Airline loyalty schemes have become commoditised, and are now a 'must have' defensive strategy that no longer differentiates the airline, according to a white paper from airline CRM software provider, IBS Software Services, which says that the true power of the FFP lies in its vast database.
Through their loyalty programmes, airlines have compiled databases of valuable customer information on millions, sometimes tens of millions, of their best customers. Many airlines now seek to capitalise on these information assets by pursuing a strategy of customer intimacy - using customer knowledge to differentiate and personalise services, and maintain a targeted and relevant communications dialogue, which reinforces customer loyalty.
Lack of data access
But customer information is often difficult to access and poorly integrated. Loyalty and marketing managers lack the tools to gain insight, and are stuck in the age of mass marketing communications due to processes and systems which require too much IT involvement. Those airlines trying to implement customer data warehouses and marketing automation systems have been forced to assemble solutions from disjointed components, few of which are tailored to the airline industry: the result has been expensive integration projects often running to tens of millions of dollars.
Through their loyalty schemes and FFPs, airlines have collected valuable information on their best customers. This information can be clearly useful in understanding customer behaviour, measuring customer value, and targeting relevant communications to each individual. However, customer profiles and loyalty activity tend to reside in the loyalty system; purchase behaviour is captured in the reservations systems; ticket revenue is held in revenue accounting; and customer service history is generally scattered across a multitude of systems (DCS, baggage tracing and others). None of these systems is designed to support flexible, ad-hoc query and analysis. The role of a data warehouse is to bring all these different types of data together into a single, 360o view of customer behaviour, supporting different types of analysis, data mining and list extraction, with good performance, and without interfering with normal operational tasks.
Static reporting no longer sufficient?
When asked how a programme is performing, most loyalty managers will turn to paper reports that provide top-level summaries of membership figures, activity levels and other Key Performance Indicators (KPIs). These reports are static, often out of date, and provide little insight into underlying trends and patterns.
Membership may be growing, but which markets are driving the growth? Which partners are generating the most enrolments, and what is the demographic profile of new members? Is overall membership growth disguising a churn problem? It is a lucky loyalty manager indeed who has a graphical "dashboard" of programme performance, and can drill down into the figures.
Customer analytics increasing
Customer analytics, including customer value models, attrition models, and various types of customer segmentation, are known to play an important role in relationship marketing, yet they remain out of reach for many airline loyalty managers.
The development of these models has required teams of consultants armed with expensive data mining tools, and often the resulting models are too complex to be trusted or used. What is needed is a hands-on toolkit that allows loyalty managers to define and test analytical models themselves, using all of the available customer information.
More personalised marketing
More knowledge about customers drives more variety and personalisation of marketing communications. Typically, once airlines have assembled a customer data warehouse with complete customer information, and have implemented customer analytics, they seek to introduce many different communications types (campaigns, offers, incentives, rewards, recognition), which reflect the most appropriate message for each (smaller and smaller) group of customers.
Traditionally, each campaign has required significant IT development work to extract the customer list, detect the responses, and credit bonuses: clearly this cottage industry approach cannot scale to 'mass customisation', where hundreds of finely-targeted campaigns run simultaneously. Coordinating so many different campaigns, and ensuring that customers are not bombarded with overlapping or conflicting messages, requires sophisticated campaign management software. These tools, again, are expensive, and do not specifically address the unique requirements of the airline industry, such as detecting campaign response which is implied by customer travel behaviour.
Identifying fraud and malpractice
Fraud and malpractice on the part of members, staff and partners, can be a serious problem and most airlines simply don't have the manpower to search for suspicious patterns, chase down every possible loophole and investigate every dubious transaction. Strangely, the tools to automate this process simply do not exist.
Overall, airlines' requirements for analytics, including management insight, customer analytics, and fraud detection, and relationship marketing are simply not met by today's offerings. Some airlines have beaten an expensive path to customised solutions; others are stuck, unable to build a business case, which justifies the high costs of software and integration work.
The full white paper is available for free download from The Wise Marketer - click here.