Customer Segmentation: Case Of United Airlines

Nowadays the airline industry is one of the fastest growing sectors worldwide. In fact, since the year of 2009 the numbers of passengers carried rocketed from 2.25 billion to more than 3.4 billion annual flyers in 2015 (International Civil Aviation Organization, 2016). This proves that air travel is becoming increasingly popular, and is likely to witness growth also in the future. However, within the market, not all customers are the same, and airlines face a challenge of successfully engaging with all of these customers, and ensuring their satisfaction. Whereas, providing products that meet the needs and wants of more than 3 billion people that come from various backgrounds is a big challenge, it can be addressed by using customer knowledge to differentiate travellers.

Customer Segmentation

Segmentation is described as a process in which customers are grouped based on a variety of factors that determine how they react to marketing stimulus (Peelen & Beltman, 2013). Peelen & Beltman (2013) identify six criteria for differentiating customers: geographical, demographic, socioeconomic, behaviour, psychographic and purchasing characteristics. In the airline industry, the geographical segmentation plays an important role, as it is the first determining factor of the customer base that the company has, yet many other criteria are applied by competitors to deliver customer value. The mileage- based segmentation has been a popular tool among the industry leaders, however, as the importance of customer experience in CRM is increasing, value-based and needs-based segmentation approaches are becoming more appropriate (IBM Institute for Business Value, 2002).

United Airlines

United Airlines (UA) is an example of company that has applied the previously mentioned value-based segmentation approach, which allows UA to manage its customers as assets. Being the world’s largest air travel provider, UA is responsible for approximately one third of all international and domestic passengers around the globe (United Airlines, 2016). In order to deliver high customer service and efficiently target current and potential client, UA uses the predictive analytics technology to find patterns among its customers. Rather than just classifying clients on the basis of income, UA creates segments based on the customer data. In order to generate more profit the company aims to attract premium clients that want to pay for premium service, but to correctly identify distinct segments, United Airlines analyses psychographic characteristics. For its global market UA has categorised customers among nine different motivational groups: global executives (frequent business travellers that crave high quality service), schedule optimizers (who have a fixed time frame to reach their destination), corporate troopers (use airline based on their employer), mile accumulators (flyers that aim to build up their air miles entitlement), reluctant travellers (who do not enjoy travelling and seek additional services to make their journey bearable), tour takers, quality vacationers (thrive for superior service), travel seekers (want to travel comfortably) and frugal flyers (who want to travel as cheap as possible, but still get good service) (United Airlines, 2016). These nine categories provide clear differentiation of customer types that board planes of United Airlines. After analyzing the main concerns of each market, UA is now able to offer services and products that complement the journey of each of these customers.

To sum up, in the competitive market that the airline industry is, focusing on customer experience is crucial. By using customer analytics, United Airlines, the world’s largest airline, has successfully implemented value-based psychographic segmentation, which increases the view of customers as company assets.

Bibliography

IBM Institute for Business Value. (2002). The future of CRM in the airline industry: A new paradigm for customer management. Somers: IBM Institute for Business Value.

International Civil Aviation Organization. (2016). Air transport, passengers carried. Retrieved 10 02, 2016, from The World Bank: http://data.worldbank.org/indicator/IS.AIR.PSGR

Peelen, E., & Beltman, R. (2013). Customer Relationship Management. Harlow: Pearson Education Limited.

United Airlines. (2016). Company Overview. Retrieved 10 01, 2016, from United: http://ir.united.com/company-information/company-overview

United Airlines. (2016). Using global segmentation to grow a business. Retrieved 10 01, 2016, from Business Case Studies: http://shop.businesscasestudies.co.uk/using-global-segmentation-to-grow-a-business-pdf

 

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One thought on “Customer Segmentation: Case Of United Airlines”

  1. I have red the UA case study earlier this year as well. Modern communication systems play a major part to gather this information. With the help of questionnaires and behavioral profiling, United Airlines was able to segment their customers by their motivations. And it proves to be an excellent approach! It enables United Airlines to maximise the efficiency of its marketing efforts.

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