director, product marketing management in the airline...
TRANSCRIPT
Customer Relationship Management in the Airline Industry
Jason SalfenDirector, Product MarketingSeptember 30, 2005
© 2005 Siebel Systems, Inc. Confidential. 2
Agenda
Why CRM Applies to the Travel Industry
What is “Customer Relationship Management”
© 2005 Siebel Systems, Inc. Confidential. 3
Travel Market Analysis
Decreased Demand for Full-
Service, Hub-and-Spoke Carriers
Decreased Loyalty
Increased Competition & Price Pressure
Consolidation & Bankruptcy
Reduced Product Differentiation
Changing Channel Dynamics
Even though the market is expanding, carriers are still experiencing pressure from all sides.
© 2005 Siebel Systems, Inc. Confidential. 4
Increase Operational Efficiency (Decrease
Costs)
Carriers’ Strategic Imperatives
Industry IssuesIndustry Issues
• Decreased demand
• Increased competition
• Price pressure
• Consolidation
• Decreased loyalty
• Decreased product differentiation
Strategic ImperativesStrategic Imperatives
Carriers strategic priorities are geared toward ensuring their near-term survival and laying the groundwork for a medium- and long-term revival.
Optimize Sales
Performance
Maximize Customer
Loyalty
Identify and Acquire
Profitable Customers
© 2005 Siebel Systems, Inc. Confidential. 5
The Effect of the Internet
The Internet has increased the importance of building a strong brand and valued customer relationships.
If the customer only sees your name, logo and price, why will they choose your carrier?
© 2005 Siebel Systems, Inc. Confidential. 6
Service Differentiation Stops Commoditization
83% of travelers say that personalized service and attention to their needs provides value. Value, rather than price, defines a good deal for customers1
Service differentiation is the foundation of brand equityBrand is a source of sustainable competitive advantage
BRAND EQUITY
Service Differentiation
Product Differentiation
time
“While consumers agree that price is important, they’d choose a slightly higher rate for added service”
Forrester, April 2002
© 2005 Siebel Systems, Inc. Confidential. 7
Carriers’ Strategic IT Investments
The two IT investment areas that encompass the four strategic priorities previously defined are the two highest priority IT investments that carries plan to make.
Cost savings – 76% rate it priority 1 or 2Improved Service or Marketing – 70% rate it priority 1 or 2
Investment priorities for future IT projects High Priority Low Priority
54%
44%
23%
20%
19%
17%
11%
32%
26%
33%
33%
48%
24%
23%
12%
21%
29%
32%
26%
40%
22%
1%
5%
13%
7%
6%
12%
16%
1%
2%
2%
3%
16%
2%
2%
6%
1%
4%
12%
Short Term Projects withProven cost savingsCustomer Services or
marketing advantageSimplifying internal
processesRunning existing
infrastructureMedium Term Projects
to cut costsLong Term Strategic
infrastructure upgradesIntegration with alliance partners
'1' '2' '3' '4' '5' No answer
Source: 2
© 2005 Siebel Systems, Inc. Confidential. 8
Carriers’ CRM Focus
CRM’s importance and priority is increasing within passenger airlines.
Expected demand for IT skills over next 2 years
80%
64%
62%
60%
60%
43%
4%
12%
26%
33%
30%
34%
51%
42%
4%
4%
6%
1%
1%
46%
8%
6%
1%
4%
5%
5%
8%
Web/open systemsapplications development
CRM/Customer Services
IT Strategy
Infrastructure/network
Business Analysts
Supplier & PartnerManagement
Legacy systems support(Coding TPF etc)
Rise Same Fall No answer
64% of carriers anticipate a rise in the demand for CRM / Customer Service-related IT skills over the next two years. 2, 3
© 2005 Siebel Systems, Inc. Confidential. 9
Hosted Loyalty
Carriers increasingly are looking for a hosted Loyalty solution.
Source: 2
IT functions already moved/planning to move to ASP mode(Base: All respondents to SITA/Airline Business “Airline IT Trends Survey, 2004”)
58%
56%
31%
27%
15%
14%
12%
11%
11%
10%
9%
23%
17%
9%
5%
9%
10%
9%
19%
22%
27%
36%
56%
56%
55%
54%
52%
13%
13%
19%
20%
20%
25%
24%
25%
28%
Reservations
Departure control/ check in
Cargo reservations
Frequent flyer application
Revenuemanagement
Airline operations planning
Financial Systems
Engineering/MRO
Purchasing
Already moved to Plan to move Keep in house No answer
IT functions already moved/planning to move to ASP mode(Base: All respondents to SITA/Airline Business “Airline IT Trends Survey, 2004”)
58%
56%
31%
27%
15%
14%
12%
11%
11%
10%
9%
23%
17%
9%
5%
9%
10%
9%
19%
22%
27%
36%
56%
56%
55%
54%
52%
13%
13%
19%
20%
20%
25%
24%
25%
28%
Reservations
Departure control/ check in
Cargo reservations
Frequent flyer application
Revenuemanagement
Airline operations planning
Financial Systems
Engineering/MRO
Purchasing
Already moved to Plan to move Keep in house No answerAlready moved to Plan to move Keep in house No answer
© 2005 Siebel Systems, Inc. Confidential. 10
Agenda
Why CRM Applies to the Travel Industry
What is “Customer Relationship Management”
© 2005 Siebel Systems, Inc. Confidential. 11
Airline CRM Definition
CRM ≠ Frequent Flyer Program
Loyalty Program ≠ Frequent Flyer Program
A comprehensive customer loyalty management (or CRM) strategy and
solution manages all customers interactions in a consistent and value-
oriented manner
© 2005 Siebel Systems, Inc. Confidential. 12
Can you tell the two airline loyalty programs apart?
#2#1
Number of partners
Credit card
Hotel
Air
Car rental
Financial services
100+
Yes
Yes
Yes
Yes
Yes
100+
Yes
Yes
Yes
Yes
Yes
Miles expire
Redeem points with partners
Blackout dates for reward travel
Not with activity
Yes
Varies
Not with activity
Yes
No
Points for domestic ticket 25k / 40k25k / 40k
Points for Europe & NA 40k / 60k / 100k50k / 80k
Points for Asia & NA 50k / 65k / 125k
60k / 100k
Number of tiers based upon recent travel
Tiers based upon lifetime travel
Tier bonuses
4
Yes
Yes
4
Yes
Yes
Accrued points vary by tix class YesYes
Example Promotions
Booking online bonus
Fixed point bonus for targeted segmentsPercentage bonus for targeted segments
Redemption discounts
No
Yes
Yes
No
YesYes
YesYes
#2#1Purchase miles
Transfer miles
Electronic upgrades
Family membership NoNo
YesYes
YesYes
YesYes
Transaction history
Point total
Update profile
Process point redemptions
Enroll in promotions
Request missing credit
Web site
Yes
Yes
Limited
Yes
YesYes
YesYes
YesYes
YesYes
Source: 4
© 2005 Siebel Systems, Inc. Confidential. 13
Break The “Parity Deadlock”
Loyalty programs are losing their ability to provide competitive advantage – no longer a brand differentiator.
Loyalty programs have reached “parity deadlock”Minimal switching costs between programs
Current Loyalty Programs' Ability to Influence Customers' Behavior "A Lot"
0%
5%
10%
15%
20%
25%
30%
GroceryStores
DepartmentStores
SpecialtyRetailers
DiscountRetailers
Pharmacies
% o
f Mem
bers
Influ
ence
d
Less than 25% of retail shoppers say that loyalty programs have a major impact on their decision to shop at a particular store
© 2005 Siebel Systems, Inc. Confidential. 14
Why Are People Loyal?
“Loyalty is a positive belief, generated over the course of multiple interactions, in the value
that a company and/or its products and services, which leads to continued interaction
and purchases over time.”
BeliefProvide Value;
“win-win”
Multiple Interactions
© 2005 Siebel Systems, Inc. Confidential. 15
Customer Expectations
Allow me to contact you through the channel of my choiceRecognise and reward my valueUse the information you have about meTreat me as an individualTreat me consistentlySolve my problems first timeMake amends when things go wrong
Frequent travelers expect:
Siebel and IBMJune 2005
© 2005 Siebel Systems, Inc. Confidential. 16
Travel Customer Management Continuum
CRM in passenger airlines extends beyond traditional sales, service, marketing and loyalty to include all of the touch points in a passenger’s travel experience.
Pre Post
Sales &Reservation
Check-In
Flight
BaggageService
Rewards
CustomerFeedback
• Baggage Information
• Lost Baggage
• Transfer to Partner • Claims
• Surveys
• In-Person
• Information
• Reservation
• Upgrades
• Aw
ards
• Personalized Service• On board sale• Arrival service• Connections
• Inf
orm
ation
• Pre
-Sale
s• S
ales
• Res
erva
tion
Wait
list
• Re-
Book
ing• R
efun
d
• Ground
Transporta
tion
• Security
Check
• Boardi
ng
• Upgrade
•Dire
ct
• Mai
lings
• eM
ail
• Com
pany
Pu
b
On Board
MarketingCommunication
Pre Post
Sales &Reservation
Check-In
Flight
BaggageService
Rewards
CustomerFeedback
• Baggage Information
• Lost Baggage
• Transfer to Partner • Claims
• Surveys
• In-Person
• Information
• Reservation
• Upgrades
• Aw
ards
• Personalized Service• On board sale• Arrival service• Connections
• Inf
orm
ation
• Pre
-Sale
s• S
ales
• Res
erva
tion
Wait
list
• Re-
Book
ing• R
efun
d
• Ground
Transporta
tion
• Security
Check
• Boardi
ng
• Upgrade
•Dire
ct
• Mai
lings
• eM
ail
• Com
pany
Pu
b
On Board
MarketingCommunication
Travel Customer Management Continuum
© 2005 Siebel Systems, Inc. Confidential. 17
Carriers’ CRM Challenges
Carriers face several key challenges in the context of using CRM to carry out their strategic priorities: 5
Decreasing cost of serving customersMoving away from expensive, custom built systems to cheaper pre-packaged appsCost-effectively integrating multiple systems and improving cross-channel service
Unified view of the customerIntegrating multiple processes that cut across in-house and 3rd party systems
Customer knowledge Identifying the most and least valuable customers
Loyalty program effectivenessDecrease costsRetain most valuable membersIncrease members’ expenditures and purchase of distressed inventory
Differentiating the productUsing service to differentiate their product and, thus, justify a higher price
Raising customers’ switching costsCreate a unique offering that competitors cannot easily duplicate
© 2005 Siebel Systems, Inc. Confidential. 18
CRM Architecture
• Customer Profiles• Transaction History• Contact History• Derived/External Info
Analytical ModelsData Warehouse
• Customer Profiles• Preferences• Loyalty Activity• Case Mgt
Operational Customer Database
• Marketing Offers• Prompts & Alerts• Product Info
Reservations Departure Control
Reporting & Analysis
• Segmentation• Lifetime Value• Predictive Modelling
• Operational• Analytical• Executive
Complaints Handling/ Case Mgt
OthersInteraction Mgt Lost & Found Cabin Service
ReportingSales
AutomationLoyalty
Administration
Sales Force
Contact Centres
(phone/ fax/ email)
Travel Centres Airport s In-Flight Web SMSKiosk
Multi-Channel Connectivity
Mail/ Fulfilment
House
Outbound Email
Campaign Management
Application Integration
Other Data Warehouse
Sources
Baggage Tracing
Touchpoints and Channels
CRM Applications
Core Airline Systems
Reporting and Analytics
Siebel and IBMJune 2005
© 2005 Siebel Systems, Inc. Confidential. 19
Integrated Loyalty Management Solution
Loyalty Marketing Lifecycle
Measure Promotion’s Results and
EffectivenessManage Flexible Loyalty
Program
Track Comprehensive
Member Profiles
Identify Members for
Targeted Promotion
Respond to Customer Questions
about Promotion
Process Members’
Transactions and Accruals
Create Loyalty Promotion
Create and Execute
Marketing Campaign
Loyalty (FFP)
Analytics
Loyalty (FFP)Marketing
Call Center &
Web
Loyalty (FFP)
Analytics
© 2005 Siebel Systems, Inc. Confidential. 20
Understand and Act Upon Customer Value
Full-service airlines must:Identify and understand high-value customersManage them through their lifecycle to maximise share of walletDeliver on their wants and needs
1 2 3 4 5 6Years
Price PremiumReferralsLower distributionCostsExtra SalesBase Profit
Profit by Customer LongevityProfit by Customer Segment
LeastProfitable
MostProfitable
Siebel and IBMJune 2005
Source: 6
© 2005 Siebel Systems, Inc. Confidential. 21
Iberia’s Customer Experience Functionality
Iberia uses Siebel to manage most customer touchpoints.
VIP Lounge Room
Management
Claims Requests in
Airports & Iberia Offices
360º Customer Information Access &
Management
SMS With Cancellations to
High Value Customers
Upgrading & Lounge Access Campaigns to
High Value Clients
On-line Membership to Iberia+ at Every
Touchpoint
Personalize Flight
Reservations in Call Centers
Lost Baggage Request
Management in Airport
Flight Incident Compensation Management in
Airports
Siebel and IBMJune 2005
© 2005 Siebel Systems, Inc. Confidential. 22
CRM Benefits
Decreased servicing costsReduced brand marketing spendIncreased revenue from target customers
Expect 2.5% increase in revenue$5bn passenger revenue, 40% from tracked customers, equates to $50m per year6
Source: 7
Siebel and IBMJune 2005
© 2005 Siebel Systems, Inc. Confidential. 23
Contact Information
Jason SalfenDirector, Product MarketingSiebel SystemsSan Mateo, CA USA(650) 477-2511 [email protected]
© 2005 Siebel Systems, Inc. Confidential. 24
© 2005 Siebel Systems, Inc. Confidential. 25
Appendix
AppendixAppendix
© 2005 Siebel Systems, Inc. Confidential. 26
LoyaltyAdmin
PartnersPortal
RelationshipMarketing
LoyaltyServiceCentre
CustomerRelations
ReservationsContactCentre
AirportTicketOffice
CityTicketOffice
Partner Accrual FilesPartner Enrolment filesPartner Profile Exchange
Retro Claims Responses
Partner Profile ExchangeRetro Claims Requests
Partner Accrual Confirmations
Customer Scores
Data Warehouse Extract
MailHouseUndelivered Email
Content & Contact Details
CustomerAnalytics
DataWarehouse
Campaign Details
Complaints Investigation
CUSTOMER SERVICEInteraction ManagementInteraction Management
Loyalty ServiceLoyalty Service
Lost & Found BaggageLost & Found Baggage
Cabin Service ReportingCabin Service Reporting
LOYALTY
Programme ManagementProgramme Management
Membership ManagementMembership Management
Accrual ManagementAccrual Management
Redemption ManagementRedemption Management
OperationalCustomerDatabase
CAMPAIGNMANAGEMENT
Campaign PlanningCampaign Planning
Campaign DesignCampaign Design
Campaign ExecutionCampaign Execution
Measurement & AnalysisMeasurement & Analysis
COMPLAINTSHANDLING
Complaints HandlingComplaints Handling
Pro-Active Recovery List
WebCase Tracking
Campaign Registrations
ExternalLists
Phone
Document Scanning
Fax
Web Forms
Fulfilment Mail
Phone Dialler
Fax
SMS
LoyaltyPartners
Prospect Lists
In-Flight LoungeBaggageServices
AirportServiceDesk
MobileAirportStaff
ReservationsRedemption Bookings
Booking Enquiry
Profile Extract
Flight Activity
Profile ExtractDeparture
Control
FinancialsPostings
Undelivered EmailContent & Contact Details
PaymentGatewayCredit Card Authorisations
Email Server
ExternalInterfaces
ApplicationUsers
InternalInterfaces
Transactions:• Applications• Profile Changes• Redemption Bookings• Retro Claims• Queries• Complaints• Campaign Registrations• Case Tracking
Inbound & OutboundChannels
Transactions:• Membership Kits• Statements• Offers• Replies• Information
Siebel and IBMJune 2005
© 2005 Siebel Systems, Inc. Confidential. 27
Siebel Loyalty Management
Partners
• Enroll members
• Send transactions to the host organization
• Approve joint loyalty promotions
• Manage service requests
• Approve transactions
• Manage products
• Collaborate on servicing the customer
MembersCarrier
• View complete member profile
• Define tiers
• Enroll members
• Reward behavior
• Create targeted promotions
• Define accrual and redemption rules
• Service a member’s request
• Join program
• Keep profile up to date
• Conduct web transactions
• Enroll in loyalty promotions
• Redeem rewards
• Refer friends
• View statements
• Create Service Requests
• Set contact preferences
Enterprise Analytics and Data Integration Platform
Rules Rewards Tiers Member Profiles Eligibility Promotions Transactions Point Expiration
Loyalty Manager Loyalty Member Portal Loyalty Partner Portal
Loyalty Engine
© 2005 Siebel Systems, Inc. Confidential. 28
Customers Using Siebel in Their Loyalty Programs
For years companies in multiple industries have been using Siebel to help manage their loyalty programs.
© 2005 Siebel Systems, Inc. Confidential. 29
CompanyCompany Objectives / IssuesObjectives / Issues
One of the world's oldest operating airlines, was established on 1st November, 1923. Finnair's route network covers about 50 int’l destinations and it carriers over 7 million passengers each yearFinnair's major shareholder is the Finnish government with a 58.4 per cent holding 9,000 employees worldwide1.7 billion Euro in revenues
SolutionSolution
Complete Loyalty management solution from Siebel that will generate significant cost, revenue and customer satisfaction benefits5% improvement in top-tier loyalty promotion response rates72% reduction in time required to create complex promotions 13% improvement in mid-tier and lower tier loyalty promotion response rates42% reduction in system costs
Improve relationship with customers and partnersIncrease sale of expiring inventory via real-time, targeted promotionsProvide complete loyalty management solution Decrease system costs
Outdated, expensive loyalty applicationInflexible rules that could not adapt to changing customer needs and competitive landscape
Objectives
Issues
Siebel Loyalty @ Work in Passenger Airlines
“With Siebel Loyalty, we will be able to ensure that the right customers receive the right promotions that increase customer lifetime value while delivering a superior customer experience at a much lower cost."
© 2005 Siebel Systems, Inc. Confidential. 30
Siebel at Iberia
Siebel and IBMJune 2005
© 2005 Siebel Systems, Inc. Confidential. 31
Sources
1. StrategyOne Survey commissioned by Wyndham International, May 2002
2. SITA / Airline Business IT Trends Survey, 20043. “The European Passenger Airline Market – A High-Level
Assessment of How Siebel Can Profit”, Siebel Systems, June 2004
4. Company FFP Web sites and calls to customer services5. “CST Airline Industry Summary”, Siebel Systems, 9/30/20046. IBM Travel industry reports and analysis (not published)7. McKinsey, CRM in the Air, 2002