Airline Industry: Let’s Get Phygital

Nowadays delivering value and ensuring customer engagement in the airlines industry is more important than ever. The market has become highly competitive, and both traditional and low-cost carriers need to differentiate themselves through customer experiences. One of the ways this result could be achieved is by effectively building relationships with a use of customer engagement arenas.

Physical Arena

For many years customer engagement arenas have been divided into digital physical (Bhalla, 2014). When it comes to physical spaces in the airline industry, it is most often referred to the in-plane or airport experience. Customer engagement in such spaces would occur through service, and tangible items that shape the experience a customer would have while flying. Many attributes, some of which are seats, meals, baggage and airline attendants, contribute to how clients perceive the flight and its value, and consequently, shape their image of a brand. The inflight product and customer service infrastructure at the airport are examples of the physical product that airlines not only provide, but can also control.

Era Of Digitalisation

The era of digitalisation has changed the way airlines engage with their customer. The buying process, physical products and face-to-face interactions started to shift since the rise of online booking systems and meta-search engines. The era of digital arenas in the airline industry truly began in 1964, when American Airlines introduced the first computer reservation system (Hanke, 2016). Since then technology has influenced the use of websites, social media and mobile apps, and encouraged brands to engage with their customers in digital arenas. This has been a very successful development in the customer relationship management field, and has allowed airline companies to use real-life data to communicate offers and flight information to their customers, and use digital platforms to drive customer engagement.

New Solution: Phygital

However, physical and digital arenas have witnessed a large lag between them, leading to mostly web-focused customer engagement. Although being connected has become an inevitable part of every traveller’s journey, physical products are re-gaining their value (Wiedmann & Labenz, 2016). As a result, a new customer engagement concept, known as phygital, has been introduced. The goal of this strategy is to blend online and offline worlds by leveraging benefits of digital arena into a physical space to give multisensory experiences to customers. Stimulating environments allow travellers to immerse themselves in the spirit of the brand, and become aware of values and products offered (Heywood, 2016).

Phygital: Case Of KLM

An example of a company that has incorporated traditional and innovative solutions into their business is KLM. In 2014 the Dutch airline launched a ‘Live High Five’ campaign, which invited customers on two opposite sides of the world, in Amsterdam and New York, to give a perfect high five. Participants’ efforts were judged the computer for timing and precision, and the perfect high fives were awarded with two flight tickets to Amsterdam/New York. By using interactive HD video and audio installations at physical locations in USA and The Netherlands, KLM easily and effectively connected total strangers in real-time. Experiences such as this one have contributed to KLM brand identity, created unforgettable memories for the participants, engaged large numbers of international customers, and have gone viral, thus promoting the brand and product (KLM, 2014). The full immersion, obtained by emerging digital and physical arenas, significantly changed customer engagement, making it easier for KLM to interact with clients; the airline managed to bring the world closer together and improve its customer relationships.

To conclude, in the era of digitalisation business can differentiate their customer experienced by combining the online and offline worlds. Interactive and innovative campaigns that merge both digital and physical arenas play a major role in convincing the customer to spend time and money on the specific airline, as well as increase brand loyalty and knowledge.

Bibliography

Bhalla, G. (2014). Collaboration and Co-creation: New Platforms for Marketing and Innovation. New York: Springer New York.

Hanke, M. (2016). Airline E-Commerce: Log On. Take Off. New York: Routledge.

Heywood, L. (2016). Retail Week Connect: When digital and physical collide. London: Retail Week Connect.

KLM. (2014, 09 08). The Perfect High-Five – Not as easy as it looks. Retrieved 10 09, 2016, from KLM: https://blog.klm.com/the-perfect-high-five/

Wiedmann, K., & Labenz, F. (2016, 01 20). Soothe Your Senses: A Multisensory Approach to Customer Experience Management and Value Creation in Luxury Tourism. Retrieved 10 09, 2016, from European Business Review: http://www.europeanbusinessreview.com/soothe-your-senses/

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

 

Airline Industry: Would You Like A Side Of Empathy With That?

Nowadays businesses around the globe are often so driven by the need for power and growth that social norms are often exchanged for market norms. And even if the industry leaders agree that in the market as competitive as air travel, customer experience is the main competitive advantage, basic human emotions, such as empathy, are being left out.

Empathy is described as the human capacity to experience another person’s condition from his/her perspective (Peelen & Beltman, 2013). Particularly in the business environment this refers to demonstrating sympathetic feelings towards the customer and his problems, and trying to understand both, positive and negative emotions that may occur.

The Customer Empathy Map, introduced by Osterwalder and Pigneur (2010), encourages companies to look at the world from the emotional, physical and social experience of the client (How do they understand this situation? What is the customer feeling? What are his needs?). By using the empathy map to portray flyers during flight delays, cancellations and other times of distress, and approaching them with compassion, airlines move towards their satisfaction as well as implementing successful customer relationship management strategies.

One of the companies that has integrated empathy within its core strategy is Lufthansa. Lufthansa is now the largest airline in Europe in terms of passengers and fleet size, and one of the best-rated service providers. Alexander Schlaubitz, the company’s Vice President has once said:

“There are three kinds of people at the airport – excited, nervous and sad. Empathy for all three is our goal” (Awal, 2016).

The company aims to differentiate itself among other airlines for extraordinary customer service provision, and it continues to prioritise the needs and wants of Lufthansa passengers. Lufthansa is one of the first airlines in Europe to take a step beyond advertising and marketing campaigns, and to spread basic human ethics and emotions like empathy, sincerity, support and a sense of reassurance.

JetBlue is another example of a company that treats its customer with compassion, and it all started with the management member experiencing the flight as a client. Truly acknowledging and addressing someone else’s pains and frustrations is hard, and in order to better understand his clients’ perspective, the company’s CEO David Neeleman used to routinely board one of JetBlue flights. Rather than boarding the first class, he would sit in the middle seat at the rear of the plane- one of the most avoided spots by passengers. He would observe the disruptions from the client’s point of view, have conversations with other passengers to hear about their thoughts, and often fly as a stewardess and deliver snacks and drinks himself. These three different angles have allowed him to ‘step into the other person’s shoes’, and become an expert at intuiting customers’ discomfort and acting on it (Pomerenke, 2014).

Overall, no airline can completely eliminate delays and cancellations, nor basic human errors or discomfort. However, by taking positive actions and understanding the customer experience through empathy, airlines can control the ways that passengers experience these events. In addition to increasing customer satisfaction and loyalty to the brand, airlines would benefit from a unique competitive advantage and a strong brand reputation.

Bibliography:

Awal, V. (2016, 03 04). Innovation starts with empathy: Alexander Schlaubitz VP Global Marketing Lufthansa. Retrieved 09 23, 2016, from Exchange4Media: http://www.exchange4media.com/digital/innovation-starts-with-empathyalexander-schlaubitz-vp-global-marketing-lufthansa_63575.html

Beltman, E. P. (2013). Customer Relationship Management. Harlow: Pearson Education Limited .

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

Pomerenke, J. (2014, 11 06). Empathy in Business Is Vital to an Entrepreneur’s Success. Retrieved 09 24, 2016, from Entrepreneur: https://www.entrepreneur.com/article/238935

 

Customers at the centre of business: Is the need to be treated well becoming more important than travelling low cost?

While the aviation industry continues to grow at an incredible rate, many airlines face intense competition. Once companies could differentiate themselves by price or service, but in nowadays market, with over 5,000 airlines worldwide and more than 3.6 billion yearly passengers, the key to success is a customer centric CRM strategy. 

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Carly Chynoweth, a freelance business and management journalist, indicates that consumer needs have witnessed in a significant shift in the recent years, leading to higher service expectations. However, many companies fail to think innovatively about what their customers actually want, and tend to talk more about being customer-focused than actually implementing it in the core strategy (Chynoweth, 2015). Particularly in the airline industry, being customer centric can help companies reduce costs, gain loyal customers and increase revenue (Birdsong, 2015), but it also means delivering offers, services and products based on their desires, providing individual treatment to clients, and ‘walking the extra mile’ to enhance their experience. In fact, in today’s market, delivering great customer value in the aviation industry is not anymore an option- whether flying with a low cost or luxurious service provider, passengers will gladly change the company for better service.

Low Budget Airlines

One of the companies that has been widely known for its low costs as much as for low service provision is Ryanair. Headquartered in Dublin, Ireland, over the years Ryanair has gained a title for being the ‘world’s most hated airline’ (Business Insider, 2010). The company’s solely sales-driven business strategy, the lack of customer management, frequent flyer programs, customer accounts and segmentation were some of the main drives for low customer experiences, yet the company still remained among the most popular European airlines for its low fare. However, as the customer behaviour began to change, and the company sales dropped significantly, Ryanair started to move towards raising the customer service bar by using current technologies to simplify the booking process (Mitchell, 2015). For Ryanair, and other low-budget businesses in the airline industry, a rising need for customer engagement and improved service are major challenges that require a carefully planned CRM strategy. Nevertheless, they seem to be successfully incorporating customer insights to reduce the gap between low and traditional service providers.

Traditional Airlines

A more upmarket airline that has also dealt with challenges in the industry is KLM. Since 2001 more traditional airlines suffered from weak demand because of the emerging low budget competition, such as previously mentioned Ryanair. KLM started cutting the costs, but soon discovered that this would not ensure long-term success. Dutch airlines decided to stabilise its market position by changing its CRM vision, mission and strategy. Personalised and consistent service delivery, customer profitability based steering and being a customer centric organisation represented the three district strategic pillars of company’s long term goals (Riseley, 2004). Soon after the plans were put into action, KLM witnessed the success in the market, and was acknowledged for its comprehensive CRM strategy (Gartner, 2004). Customer focused initiatives aimed at enhancing the travel experience, such as Meet & Seat, Lost & Found, continue to be at the core of KLM, leaving its passengers more than satisfied with the service received.

To summarise, the developments in consumer behaviour, and their preference for higher service has had a significant effect on the airline industry. Both, low budget and traditional airlines show that customer centricity is gaining high importance in today’s business world. It does not only give a competitive advantage to the company, but has become a tool in creating unique experiences, increasing customer satisfaction, growing market share, and, above all, stabilising the customer relationships between companies and clients in the airline industry.

Bibliography

Birdsong, D. (2015). Customer Bonding: Why Customer-Centric Airlines Will Lead The Industry. Retrieved 09 17, 2016, from Ascend: http://www.ascendforairlines.com/sites/default/files/12-Customer%20Bonding.pdf

Business Insider. (2010, 12 02). The 10 Worst Airlines In The World. Retrieved 09 17, 2016, from Business Insider: http://uk.businessinsider.com/worst-airlines-in-the-world-2010-12?r=US&IR=T#1-ryanair-10

Chynoweth, C. (2015, 09 08). Putting customers at the centre of business. CUSTOMER EXPERIENCE & LOYALTY .

Gartner. (2004, 05 10). KLM Royal Dutch Airlines Wins Gartner CRM Excellence Award 2004 . Retrieved 09 17, 2016, from Gartner: http://www.gartner.com/newsroom/id/492030

Mitchell, N. (2015, 06 14). Ryanair (Finally) Discovers The Benefits of Customer Service. Retrieved 09 17, 2016, from MyCustomer: http://www.mycustomer.com/community/blogs/customer-technology/ryanair-finally-discovers-the-benefits-of-customer-service

Riseley, M. (2004). KLM Demonstrates the Power of Persuasion to Drive CRM Success. Stamford: Gartner Inc.