AirlineCRM-SiebelSystems-9_30_05

Customer Relationship Management in the Airline Industry

Jason SalfenDirector, Product MarketingSeptember 30, 2005

© 2005 Siebel Systems, Inc. Confidential. 2

Agenda

Why CRM Applies to the Travel Industry

What is “Customer Relationship Management”


Travel Market Analysis

Decreased Demand for Full-

Service, Hub-and-Spoke Carriers

Decreased Loyalty

Increased Competition & Price Pressure

Consolidation & Bankruptcy

Reduced Product Differentiation

Changing Channel Dynamics

Even though the market is expanding, carriers are still experiencing pressure from all sides.


Increase Operational Efficiency (Decrease

Costs)

Carriers’ Strategic Imperatives

Industry IssuesIndustry Issues

• Decreased demand

• Increased competition

• Price pressure

• Consolidation

• Decreased loyalty

• Decreased product differentiation

Strategic ImperativesStrategic Imperatives

Carriers strategic priorities are geared toward ensuring their near-term survival and laying the groundwork for a medium- and long-term revival.

Optimize Sales

Performance

Maximize Customer

Loyalty

Identify and Acquire

Profitable Customers


The Effect of the Internet

The Internet has increased the importance of building a strong brand and valued customer relationships.

If the customer only sees your name, logo and price, why will they choose your carrier?


Service Differentiation Stops Commoditization

83% of travelers say that personalized service and attention to their needs provides value. Value, rather than price, defines a good deal for customers1

Service differentiation is the foundation of brand equityBrand is a source of sustainable competitive advantage

BRAND EQUITY

Service Differentiation

Product Differentiation

time

“While consumers agree that price is important, they’d choose a slightly higher rate for added service”

Forrester, April 2002


Carriers’ Strategic IT Investments

The two IT investment areas that encompass the four strategic priorities previously defined are the two highest priority IT investments that carries plan to make.

Cost savings – 76% rate it priority 1 or 2Improved Service or Marketing – 70% rate it priority 1 or 2

Investment priorities for future IT projects High Priority Low Priority

54%

44%

23%

20%

19%

17%

11%

32%

26%

33%

33%

48%

24%

23%

12%

21%

29%

32%

26%

40%

22%

1%

5%

13%

7%

6%

12%

16%

1%

2%

2%

3%

16%

2%

2%

6%

1%

4%

12%

Short Term Projects withProven cost savingsCustomer Services or

marketing advantageSimplifying internal

processesRunning existing

infrastructureMedium Term Projects

to cut costsLong Term Strategic

infrastructure upgradesIntegration with alliance partners

'1' '2' '3' '4' '5' No answer

Source: 2


Carriers’ CRM Focus

CRM’s importance and priority is increasing within passenger airlines.

Expected demand for IT skills over next 2 years

80%

64%

62%

60%

60%

43%

4%

12%

26%

33%

30%

34%

51%

42%

4%

4%

6%

1%

1%

46%

8%

6%

1%

4%

5%

5%

8%

Web/open systemsapplications development

CRM/Customer Services

IT Strategy

Infrastructure/network

Business Analysts

Supplier & PartnerManagement

Legacy systems support(Coding TPF etc)

Rise Same Fall No answer

64% of carriers anticipate a rise in the demand for CRM / Customer Service-related IT skills over the next two years. 2, 3


Hosted Loyalty

Carriers increasingly are looking for a hosted Loyalty solution.

Source: 2

IT functions already moved/planning to move to ASP mode(Base: All respondents to SITA/Airline Business “Airline IT Trends Survey, 2004”)

58%

56%

31%

27%

15%

14%

12%

11%

11%

10%

9%

23%

17%

9%

5%

9%

10%

9%

19%

22%

27%

36%

56%

56%

55%

54%

52%

13%

13%

19%

20%

20%

25%

24%

25%

28%

Reservations

Departure control/ check in

Cargo reservations

Frequent flyer application

Revenuemanagement

Airline operations planning

Financial Systems

Engineering/MRO

Purchasing

Already moved to Plan to move Keep in house No answer

IT functions already moved/planning to move to ASP mode(Base: All respondents to SITA/Airline Business “Airline IT Trends Survey, 2004”)

58%

56%

31%

27%

15%

14%

12%

11%

11%

10%

9%

23%

17%

9%

5%

9%

10%

9%

19%

22%

27%

36%

56%

56%

55%

54%

52%

13%

13%

19%

20%

20%

25%

24%

25%

28%

Reservations

Departure control/ check in

Cargo reservations

Frequent flyer application

Revenuemanagement

Airline operations planning

Financial Systems

Engineering/MRO

Purchasing

Already moved to Plan to move Keep in house No answerAlready moved to Plan to move Keep in house No answer


Agenda

Why CRM Applies to the Travel Industry

What is “Customer Relationship Management”


Airline CRM Definition

CRM ≠ Frequent Flyer Program

Loyalty Program ≠ Frequent Flyer Program

A comprehensive customer loyalty management (or CRM) strategy and

solution manages all customers interactions in a consistent and value-

oriented manner


Can you tell the two airline loyalty programs apart?

#2#1

Number of partners

Credit card

Hotel

Air

Car rental

Financial services

100+

Yes

Yes

Yes

Yes

Yes

100+

Yes

Yes

Yes

Yes

Yes

Miles expire

Redeem points with partners

Blackout dates for reward travel

Not with activity

Yes

Varies

Not with activity

Yes

No

Points for domestic ticket 25k / 40k25k / 40k

Points for Europe & NA 40k / 60k / 100k50k / 80k

Points for Asia & NA 50k / 65k / 125k

60k / 100k

Number of tiers based upon recent travel

Tiers based upon lifetime travel

Tier bonuses

4

Yes

Yes

4

Yes

Yes

Accrued points vary by tix class YesYes

Example Promotions

Booking online bonus

Fixed point bonus for targeted segmentsPercentage bonus for targeted segments

Redemption discounts

No

Yes

Yes

No

YesYes

YesYes

#2#1Purchase miles

Transfer miles

Electronic upgrades

Family membership NoNo

YesYes

YesYes

YesYes

Transaction history

Point total

Update profile

Process point redemptions

Enroll in promotions

Request missing credit

Web site

Yes

Yes

Limited

Yes

YesYes

YesYes

YesYes

YesYes

Source: 4


Break The “Parity Deadlock”

Loyalty programs are losing their ability to provide competitive advantage – no longer a brand differentiator.

Loyalty programs have reached “parity deadlock”Minimal switching costs between programs

Current Loyalty Programs' Ability to Influence Customers' Behavior "A Lot"

0%

5%

10%

15%

20%

25%

30%

GroceryStores

DepartmentStores

SpecialtyRetailers

DiscountRetailers

Pharmacies

% o

f Mem

bers

Influ

ence

d

Less than 25% of retail shoppers say that loyalty programs have a major impact on their decision to shop at a particular store


Why Are People Loyal?

“Loyalty is a positive belief, generated over the course of multiple interactions, in the value

that a company and/or its products and services, which leads to continued interaction

and purchases over time.”

BeliefProvide Value;

“win-win”

Multiple Interactions


Customer Expectations

Allow me to contact you through the channel of my choiceRecognise and reward my valueUse the information you have about meTreat me as an individualTreat me consistentlySolve my problems first timeMake amends when things go wrong

Frequent travelers expect:

Siebel and IBMJune 2005


Travel Customer Management Continuum

CRM in passenger airlines extends beyond traditional sales, service, marketing and loyalty to include all of the touch points in a passenger’s travel experience.

Pre Post

Sales &Reservation

Check-In

Flight

BaggageService

Rewards

CustomerFeedback

• Baggage Information

• Lost Baggage

• Transfer to Partner • Claims

• Surveys

• In-Person

• Information

• Reservation

• Upgrades

• Aw

ards

• Personalized Service• On board sale• Arrival service• Connections

• Inf

orm

ation

• Pre

-Sale

s• S

ales

• Res

erva

tion

Wait

list

• Re-

Book

ing• R

efun

d

• Ground

Transporta

tion

• Security

Check

• Boardi

ng

• Upgrade

•Dire

ct

• Mai

lings

• eM

ail

• Com

pany

Pu

b

On Board

MarketingCommunication

Pre Post

Sales &Reservation

Check-In

Flight

BaggageService

Rewards

CustomerFeedback

• Baggage Information

• Lost Baggage

• Transfer to Partner • Claims

• Surveys

• In-Person

• Information

• Reservation

• Upgrades

• Aw

ards

• Personalized Service• On board sale• Arrival service• Connections

• Inf

orm

ation

• Pre

-Sale

s• S

ales

• Res

erva

tion

Wait

list

• Re-

Book

ing• R

efun

d

• Ground

Transporta

tion

• Security

Check

• Boardi

ng

• Upgrade

•Dire

ct

• Mai

lings

• eM

ail

• Com

pany

Pu

b

On Board

MarketingCommunication

Travel Customer Management Continuum


Carriers’ CRM Challenges

Carriers face several key challenges in the context of using CRM to carry out their strategic priorities: 5

Decreasing cost of serving customersMoving away from expensive, custom built systems to cheaper pre-packaged appsCost-effectively integrating multiple systems and improving cross-channel service

Unified view of the customerIntegrating multiple processes that cut across in-house and 3rd party systems

Customer knowledge Identifying the most and least valuable customers

Loyalty program effectivenessDecrease costsRetain most valuable membersIncrease members’ expenditures and purchase of distressed inventory

Differentiating the productUsing service to differentiate their product and, thus, justify a higher price

Raising customers’ switching costsCreate a unique offering that competitors cannot easily duplicate


CRM Architecture

• Customer Profiles• Transaction History• Contact History• Derived/External Info

Analytical ModelsData Warehouse

• Customer Profiles• Preferences• Loyalty Activity• Case Mgt

Operational Customer Database

• Marketing Offers• Prompts & Alerts• Product Info

Reservations Departure Control

Reporting & Analysis

• Segmentation• Lifetime Value• Predictive Modelling

• Operational• Analytical• Executive

Complaints Handling/ Case Mgt

OthersInteraction Mgt Lost & Found Cabin Service

ReportingSales

AutomationLoyalty

Administration

Sales Force

Contact Centres

(phone/ fax/ email)

Travel Centres Airport s In-Flight Web SMSKiosk

Multi-Channel Connectivity

Mail/ Fulfilment

House

Outbound Email

Campaign Management

Application Integration

Other Data Warehouse

Sources

Baggage Tracing

Touchpoints and Channels

CRM Applications

Core Airline Systems

Reporting and Analytics



Integrated Loyalty Management Solution

Loyalty Marketing Lifecycle

Measure Promotion’s Results and

EffectivenessManage Flexible Loyalty

Program

Track Comprehensive

Member Profiles

Identify Members for

Targeted Promotion

Respond to Customer Questions

about Promotion

Process Members’

Transactions and Accruals

Create Loyalty Promotion

Create and Execute

Marketing Campaign

Loyalty (FFP)

Analytics

Loyalty (FFP)Marketing

Call Center &

Web

Loyalty (FFP)

Analytics


Understand and Act Upon Customer Value

Full-service airlines must:Identify and understand high-value customersManage them through their lifecycle to maximise share of walletDeliver on their wants and needs

1 2 3 4 5 6Years

Price PremiumReferralsLower distributionCostsExtra SalesBase Profit

Profit by Customer LongevityProfit by Customer Segment

LeastProfitable

MostProfitable


Source: 6


Iberia’s Customer Experience Functionality

Iberia uses Siebel to manage most customer touchpoints.

VIP Lounge Room

Management

Claims Requests in

Airports & Iberia Offices

360º Customer Information Access &

Management

SMS With Cancellations to

High Value Customers

Upgrading & Lounge Access Campaigns to

High Value Clients

On-line Membership to Iberia+ at Every

Touchpoint

Personalize Flight

Reservations in Call Centers

Lost Baggage Request

Management in Airport

Flight Incident Compensation Management in

Airports



CRM Benefits

Decreased servicing costsReduced brand marketing spendIncreased revenue from target customers

Expect 2.5% increase in revenue$5bn passenger revenue, 40% from tracked customers, equates to $50m per year6

Source: 7



Contact Information

Jason SalfenDirector, Product MarketingSiebel SystemsSan Mateo, CA USA(650) 477-2511 [email protected]


Appendix

AppendixAppendix


LoyaltyAdmin

PartnersPortal

RelationshipMarketing

LoyaltyServiceCentre

CustomerRelations

ReservationsContactCentre

AirportTicketOffice

CityTicketOffice

Partner Accrual FilesPartner Enrolment filesPartner Profile Exchange

Retro Claims Responses

Partner Profile ExchangeRetro Claims Requests

Partner Accrual Confirmations

Customer Scores

Data Warehouse Extract

MailHouseUndelivered Email

Content & Contact Details

CustomerAnalytics

DataWarehouse

Campaign Details

Complaints Investigation

CUSTOMER SERVICEInteraction ManagementInteraction Management

Loyalty ServiceLoyalty Service

Lost & Found BaggageLost & Found Baggage

Cabin Service ReportingCabin Service Reporting

LOYALTY

Programme ManagementProgramme Management

Membership ManagementMembership Management

Accrual ManagementAccrual Management

Redemption ManagementRedemption Management

OperationalCustomerDatabase

CAMPAIGNMANAGEMENT

Campaign PlanningCampaign Planning

Campaign DesignCampaign Design

Campaign ExecutionCampaign Execution

Measurement & AnalysisMeasurement & Analysis

COMPLAINTSHANDLING

Complaints HandlingComplaints Handling

Pro-Active Recovery List

WebCase Tracking

Campaign Registrations

ExternalLists

Phone

Document Scanning

Fax

Email

Web Forms

Fulfilment Mail

Email

Phone Dialler

Fax

SMS

LoyaltyPartners

Prospect Lists

In-Flight LoungeBaggageServices

AirportServiceDesk

MobileAirportStaff

ReservationsRedemption Bookings

Booking Enquiry

Profile Extract

Flight Activity

Profile ExtractDeparture

Control

FinancialsPostings

Undelivered EmailContent & Contact Details

PaymentGatewayCredit Card Authorisations

Email Server

ExternalInterfaces

ApplicationUsers

InternalInterfaces

Transactions:• Applications• Profile Changes• Redemption Bookings• Retro Claims• Queries• Complaints• Campaign Registrations• Case Tracking

Inbound & OutboundChannels

Transactions:• Membership Kits• Statements• Offers• Replies• Information



Siebel Loyalty Management

Partners

• Enroll members

• Send transactions to the host organization

• Approve joint loyalty promotions

• Manage service requests

• Approve transactions

• Manage products

• Collaborate on servicing the customer

MembersCarrier

• View complete member profile

• Define tiers

• Enroll members

• Reward behavior

• Create targeted promotions

• Define accrual and redemption rules

• Service a member’s request

• Join program

• Keep profile up to date

• Conduct web transactions

• Enroll in loyalty promotions

• Redeem rewards

• Refer friends

• View statements

• Create Service Requests

• Set contact preferences

Enterprise Analytics and Data Integration Platform

Rules Rewards Tiers Member Profiles Eligibility Promotions Transactions Point Expiration

Loyalty Manager Loyalty Member Portal Loyalty Partner Portal

Loyalty Engine


Customers Using Siebel in Their Loyalty Programs

For years companies in multiple industries have been using Siebel to help manage their loyalty programs.


CompanyCompany Objectives / IssuesObjectives / Issues

One of the world's oldest operating airlines, was established on 1st November, 1923. Finnair's route network covers about 50 int’l destinations and it carriers over 7 million passengers each yearFinnair's major shareholder is the Finnish government with a 58.4 per cent holding 9,000 employees worldwide1.7 billion Euro in revenues

SolutionSolution

Complete Loyalty management solution from Siebel that will generate significant cost, revenue and customer satisfaction benefits5% improvement in top-tier loyalty promotion response rates72% reduction in time required to create complex promotions 13% improvement in mid-tier and lower tier loyalty promotion response rates42% reduction in system costs

Improve relationship with customers and partnersIncrease sale of expiring inventory via real-time, targeted promotionsProvide complete loyalty management solution Decrease system costs

Outdated, expensive loyalty applicationInflexible rules that could not adapt to changing customer needs and competitive landscape

Objectives

Issues

Siebel Loyalty @ Work in Passenger Airlines

“With Siebel Loyalty, we will be able to ensure that the right customers receive the right promotions that increase customer lifetime value while delivering a superior customer experience at a much lower cost."


Siebel at Iberia



Sources

1. StrategyOne Survey commissioned by Wyndham International, May 2002

2. SITA / Airline Business IT Trends Survey, 20043. “The European Passenger Airline Market – A High-Level

Assessment of How Siebel Can Profit”, Siebel Systems, June 2004

4. Company FFP Web sites and calls to customer services5. “CST Airline Industry Summary”, Siebel Systems, 9/30/20046. IBM Travel industry reports and analysis (not published)7. McKinsey, CRM in the Air, 2002

AirlineCRM-SiebelSystems-9_30_05

Documents

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