same survey 18% of respondents had defected from the technology, one of
the highest defection rates for all management tools, mainly because of difficulty in
implementation. According to WRQ Verastream (See Note 3) 70% of CRM
implementations fails.

For CRM to work it needs a champion which, if not the chief executive themselves, needs to
have their full support. This support is required not just at the inception of the project or for
the duration of the implementation phase of the project, but for the lifetime of CRM as part
of the culture of the business.

Moving to CRM, like any other systems initiatives, involves a common process:

1. Decide the business need the initiative is to address

2. Appoint a champion and ensure complete buy in from the top
3. Set up a proper project plan with a nominated project manger
4. Document exactly what you are going to do and how you will measure success
5. Make sure suppliers meets the needs expressed in the document
6. Implement the initiative paying full attention to the change process (especially if a
change of organisational culture is required)
7. Measure and celebrate its success
8. Continually seek to improve the new processes

e) About MEC Services Ltd.

The company is a consulting firm that helps organisations to achieve their mission through
management education and support across the whole life cycle of strategic change and IT
projects. We specialise in the travel industry and other service industries, details can be
found on our web site at www.mecservices.co.uk.

f) Notes

1. Hoseasons, 1993. In Looking At Tourism, D. Anderton, Hodder & Stoughton, 1996

2. Bain & Company – Management Tools 2001 Global Results
3. Roy Grevink Verastream Product Marketing Manger, Europe and Asia Pacific, WRQ;
Presentation to PMP Symposium November 2001