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Relationship Management - investigating in to the application of the frequent flyer programme, a CRM based database and the related strategies in the Airline sector

Extracts from this document...

Introduction

1.0 Introduction Customer Relationship Management is a management process, which enables organisations to identify, attract and increase the retention of customers by managing customer relationships. This report will be investigating in to the application of the 'frequent flyer programme,' a CRM based database and the related strategies in the Airline sector. Free flight programmes give airlines customer loyalty by knowing who their customers are, through the use of database marketing. It is a key part of CRM strategy ensuring near-term survival and medium and long term revival for airlines. (Siebel 2005a) The report will concentrate on, BA airlines, Virgin Atlantic and the growing BMI company, UK's three key players in the fragmented airline industry. This is due to the variety of market segments their serve to, competing against increased competition, decreased product differentiation, demand and loyalty, with increased price pressures. (Siebel 2005a) 2.0 Market Overview Air travel represents a minor mode of transport for UK travel and tourism industry. (Euromonitor, Sept 2005a) Air transport sales amounted to �9 billion in 2004 (Euromonitor, May 2005a) According to Euromonitor (May 2005b) it is the preferred mode of arrival in the UK accounting for 73% in 2004. It held the largest share of departures at 76% in 2004, with a significant rise of 26% over four years. (Euromonitor, May 2005c) British Airways (BA) is the dominant UK airline; its share by turnover was 52% in 2004 against 54% in 2003. This decline in shares is to the low-cost carriers, who are continuing to grow their share, such as EasyJet and Ryanair. Both airlines hold 16% of the market share between them. (Euromonitor, May 2005d) The second largest operator in the UK is Virgin Atlantic which has increased the value of shares from 10% in 2001 to around 17% by 2004, due to continued investment in new airlines and products. (Euromonitor, May 2005d) British Midland, 'BMI,' holds 5% of the UK airline value and operates over 2,000 flights per week mainly in Europe in addition to their budget flights with the 'bmibaby' brand. ...read more.

Middle

Most companies use this technique. ACI holds the following information: * The flight number * Passengers name * Seat number * Flying club number * Gender information * Baggage information Virgin Atlantic's customer recognition programme 'UNIQ', is linked to the ACI system so employees are able to identify passengers who require special treatment. This segmentation method is used for customers travelling on VAA routes.6 The numbers of UNIQ customers are recorded by the premier service team on to the lotus notes database at London Heathrow. This is linked to the CRM database, 'Avenue,'7 which incorporates the sales structure and analyses sales performance. It's used to plan the delivery of products and services that customer's want. Once BA's raw operational data is fed in to the database it is cleaned using proprietary software and a single customer view is created as part of the CRM strategy to understand the customer behaviour. Additional variables added on the database include:8 * Gender * Type of trip * Purpose of trip * Domestic/short European hop/long haul trip Life-stage, Lifestyle and Geo-demographics are used to support the primary data. Data exploration techniques are applied once the database has been cleaned; housed and enhanced, using a strategic communications plan. BA's bespoke value-behaviour segmentation model is used to understand and identify consumer relationships, this requires the customer information, including: * Number of flights they took * The flight destination * Length of trip * Seat Class * Number of people on the booking * Value of transaction BA's ICM and Teradata CRM supports email, direct mail, call centre and web channels, this technology supports e.g. * Online purchase, check in, and loyalty club registration * Value segmentation * Trend forecasting * Rapid campaign creation and implementation * Automated self service, using BA's CEBA (Customer-Enabled BA) * Personalised communication and customer service * Direct email campaign execution * Personalising website 'landing pages' Identification of special events in the year is used to predict forecasts and how the FFP data would be used to compensate for unusual days and/or adverse weather conditions. ...read more.

Conclusion

* Companies can save money by redeeming points for a range of travel products like reward flights, reward flight upgrades and Hotel accommodation. This service is open to a company with five or more travelling employees. * The Loyalty Marketing Lifecycle continues and more promotional activities are created 10.0 Conclusion The CRM not only depends on the database management but also the relationship management strategy and the contacts and communications. (AAI, 2001a) In reality there are many databases used by the companies which are interconnected, it is the ability of the system that can hold and help to translate the data in to useful meaning, which largely depends on the manager's aptitude to use the system to its full potential. It requires cross-communication between the differing managers and staff working around the specific database. Each database is likely to have a specific objective for storing particular information e.g. check in system, inbound calls, promotions etc. Despite analysing each database the core activities surround the inter-relation of the information between these databases. Customer information is segmented in accordance with customer buying behaviour and location, which is important because of their geographically diverse operations. 1 Please refer to Appendix 1 and 2 for graphical representation of CRM's importance within the airline industry and the increased focus on FFP as part of CRM strategy. 2 RFV stands for Recency, Frequency, Value 3 Please refer to Appendix 3-5 for the companies loyalty program benefits 4 Please refer to Appendix 10 for the application forms which the companies ask to fill over their Internet sites. 5 Please refer to Appendix 11 for a comparison of the online booking system and information that is required. 6 Please refer to Appendix 12 for the different headings that fall under UNIQ. 7 This is part of Saratoga's off the shelf package (Saratoga, 2000) 8 This is collected via promotions and campaigns 9 Please refer to Appendix ?? ?? ?? ?? ...read more.

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