How beacon technology at airports can ensure customer engagement without privacy concerns

commonuse-beacon-registrySource: (Pendrill, 2015)

Mobile marketing is developing very fast and has enormous potential as a main channel in the internet infrastructure. It allows organisations to integrate in the daily lives of its customers by entering their living space and identify their needs (Beltman and Peelen, 2013). Several airports recognised this opportunity and launched recently the beacon technology in order to improve the customers stay through passenger’s smartphones before departure. Beacons is an app which offers a broad variety of functions such as providing flight information, wayfinding, baggage collection and measuring the distance to the gate (Babu, 2016).

Apart from technological features and possibilities, the app should be also about supporting the customer engagement and experience (Beltman and Peelen, 2013). Miami International Airport for example provides passengers with personalized updates, directions and advices based on location and needs. The HIAQatar app of Hammad International Airport allows customers to scan the boarding pass in order to receive real-time information with regard to flight schedules baggage claim and the assigned gate whereas Bologna Airport focuses on alerts, notifications and promotions (Babu, 2016). Due to the individual approach to every single passenger, they are able to build up a more personal relationship than before. By installing beacons into the technology, airports can increase both passenger satisfaction as well as productivity (Gregory, n.d.).

However, privacy and security, especially around mobile devices, remains important and people are understandably concerned about companies that obtain access to the personal data (Walton, 2015). According to a survey by Flightview, 53 percent of travellers in the United States would like to benefit from the beacon technology, but are not willing to release personally identifiable information (Samuely, 2015). Consumers are slowly beginning to understand how the technology works and noticed that it is impossible for beacons to invade their privacy without permission.

Therefore, there are certain measures that airports can take in order to earn trust and avoid jeopardizing the overall customer experience. First of all, airports should give customers the opportunity to cancel data sharing at any time. Apart from that, passengers need to be informed upfront about the reason behind collecting location or user data through their value proposition. Furthermore, the app should limit the frequency of notifications. According to a report by Loyalytics, receiving two to five messages in a week would cause 32 percent of respondents to stop using the app (Babu, 2016).

In the near future, the relationship between customers and airports will certainly continue to benefit from the beacon technology. Nevertheless, they have to consider that consumers need to be convinced about the trustworthiness of an organisation when giving access to their personal information. The research has shown that transparency and reserved behaviour in terms of contact to the customer is the key to gain confidence.

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Bibliography

Babu, P. (2016). 7 Tips on Relieving Beacon Privacy Concerns of your Customers. Retrieved on 9th of October, 2016, from: http://blog.beaconstac.com/2016/08/7-tips-on-relieving-beacon-privacy-concerns-of-your-customers/

Babu, P. (2016). 10 Airports Using Beacons to Take Passenger Experience to the Next Level. Retrieved on 9th of October, 2016, from: http://blog.beaconstac.com/2016/03/10-airports-using-beacons-to-take-passenger-experience-to-the-next-level/

Beltman, R. & Peelen, E. (2013). Customer Relationship Management (2nd ed.). Edinburgh, United Kingdom: Pearson Education Limited.

Gregory, J. (n.d.). Airports and Airlines Using Beacon Tech to Send Location-Based Messages to Travelers. Retrieved on 9th of October, 2016, from: https://insights.samsung.com/2016/05/03/airports-and-airlines-using-beacon-tech-to-send-location-based-messages-to-travelers/

Samuely, A. (2015). Beacons will conquer travel marketing in 2015 despite privacy concerns. Retrieved on 9th of October, 2016, from: http://www.mobilemarketer.com/cms/news/software-technology/19513.html

Walton, J. (2015). Beacon benefits need explaining to outweigh privacy concerns. Retrieved on 9th of October, 2016, from: https://www.runwaygirlnetwork.com/2015/11/16/beacon-benefits-need-explaining-to-outweigh-privacy-concerns/

How low-cost-carriers survive in the airline industry by cross-selling

Airlines have faced a challenging time in recent years which forced them to cut costs and search for new revenue streams in order to stay in business (Amadeus, n.d.). Thereupon, airlines encountered cross-selling which can be described as the scale of products to current customers who are already purchasing one or more products from the supplying company (Beltman and Peelen, 2013). In the aviation industry this source of income is called ancillary revenue and is generated by activities and services beyond the simple transportation and includes for example commissions gained from hotel bookings, insurances or sale of frequent flier miles to partners (Sorensen, 2015).

A couple of years ago low-cost-carriers started to think out of the box and came up with innovative products for their customers in order to be more profitable. For instance, the Latvian carrier airBaltic launched their own taxi company due to the fact that taxi drivers in the city often charge visitors too much for rides and thus became a big competitor for local transport companies (Kollau, 2011). Furthermore, Scoot lunched a child-free zone in their planes called ScootinSilence and charges an additional 14ZSD per seat on top of the regular fare (Kollau, 2013). A Spanish low-cost carrier introduced a loyalty pass where customers can sign up for a recurring annual charge for a year of priority treatment (Tnooz, 2012). These examples show different ways of generating revenue where customers expand the products they buy from the company by buying a product from another category (Beltman and Peelen, 2013).

LCCs in particular are dependent from cross-selling as their costs cannot be covered by the revenue of cheap tickets. They rely upon a la carte activity by aggressively seeking profit from assigned seats, checked bags or extra leg room seating. Spirit Airlines for example announced a total revenue of 119$ per passenger in 2015 whereby 52$ on average was earned from additional features (Sorensen, 2016). Moreover, Ryanair generated in the same year almost $26bn from non-flight ticket items which represents 24% of their total income (Percival, 2016). Flag carriers that sell regular fares such as Lufthansa Group in Germany generate a similar revenue from ancillaries, but it represents in comparison to LCCs only 5.5% of their total income (Sorensen, 2016).

To conclude, airlines that continue offering low fares need to find their way to survive in this highly competitive market by selling ancillaries before, along and after the booking process. It represents the safety income which determines whether low prices can co-exist with airline profitability.

Bibliography

Amadeus (n.d.). Quantas cross-sell: Case study. Retrieved on 2nd of October from: http://www.amadeus.com/airlineit/docs/qantas_cross-sell_case_study.pdf

Beltman, R. & Peelen, E. (2013). Customer Relationship Management (2nd ed.). Edinburgh, United Kingdom: Pearson Education Limited.

Kollau, R. (2011). Austrian Airlines starts its own branded airport taxi service. Retrieved on 2nd of October from: http://www.airlinetrends.com/2011/04/09/austrian-redcab/

Kollau, R. (2013). Long-haul low-cost carrier Scoot takes a cue from AirAsia X with new quiet zone. Retrieved on 2nd of October from: http://www.airlinetrends.com/category/ancillary-revenues/

Percival, G. (2016). Ryanair’s ancillary revenue hits record level. Retrieved on 2nd of October from: http://www.ideaworkscompany.com/wp-content/uploads/2016/08/2016-07-21-Irish-Examiner.pdf

Sorensen J. (2015). Airline ancillary revenue projected to be $59.2 billion worldwide in 2015. Retrieved on 2nd of October, 2016, from: http://www.ideaworkscompany.com/wp-content/uploads/2016/04/Press-Release-103-Global-Estimate.pdf

Sorensen, J. (2016). The CarTrawler Yearbook of Ancillary Revenue. Retrieved on 2nd of October from: http://www.ideaworkscompany.com/wp-content/uploads/2016/09/2016-Ancillary-Revenue-Yearbook-R.pdf

Tnooz (2012). The global all-stars of upselling and cross-selling have tricks to teach the travel industry. Retrieved on 2nd of October from: https://www.tnooz.com/article/the-global-all-stars-of-upselling-and-cross-selling-have-tricks-to-teach-the-travel-industry/

DART principles: How Finnair and Helsinki Airport invite passengers to co-create new products

 

Many businesses are focusing nowadays on a close relationship with their customers. Co-creation is a business strategy which focuses on customer experiences by encouraging an active involvement from the customer to create new products and services (BusinessDictionary, n.d.). Finnair and Helsinki Airport came up with an innovative initiative in 2010 named “Quality Hunters” whereas Finnair started to look for applicants from all around the world to travel their network and share experiences with the aim to create new ideas (Loukas, 2013). According to Prahalad and Ramaswamy (2004), the success of co-creation is dependent on several factors which is described in the DART principles: Dialogue, Access, Risk and Transparency. In the next step, it will be discussed if the Quality Hunter programme meets these success criteria’s with the intention to recognize potential for improvements.

Dialogue requires a common language which permits a meaningful exchange and it involves interactivity, commitment, dedication of attention as well as resources (Beltman & Peelen, 2013). Markus Haapamäki, head of social media at Finavia, says that they would like to see an interaction with their passengers via social media in order to improve their travel experience (AirportWorld, 2013). However, when analysing for example the Facebook page of Quality Hunters, no dialogue or interaction between participants can be found which could be caused by a low number of followers.

Access to each other’s world allows faster, more efficient and better solutions to problems (Beltman & Peelen, 2013). Different social media channels such as blogs, twitter, Facebook and Pinterest boards are used in this initiative so that anyone can take part in the process. Everyone can share thoughts on travel, things that inspire or even irritate the customer and suggestions for solving certain problems (Qualityhunters, n.d.).

Involving customers and other organisations in a co-creative process is also linked with taking risks which makes risk assessment an important issue (Beltman & Peelen, 2013). As the applicants of the quality hunter programme travel a lot across their network, the chance that they face problems on their journey is certainly high. Furthermore, there are costs in the project such as free flights for the participants and salaries of employees which needs to be taken into account.

The customer needs to have a motivation and should consider the process as being mutual beneficial. By determining beforehand where the ownership of the outcome lies and what benefits there are for the contribution of customers, many problems can be prevented (Beltman & Peelen, 2013). According to AirportWorld (2013), Finnair wants to share accurate information with the public, allowing to become aware of who they are and what they can expect from Helsinki airport. Moreover, the applicants will benefit from the opportunity to test Finnair’s services and join them in exclusive workshops where they can develop the community’s ideas (Qualityhunters, n.d.).

Finally it can be said that access, risks and transparency are factors that are apparently met by Finnair. Nevertheless, there is potential for improvements in terms of interactivity and online engagement via their channels. The foundation for a successful co-creation was given, but the airline could have benefited from a larger amount of ideas by creating more awareness via social media across the globe.

Bibliography

AirportWorld (2013). QUALITY HUNTER. Retrieved September 24, 2016, from: http://www.airport-world.com/features/marketing-communications/2554-quality-hunter.html

Beltman, R. & Peelen, E. (2013). Customer Relationship Management (2nd ed.). Edinburgh, United Kingdom: Pearson Education Limited.

BusinessDictionary (n.d.). What is co-creation? definition and meaning. Retrieved September 24, 2016, from: http://www.businessdictionary.com/definition/co-creation.html

Loukas, N. (2013). Finnair and Helsinki Airport invite Quality Hunters to co-create new products. Retrieved September 24, 2016, from: http://www.airlinetrends.com/2013/10/24/finnair-helsinki-airport-quality-hunters-cocreation/

Qualityhunters (n.d.). What is Quality Hunters 2013?. Retrieved September 24, 2016, from: http://www.qualityhunters.com/about/

Frequent flyer data vs. value based segmentation: does the data of frequent flyer passengers provide a clear view of a loyal customer?

 

Treacy and Wiersema researched market leaders in a variety of industries and came up with three value disciplines which helps businesses to find the right position on their market. The customer intimacy strategy is characterised by the fact that a company builds up a strong relationship based on the knowledge of the individual customer (Beltman & Peelen, 2013). Airlines try to create this bond by frequent flyer programmes which provide different benefits to their loyal customers. Scandinavian Airlines for example just opened a city lounge for its frequent flyers in downtown Stockholm with open plan work areas and private meeting rooms where passengers can work and network (Kollau, 2016).

“Customer service causes loyalty that can’t be explained by low prices alone,” said Donna Conover, vice president of customer service at Southwest Airlines. If a company decides to adapt to a customer intimacy strategy, a great deal of attention is focused on the development of the desired customer base (Beltman & Peelen, 2013). FFP’s allow airlines to have access to valuable data about the customers travel patterns and behaviour and can therefore be considered as a CRM initiative (Tnooz, 2013). For this reason, one could assume that airlines can take strategic decisions based on this data. However, Killisly (2009) claims that many have found that it limits the ability to have a clear view of loyal customers as frequent flyer members may not be the most valuable customer. Several behaviour studies confirm that the choice of airline travellers is not only based on FFP’s but also on schedule, price, product attributes, service and individualisation. Segmenting customers on the basis of their values to the company instead of flown miles (current method of FFPs) could be therefore a more effective instrument for an airline (Tnooz, 2013).

According to Beltman and Peelen (2013), a company which employs a customer intimacy strategy looks at the life-time value of a customer. A value based segmentation model in the airline industry has been developed with which the total value of a customer to the company can be assessed on the basis of various parameters (Tnooz, 2013); the period since last purchase, number of purchases made within a certain period and the cumulative profit that the airline acquired from the customer over a given period. Through these parameters, an airline is able to calculate a so called Customer Lifetime Value (CLV) score which helps to predict future purchases of a customer.

Finally it can be said that FFP’s databases will remain important for airlines especially in the business travel sector and cannot be undermined. However, these programmes are commonly used by business travellers who are travelling on a regular basis. When it comes to leisure travel, which counts for most of the airlines as the larger segment, it should be realised that a value based approach is more applicable. The outcome of a value based segmentation provides indicators about the life-time value and thereupon the behaviour of a potential loyal customer can be determined.

Bibliography

Beltman, R. & Peelen, E. (2013). Customer Relationship Management (2nd ed.). Edinburgh, United Kingdom: Pearson Education Limited.

Killisly, N. (2009). CRM: Going Beyond a Frequent Flyer Program. Retrieved September 18, 2016, from: http://www.sabreairlinesolutions.com/pdfs/CRM-GoingBeyondAFrequentFlyerProgram_APR_2004.pdf

Kollau, R. (2016). SAS offers frequent flyers a space to meet and work in downtown Stockholm. Retrieved September 18, 2016, from: http://www.airlinetrends.com/category/crm-loyalty/

Tnooz (2013). The ultimate guide to airline customer relationship management and loyalty. Retrieved September 18, 2016, from: https://www.tnooz.com/article/the-ultimate-guide-to-airline-customer-relationship-management-and-loyalty/