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

The ‘Flying Club’ is the name of Virgin Atlantic’s FFP, which consists of the Red, Silver and Gold levels, where new members are given a red card and the status increases to silver and gold, as their RFV score increases. (Virgin Atlantic, 2006b)

BMI customers join the ‘Diamond Club’ (FFP) there are no tiers due to they switch to a single class service. (bmi, 2006a)

All three airlines have marketing partners within the travel and tourism industry; please view Appendix 6-8 for the details.  

The implementation of CRM begins with the data mart/warehouse which is used to collate information via queries, testing customer communications and other means of output. The third stage includes the customer service interface which includes elements such as reservations and customer service and the fourth stage the use of tailored touchpoints. (AAI, 2001b)

5.0 The use of data warehouse/data marts and software solutions

The CRM strategy helps to tailor and communicate benefits and services to customers in a timely order. Virgin Atlantic highlighted the ways it helps their organisation, as listed below:

• Administration of Membership Records  
• Advertising
• Marketing
• Public Relations
• Software Development
• Testing
• Research

Virgin Atlantic stores the information collected from their frequent flyer program in many different transactional databases. They have a data mart called Genio, which helps them control their customer data.

“Genio extracts snapshots of the transactional system and copies them into an operational data store… Genio “reshapes” the transactional data into structures and values that are fed into a multidimensional database to facilitate management reporting and analysis.”

Virgin’s OLTP database structure

BMI have also been using Genio data warehousing since early 1998, which had then used Genio only to solve their specific organisational data problems. It was initially used to handle the exchange of data between BMI’s Oracle and Essbase databases. It is used with numerous information systems to provide crucial ‘data ageing’ solutions. It holds the corporate data accessible to many employees. (Cummings, 1999)

Recently BMI has set a 10-year contract with Fujitsu in January 2006 to provide CRM applications including other IT services and products. They are likely to employ ‘Siebel,’ CRM software.

BA uses data warehouse in which databases are combined across an entire enterprise, where data marts focus on a particular subject or department. BA labels their data marts as ‘dependent data marts’, which are subsets of larger data warehouses. Here the company’s relational database and transactional data are kept. However, other data, not used for decision support is also stored in data warehousing.

This allows BA's marketers and analysts to manage customer communications and combine both operational and analytical customer management more efficiently.

The FFP programme will be part of many other programmes within the data mart, please refer to Appendix 9 for further information.

6.0 Operational and Analytical CRM

The initial information added on the FFP databases includes the data from the loyalty programme membership. 

The Internet is an important communication median between FFP members who are able to use the site to check their mileage, rewards and earning opportunities as well as enrolling new members online. This strengthens brand awareness and helps to acquire new members for its customer retention program.

Registered customers can receive account update, program information and special offers. The airlines respond quickly and appropriately, whilst providing their departments with the feedback needed to improve services.

BA’s Customer-enabled portal managed by SITA SC is where customers can book and manage their travel via its website. Important information is held for key customers and is used to identify groups of customers who are using the site so BA can market to other sectors. (SITA, 2005)

Virgin’s website , allows passengers to reserve and pay for tickets online as well as gain destination information. EDS' Air Transport Service Group maintains SHARES, the reservation and booking engine of Virgin Airways.

(Inside Panther, 2006)

Blue Sky introduced in 2003 is BMI’s e-enablement programme covering processes like e-ticketing, self-service check -in and online check-in.

Research shows that Virgin’s online booking system lacks efficiency and good quality data e.g. a customer received a reminder email with incorrect flight details. (Tuck, 2006)

When the ‘automated check in service’ (ACI) is used to check in passengers with their loyalty card this can give insights in to their needs and wants. 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.

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,’ 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: 

• 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.

Since 2005 Fujitsu has provided BMI with CRM software that generates an integrated view of journeys, profiles and behavioural trends so BMI can offer personalised services when used with loyalty cards.

The illustration, over the page shows how operational data communicates within the FFP system to produce analytical CRM.

Siebel (2005e)

7.0 Data Quality and Integrity

To ensure consistency and appropriateness of customer service BA carries health checks on their services to maintain valuable relationships with customers.

DataFlux, BA’s provider of data quality integration solutions, provides data profiling technology and provides an interface to uncover potentially problematic data (Cary, 2005)

Virgin Atlantic’s software solution ‘Business Objects’ provides an integrated BI platform that includes data integration, reporting, query and analysis, and performance management. (Business Objects, 2005)

The companies update customer details by sending them an email asking them which information is out of date. This gives the customer the opportunity to update and correct current details they have.

8.0 Touchpoint Analysis

Touchpoint is a means of contact between a customer and the company for any reason. Below is a generic diagram highlighting the touchpoint elements that airlines follow through the customer journey.

(Siebel, 2005f)

The FFP program is used to identify the customer value before targeting them with a combination of particular touchpoints. Database is used for direct marketing in the form of, emails, Mail, door drop around travel shops and local press and radio advertising

The graphic highlights the main touchpoints used by the companies to communicate to the customers at the differing stages of their journey.

(Siebel, 2005g)

The illustration shows the touchpoints made by the companies to maintain loyalty.  (Siebel, 2005h)

Viral campaigns are used by BA to increase customer reach and increase the number of opt-ins to the BA database and seat-sale awareness, e.g. Wimbledon sponsorships.

The airlines also market to travel agents through trade publications and support sales team with promotions.

Benefits from partner memberships are driven by passenger traffic that can be internalised from other carriers. This enhances operational performance and shapes the communication sent to customers.

BMI has the advantage of full marketing corporation from Star alliance, with respect to the FFP. Research shows that BMI do not have an integrated common information technology platform to manage the alliances. There is lack of cross over information so different messages are sent to consumers because of the amount of knowledge about where the customer is within the customer journey stage.

Virgin Atlantic and BA are part of bilateral groups as listed in Appendix 6-8.

The extent to which the airlines hold consumer information depends on the amount of group-specific variables and member specific variables they hold, which shapes their communication accordingly.

The purpose of the FFP is to keep customers and prevent them with flying with someone else. FFP’s are designed to ensure customer loyalty by offering various forms of offers.

9.0 Closed loop management

The airlines try to retain their customers by keeping them in a ‘closed loop,’ as shown below.

(Siebel, 2005i)

The example below is of BMI’ closed loop management.

• They create loyalty promotion such as advertise the frequent flier program where passengers can earn miles and therefore benefits each time they fly

• This is to encourage passengers to fly with them regularly, hence increasing loyalty

• They create and execute marketing campaigns to raise awareness of their loyalty programs and any partnerships they have e.g. bmi are partners with hotels such as the Hilton hotels and car rentals such as Avis

• BMI have a customer relations contacts team who deal with any queries or issue that passengers may have

• All members’ transactions such as the number of flights they take and information about them is processed.

• Results of their promotions are measured – for example has sales increased after their campaigns or advertising

• They manage Diamond Club, their frequent flier loyalty program

• Member profiles are then tracked and analysed for patterns, similarities and differences, as well as buying behaviours

• Finally members are identified for targeted promotion, for example different types of people.  As part of bmi’s FFP  they have a ‘high fliers’ section which is exclusively for PA’s and secretaries organising business travel

• The cycle continues and further loyalty promotions are created

BA and Virgin Atlantic operate in similar closed loop system.

• They create a loyalty program which will attract passengers every time they fly with British Airways, they can earn BA miles to redeem rewards for flights

• They encourage passengers to fly with them more, so that they are able to build high customer loyalty

• BA creates marketing campaigns to increase the image and loyalty of the airline and their partnerships with Hotels like Marriot, Radisson and Starwood. They also have connections with One World Partners and Car Rental Services.

• BA’s aim within customer relations is to maintain a relationship with its customers after they have travelled, and ensure that they wish to travel with BA again

• All members transaction of flights are now recorded and processed online so that customers can manage their account 24 hours a day

• The outcome of promotional campaigns are measured after such success for example increase in sale figures

• BA has a ‘check-in online’ service which allows members of the executive club to access their frequent flyer program. This also gives them the opportunity to view their statement and claim missing BA miles

• BA builds customer profiles so that they can track, update and record details on a regular basis. They also analyse buying behaviours.

• They have fully trained and experienced professionals to respond to your comments and concerns about your experiences with the airline. They also provide other departments with the feedback they receive from customers so that they can improve their services to meet customer’s individual needs

• Nevertheless, members are identified for targeted promotion in terms of different types of people such as an ‘On Business’ travel system. As a part of BA’s corporate travel they have organised a strategy which will make your company’s travel budget go further, by rewarding your company with On Business Points every time your employees travel with us.

• 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.

---