Beruflich Dokumente
Kultur Dokumente
Philipp Goedeking
Holger Sindemann Study
Contents
The authors 23
3 | CRM for airlines
1. Who are your most valuable customers and what are their key needs?
2. How do you build a relationship with your customers through touch-
point interaction?
3. How do you establish structures and systems to manage the CRM
process across your organization?
CRM
1 2 3
Who are your most How do you build a relationship How do you manage CRM?
valuable customers with your customers? > Selection and deploy-
and what are their key > Touchpoint mapping ment of treatments
needs? > Treatment definition > CRM infrastructure
> Customer analysis > "Touchpoint logic" — Touchpoint enabling
— Customer value — Customer identification — Backoffice infrastructure
— Customer needs — Treatment delivery
— Response measurement
Consequently, the Roland Berger approach to CRM for airlines starts with a
detailed understanding of customer value and customer needs.
Third, processes and systems are developed to translate the idea of CRM
into actions. As a result, you will have a clear understanding of how to
offer what treatment to which customers at which touchpoint – in other
words, you will have defined a comprehensive CRM concept!
... focusing on winning, growing, and retaining ... focusing on winning and retaining any
high-value customers customer
... maximizing customer knowledge in terms of ... aimed at collecting, storing, and analyzing
customer value and customer needs any type of customer information
... developing personalized services and improving ... creating new, costly customer service
customer service efficiency for high-value measures available to any customer
customers (e.g. reducing processing times)
... an opportunity to increase marketing efficiency ... a driver of increased marketing spending
and measure the effects of individual marketing ("spend, spend, spend"-mentality)
activities
Note that IT is conspicuously absent from this list of key ingredients, as we The priorities are clear:
firmly believe that CRM should not be regarded as a technology exercise. Strategy comes first,
IT comes second
However, the fact that a comprehensive CRM initiative requires substantial
investment in IT cannot be ignored. Still, IT is just an enabler, and techni-
cal capabilities should never be the driver of CRM.
Therefore, the appropriate use of technology will not be discussed until the
third step (process design) after the major pieces of the CRM strategy –
namely determining which customers should get what kind of treatment at
which touchpoint – are completed.
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1.1 Customer value: How can you establish a measurement for customer
value as a basis for service differentiation?
Understanding the value of an individual customer is essential to effec-
tively differentiate services. In addition, a meaningful value concept is the
foundation of a performance measurement system that should be linked to
any CRM initiative.
Loyalty program status represents an initial approach to modeling customer Loyalty program status is an
value – this assumes that mileage levels correlate with value. However, initial clue to customer value,
there are four key disadvantages to using loyalty program tier level as a its disadvantages need to be
proxy for value: understood, though
> Such a value concept is solely based on historical data, since loyalty
program tier levels are awarded based on past activity
> There is a focus on buying intensity (transactions per period, i.e. number
of flights) rather than the value (profitability) of transactions – mileage
bonuses for the premium cabins are just a crude proxy for the value of
an itinerary
> Using tier levels results in only a few (usually three or four) distinct
categories – this is insufficient to rank particular customers in order to
prioritize premium treatments
> The spread of values of individual members in each category, especially
the top category, is very high, which limits the opportunities for true
service differentiation
7 | CRM for airlines
89 96
You are under- Top-tier members
investing in 48% of the loyalty program
of your high value 48
customers! Regular members
of the loyalty program
% of total
8 51 41
customers
High value Medium value Low value
customers customers customers
Our analyses have shown that loyalty program status does not adequately
predict customer value. As you can see from the chart above, many custo-
mers are not currently treated according to their value: For a typical air-
line, only 52% of its high-value customers are also top-tier members of its
loyalty program. This means that an airline is likely to underinvest in
almost half of its high-value passengers. At the same time, an airline is
likely to overinvest in a significant portion of its top-tier loyalty program
members, many of whom may actually be unprofitable and do not deserve
top-tier benefits, which are costly to provide.
A more sophisticated way to model customer value is to allocate revenues Leading-edge customer
and costs to customers. This results in an understanding of historic profita- value modeling takes
bility based on past transactions. To go even further, you need to adopt a into account a customer’s
forward-looking view by forecasting future transactions and the develop- future development
ment potential of a particular customer. This view is similar to the net potential
present value approach taken in capital budgeting problems. Modeling the
future value can be accomplished through customer lifecycle concepts, for
example. Incorporating development potential means quantifying the
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1.2 Customer needs: How do you understand key customer needs and the
drivers of purchasing decisions?
Understanding your customers also means understanding their needs.
There are two categories of needs that should be covered with separate
strategies: explicit needs and the drivers of purchasing decisions.
Customer
needs data
Drivers of purchasing "Pamper"
decisions
> Select relevant treatments
> Method of collection: indirect for high value customers
("learn", e.g. response behavior)
> Examples: Price, flexibility,
comfort, brand image, loyalty
program mileage, and benefits
First, explicit needs are basically customer preferences, e.g. the "need" for a
window seat, a special meal, or wheelchair assistance. Such needs can be
derived from direct interaction with customers, e.g. by having them fill out
a customer profile on the airline's website. Additional explicit needs
include customer interests and hobbies which can serve as a basis for
targeting marketing offers and cross-selling.
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However, in working with customer profiles, the guiding principle should An effective customer profile
always be that recording a particular type of need can add value for the focuses on recording a few
airline. Our experience has shown that focusing on a fairly short list of explicit needs rather than
needs is more practical than aiming for an elaborate needs profile that will maintaining a long list of
never be used in its entirety. hobbies, preferences etc.
The typical travel process creates many customer interactions at the touch-
points
> Web-site > Check-in/priority > Onboard crew > Baggage claim > Web-site
check-in
> Call center > Inflight entertain- > Baggage service/ > Call Center
> Multi-purpose ment system lost & found
> City ticket office automat (e.g. inflight web) > Customer mailbox
> Arrival lounge
> Customer mailbox > Lounge > Transfer desk
One of the key challenges here is to manage complexity while first looking In the development phase,
at treatments independently of the touchpoint. For example, proactively treatment definition should
reminding selected customers of a promotional offer previously sent to take place independently of
them could be done through e-mail or a traditional mailing, but also during touchpoints
a telephone conversation with the call center or while checking in at the
lounge.
13 | CRM for airlines
"Touchpoint logic":
Which customer gets what treatment at which touchpoint?
> Customer identification: A customer is identified at a particular touch- A state of-the-art touchpoint
point. Example: Mrs. Jones arrives at the airport check-in desk and is process involves three steps:
identified by swiping her loyalty program card. customer identification,
treatment delivery, and
> Treatment delivery: The touchpoint system queries the centralized custo- response measurement
mer database for customer-specific information and prompts treatments
that have been queued. Example: Mrs. Jones' current flight information
is displayed to the check-in agent. Simultaneously, the check-in agent
receives a "pop-up" message to offer an upgrade to Mrs. Jones for a
reduced mileage of 15,000. This is based on the booking situation of the
flight (availability of upgrade seats), the most recent customer valuation
for Mrs. Jones and any information the airline has on Mrs. Jones' prefe-
rence for using miles instead of a cash payment, and possibly Mrs. Jones'
price sensitivity or her likelihood to defect.
First, it ensures that the appropriate treatments are delivered to the "right"
customers at the first possible contact. Second, it also guarantees that the
same treatment (e.g. a particular promotional offer) is triggered only once
for a particular customer.
In order to "make CRM happen", there are two key work flows to consider:
Treatment selection/deployment and the setup of the CRM infrastructure.
3.1 Treatment selection: How do you identify treatments that add value to
your organization through revenue enhancement or cost savings?
First, you need to look at how to select and deploy treatments. It is impor-
tant to realize that not all CRM activities are equally lucrative. Thus, under-
standing the value added of each treatment and then prioritizing which
CRM treatments to go after first is a key task in view of limited resources.
The valuation of a treatment should include such components as the expec-
ted bottom line impact, the infrastructure (notably IT) investment requi-
red, and the time to implement. The list below provides an evaluation of
typical CRM treatments and measures.
An evaluation of the "classic" areas of CRM reveals the key areas of leverage
As you can see from the chart, high priority measures are centered around
improved targeting of campaigns, promotion of loyalty program member-
ship, and up-selling, notably using upgrades. It is important to understand
that the promotion of loyalty program membership should only be focused
on customers that promise to be valuable. By enrolling these customers in
the loyalty program, you make them identifiable and accessible for develop-
ment through targeted treatments, thereby increasing revenues in the
medium term.
A key conclusion from this analysis is that the prioritized activities are An effective CRM initiative
primarily aimed at revenue generation. Our research shows that the bene- focuses on generating
fits of cost reduction, albeit an integral part of any CRM initiative, are of incremental revenues
significantly lower magnitude, especially in the short term.
A plan to deploy the high priority treatments is the logical next step. In our
experience, starting with a prototype that is developed in a cross-functional
team including CRM project members and experts from the touchpoint is
most conducive to ensuring a smooth roll-out. In addition, it is essential to
clearly define process ownership across all organizational units involved.
The backoffice infrastructure represents the IT to support CRM across the A centralized customer
entire organization. The key ingredients are a centralized customer data- database is the hub for all
base and a data warehousing infrastructure. A customer database needs to customer information
include basic data (such as address and preferred method of payment),
needs (e.g. seating preference and hobbies entered into the customer
profile), and allocation to customer segments. The allocation to segments
could include additional derived parameters such as price sensitivity or
likelihood to defect.
"CRM at Lufthansa
means enabling touchpoints to provide
differentiated treatments to our customers"
How did Roland Berger assist you in your CRM effort? Roland Berger helped Luft-
Roland Berger helped structure our approach by creating a "screenplay" for hansa develop the "functiona-
CRM at Lufthansa. Our CRM "functionality matrix" provides an exhaustive lity matrix" as a roadmap for
list of customer-driven capabilities and allocates touchpoints where these its CRM effort
capabilities should be offered. Let me give you an example: We feel that
customers should be able to ask for mileage retrocredit or register for
promotions at multiple touchpoints. So, the "functionality matrix" tells us
at which touchpoints it makes sense to perform this function. One great
benefit is that the "functionality matrix" is now the driver of IT develop-
ment. This is an essential point as we pre-empted IT projects from beco-
ming the driver of the CRM process, which I believe is the "kiss of death"
for any CRM initiative. In addition to developing the "functionality matrix",
Roland Berger assisted us in creating a multi-year work plan based on a
quantitative prioritization of CRM measures, and also helped us get organi-
zed for our CRM effort. One very valuable recommendation from Roland
Berger was to create integrated teams of CRM experts, members of the
functional areas, and IT specialists, to ensure the smooth implementation
of measures.
Our Marketing and Sales Competence Center has developed in-depth CRM
know-how through projects with leading global companies across indus-
tries, such as high tech, retail, banking, telecommunication and logistics
services.
23 | CRM for airlines
The authors
Michael Beckmann
Senior Consultant
Roland Berger Strategy Consultants
Arabellastr. 33
81925 Munich, Germany
michael_beckmann@ de.rolandberger.com
Tel. + 49-89 9230 8022
Holger Sindemann
Associate Partner
Roland Berger Strategy Consultants
Arabellastr. 33
81925 Munich, Germany
holger_sindemann@ de.rolandberger.com
Tel. + 49- 89 9230 8347
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