FINAL APPROACH
BEST PRACTICES IN
CUSTOMER-CENTRIC
REVENUE MANAGEMENT
AIRLINE BRIEF
Evert de Boer, General Manager,
Global Business Development — Travel
Joanne Ward, Director,
Strategic Development and Innovation
B / Final Approach
YOUR
BUSINESS
RESULTS
DELIVERED
OUR
INSIGHT
aimia.com
© 2014 Aimia Inc. All Rights Reserved.
Final Approach / 1
INTRODUCTION
On any given day, you can ask every passenger on any
given airliner what fare they’ve paid, and you’re likely
to get as many different answers as the number of
passengers willing (and able) to tell you. This plethora
of fares is a product of complex revenue management
systems evolved by airlines to optimize seat revenues.
But is the current system of management the revenue
endgame? Or is there an opportunity to look beyond
traditional accept-or-reject decisions to build a more
customer-centric revenue management system —
one that builds on new customer insights to drive
management decisions and uncover new sources
of revenue?
With its high fixed and low marginal cost, the airline
industry by design is greatly dependent on revenue
(or yield) management techniques to optimize profits.
For decades, airlines have been trying to sell seats at
the right price through either accepting or rejecting
a booking request based on revenue forecasts. This
accept-reject decision has become a question of
valuation: what is the value of selling the seat now,
versus the expected value of selling the seat later?
Answering this question has become the raison d’être
for the bid pricing functionality that traditionally guides
revenue management decisions.
Traditional revenue management approaches
optimize the right mix of fares and load factors
without accounting for the value of customer
relationships. In a customer-centric approach to
revenue management, by contrast, selling decisions
also incorporate the data points that predict the
peripheral or associated value of individual customers.
What is the likelihood that a customer will purchase
ancillary revenue products? What is the customer’s
predicted lifetime value? These are a few of the
questions central to customer revenue management.
A better understanding of customer value will enable
airlines to develop and offer products, features, and
communications that match customer needs. To
obtain this understanding, airlines must borrow a
page from retailers who have become adept at mining
customer data for insight to build sustainable customer
relationships that in turn drive more profitable results
from tactical offers. Customer revenue management
offers airlines both greater opportunity in traditional
revenue management, as well a chance to explore new
avenues of profit. For airlines looking to break out of
the traditional yield management box, it may offer the
optimal final approach.
Table of Contents
1 Introduction
2 Instrument Flight Rules: Airline Insights Today
4 The Customer-Centric Approach
6 Customer Insights: A Retail Case Study
7 The Power of Customer Insight
8 From Revenue Management to Customer Management
9 The Four Pillars of Customer Revenue Management
10 Moving Beyond Traditional Revenue
11 Maximum Headroom
12 Conclusion: From Theory to Practice
© 2014 Aimia Inc. All Rights Reserved.
2 / Final Approach
INSTRUMENT FLIGHT RULES:
AIRLINE INSIGHTS TODAY
Airline pilots fly under one of two
sets of flight rules. When flying under
Instrument Flight Rules, pilots must
submit in advance and adhere to a
meticulously detailed flight plan.
When flying under Visual Flight
Rules, which rely on observation
of their surroundings, pilots have
more flexibility in their flight plan
and approach. Both sets of rules are
essential to flying safely. But only
when flying under Visual Flight Rules
can the pilot see the big picture —
and all the opportunities available.
Traditional revenue management
systems operate more like
Instrument than Visual Flight Rules.
So when we think of companies
that put deep customer insights at
the core of their business, airlines
typically don’t make the top of the
list — and they arguably lag behind.
What systemic roadblocks have
made airlines laggards in the mining
of customer data for insight?
Here are a few of the key legacy
business issues that prevent
airlines from evolving from
traditional to customer-centric
revenue management:
> Airlines build for scale. Airlines
build products and services for
scale, rather than to address the
needs and values of individual
customers. That is, they create
relatively uniform products and
sell them to as many customers
as possible at the highest possible
price. The complex revenue
management systems underlying
the airline business tend to be
customer-agnostic — as they
make accept-or-reject decisions
based on a bid-price system,
they don’t differentiate between
customers of differing value.
When we think of
companies that put deep
customer insights at the core
of their business to shape new
products that meet consumer
needs, airlines typically don’t
make the top of the list — and
they arguably lag behind.
> Airlines have trouble connecting
the dots. Data collection isn’t
necessarily the issue — airlines
possess a wealth of data on
their customers. Their challenge
is to connect the data “dots” in
a way that helps them develop
a complete customer view. A
significant portion of airline
product distribution occurs
though third-party channels,
which limits the airlines’ ability
to build insight. Meanwhile, the
wealth of data available in various
legacy systems, such as historical
transactions and events, often
remains unconnected to individual
customers, and thus provides little
useful insight.
The exception to this rule is
the frequent flyer program
database, which typically unites
demographic, historical flight, and
program transactional information
into a more complete customer
© 2014 Aimia Inc. All Rights Reserved.
picture. Without integrating other
important operational information
such as service interruptions or
lounge usage, however, insight
is left on the table. In addition,
many airlines do not integrate
behavioural and attitudinal
information to gain a 360 degree
customer view.
> Airlines are focused on customer
friendliness, not customer
insights. In 2007, Forrester
identified US-based airline JetBlue®
as a standout in the industry
for its customer-centric culture
that drives business results.
Well-known examples include the
use of JetBlue employees (known
as ‘crewmembers’) as brand
ambassadors, and the frequent
interactions with customers by
all levels of JetBlue management.
Over the years, other airlines have
similarly innovated, resulting in
lower costs and improved customer
experiences. However, there are
two primary reasons why these
cost savings often fail to translate
into improved margins. First, cost
efficiencies typically translate
into lower prices for travelers;
according to a 2013 report from
the International Air Transport
Association (IATA), since the 1970’s
the inflation-adjusted cost of air
travel has been cut in half. Second,
the competitive advantage derived
from product innovations, such as
reclining beds in business class, or
new aircraft like the Airbus A380,
typically has a short shelf life.
Fortunately, there is a real
opportunity for airlines to move
beyond the panacea of cost
reductions to find innovative sources
of value. To do so requires moving
beyond a uniform or tier-segment
approach to a customer-centric
approach — one that uses real-time
data to deliver a differentiated
customer experience based on
value. By leveraging individual
customer insights, revenue and
customer experience, managers
can unearth fruitful harvests for
airlines seeking to generate more
lasting value.
Final Approach / 3
The objective of revenue
management is to sell the
right inventory to the right
consumer, at the right time
and for the right price.
The application of
revenue management
principles in the airline
industry has been a major
source of price dispersion:
the variation in pricing
charged to different
passengers on the same
airline and route.
36%
Percentage of an airline’s
mean ticket price that is the
expected difference in fares
paid by two passengers
selected at random
on the same route.1
"Competition and Price Dispersion in the U.S. Airline Industry,"
Borenstein and Rose, Journal of Political Economy, 1994.
1
© 2014 Aimia Inc. All Rights Reserved.
4 / Final Approach
THE CUSTOMER-CENTRIC APPROACH
Customer analytics have become
so sophisticated that marketers
can often anticipate major
events in their customers’ lives
— a pregnancy, a marriage, the
purchase of a new home — with
uncanny precision. When used
to build real relationships, such
advanced analytics offer increased
value for both brands and their
best customers. The good news
for airlines is that new sources of
data, new technologies, and rising
competition have all combined to
make customer-centric revenue
management an attractive option
for airlines looking to tap the
additional sources of value inherent
in loyal customer relationships.
Historically, airlines have struggled
to benefit from data analytics for two
primary reasons: first, they’ve lacked
the ability to integrate data from
different sources in a coherent and
cost-effective way; second, they’ve
lacked the ability to convert data
insights into actionable marketing
or customer service approaches.
Large investments in CRM and data
warehouses have likewise had a
limited impact on airline decision
making, and typically were used
only by a small group of specialized
marketing and communications
analysts. The good news is that
collecting and mining passenger data
for insight is now easier and more
attractive for airlines than at any time
in modern airline history. Here are five
reasons why airlines should begin
tapping passenger data sooner,
rather than later:
> Improved data access. A new
generation of technologies offers
airlines powerful methods to
process both structured and
unstructured data. Fast and
flexible tools for intuitive data
exploration and visualization now
cater to non-technical business
users. Airline marketers and their
service providers now possess
the power to manage, analyze,
and transform data to unearth
actionable customer insight.
In assessing customer
revenue potential, airlines
should look beyond traditional
yield management forecasting
to consider total customer value,
including the potential to generate
non-core revenues. New non-core
revenue opportunities will arise as
airlines learn to responsibly share
customer data with third-party
marketing partners to offer
highly targeted, relevant, and
value-added offers.
© 2014 Aimia Inc. All Rights Reserved.
to interact directly with their
customers. Instead of offering
a one-size-fits-all marketing
approach, airlines will soon
be able to offer customized
pricing and product solutions
to their best customers through
applications powered by real-time
analytics and sophisticated
recommendation engines.
> The rise of non-core revenues.
Major carriers are increasingly
dependent on ancillary revenues.
A research report by consulting
firm Ideaworks revealed that
the airline industry’s estimated
2013 worldwide haul in ancillary
revenues of $42.6 billion
represented an 89 percent
increase over 2010’s estimate
of $22.6 billion. Current
revenue management
techniques are ill equipped to
capitalize on this increase. With
record-breaking load factors
across the industry, short-term
industry growth will come
primarily from increasing
average passenger yield. In
assessing customer revenue
potential, airlines should
look beyond traditional yield
management forecasting to
consider total customer value,
including the potential to
generate non-core revenues.
These revenue opportunities
will arise as airlines learn to
use customer data to offer
highly targeted, relevant, and
value-added offers.
> Rising customer expectations.
While customers are now
more willing to share personal
information, they increasingly
want something in return. Today,
customers expect companies to use > New competition. For airlines, the
competitive landscape is changing
this information to provide richer
faster than their ability to react.
rewards, more relevant offers, and
Big Data search, online retail, and
more memorable experiences — at
social media companies, with
the time and through the channel of
their ability to generate terabytes’
their choosing. To meet these rising
worth of customer data insights,
expectations, airlines must create
could prove formidable players
richer customer profiles — and then
in the travel value chain. Their
act on these insights to deliver
deep pockets could potentially
increased relationship value.
jeopardize the airlines’ ability to
continue to drive the majority of
> New communication channels.
bookings through direct channels,
New social and mobile channels
as well as reduce their ability to
combined with changing
reap the rewards from their own
customer attitudes now
customer data.
make it possible for airlines
Final Approach / 5
THE ORIGINS OF
REVENUE MANAGEMENT
With the introduction of discounted airfare products in the late 1960s,
optimizing the mix between discounted and full-fare products became
the key question for airline operators. In what arguably became the first
expression of revenue management, in 1972 Ken Littlewood, an employee
of BOAC (the predecessor to British Airways) devised a rule that set the
optimal number of discounted versus full-fare seats.
Named after its inventor, Littlewood’s Rule proposed that an airline should
continue to sell discounted seats as long as the revenue value of those
seats exceeded the expected value of future full-fare bookings. The key
component in the equation was predicting how many full-fare tickets the
airline could sell in order to optimize the full-revenue potential. Offer
too few discount fares, and the airline would have an airplane leave
the tarmac with empty seats; offer too many discounted fares,
and the airline either loses money by displacing other full-fare
passengers, or frustrates flyers by overbooking flights.
© 2014 Aimia Inc. All Rights Reserved.
6 / Final Approach
CUSTOMER INSIGHTS: A RETAIL CASE STUDY
With its adoption of core revenue
management principles, the airline
industry arguably gave birth to the
disciplines of both modern loyalty
marketing and modern customer
analytics. But while retailers have
long adopted revenue management
best practices from the airlines to
manage their businesses, many of
the world’s most successful retailers
have evolved these practices even
further — by infusing their revenue
management decisions with highly
detailed customer insights. It’s now
time for airline marketers to take a
page from their retail counterparts
and take their own customer insight
abilities to the next level. In this
case study, United Kingdom retailer
Sainsbury’s uses sophisticated
analytical tools and techniques
to build real relationships with
its best customers.
After losing significant market share
to its key competitor, in early 2004
Sainsbury’s recruited new Chief
Executive Officer Justin King to
lead its recovery. Later that year,
King launched a revitalization
program under the banner
“Making Sainsbury’s Great Again.”
© 2014 Aimia Inc. All Rights Reserved.
and personalized communications
In 2007, Sainsbury’s Mike Coupe,
through a variety of channels:
then Trading Director now CEO
email, mobile applications, regular
Designate, threw down the gauntlet:
points updates, and direct mail.
Sainsbury’s needed to develop
By informing customers directly
stronger and closer relationships
about products and promotions
with its customers and suppliers
based on their purchasing habits,
— and data from Sainsbury’s
Sainsbury’s encouraged more
partnership with the Nectar coalition
frequent visits, thereby building
loyalty program, owned and operated
more rewarding customer loyalty.
by Aimia, would be key to delivering
on this mandate. Since embarking on
> New integration processes and
this ambitious path to business
technology. Another important
transformation, Sainsbury’s and
step towards a customer-centric
Aimia have worked together to use
approach was Sainsbury’s
insight from Nectar data to transform
integration of customer insights
Sainsbury’s business, take on the
in both strategic and day-to-day
competition, and put customers at
business decision making in
the heart of the company’s business
areas beyond Marketing and
strategy. Here’s how they did it:
Communications. For example,
Sainsbury’s management of
> A clear strategic plan. Over the
assortment, pricing and new
years, Sainsbury’s had amassed a
product launches is insight-led,
vault of customer data, accessible
using rich dynamic customer
to a handful of skilled analysts
profiles and segments that
and coders who could see the
combine transactional, behavioural
information but weren’t using it
and attitudinal information. At
to its full capacity. This limited
the core of this ability was a
accessibility left Sainsbury’s
self-service reporting technology
buying and merchandising teams
solution that placed complex
short of the customer insights
customer data into the hands
that would enable them to break
of business managers.
new ground and truly focus their
strategy around the customer.
Airlines and retailers have much
To drive the necessary change
in common: marketers in both
across the business, Sainsbury’s
industries try to match the right
and Nectar would need to gain
product to the right customer. The
deeper customer insight by
biggest difference between the
analyzing purchase behaviour,
two industries is the perishable
testing promotions, measuring
inventory of airline seats — once the
the results, and reporting the
plane takes off with an empty seat,
impact on in-store product sales.
the opportunity to sell that seat is
Sainsbury’s challenge was clear:
lost. Still, the airline industry would
Nectar customer data had to be
unlocked, decoded, and unleashed do well to adopt the strategy and
technologies pioneered by retailers
to reward customers and in turn
like Sainsbury’s: Sophisticated
support the company’s quest to
analytics and self-serve reporting
transform its business.
tools; the broad use of customer
insights for strategy development
> Offers tied to transactional
and day-to-day business
behaviour. Analyzing individual
management; and automated
customers’ spend history and
real-time customer analytics. The
purchasing behaviours allowed
increasing importance of direct sales
Sainsbury’s to reward each of
them for their loyalty by delivering channels, as well as the multitude of
marketing offers tailored to them, customer touch points, offer ample
which in turn reduced unprofitable opportunity for airlines to leverage
data to drive behaviour, generate
activity and maximized return
incremental revenues, and reshape
on investment (ROI). Customer
the customer experience.
modelling led to more targeted
Final Approach / 7
THE POWER OF CUSTOMER INSIGHT
Ten years into its partnership with Aimia, Sainsbury’s has shown sustained improvement in operating performance.
Using insight from Nectar data has helped Sainsbury’s grow.
OWN BRAND SALES PENETRATION GROWTH
Percent Total Grocery Sales
Aimia has worked with Sainsbury’s to extend its own brand into categories previously dominated by branded products.
52
50
48
46
44
42
40
Sainsbury’s
Source: Data provided by Kantar
Tesco
Asda
Morrison’s
“A decade ago, Sainsbury’s
embarked on a single mission:
to put the customer at the heart
of everything they do. Together
we have achieved this, using Nectar
data to unlock customer insight and
tailor stores, products, promotions and
communications — and we’re only at the
beginning of our journey together.”
— James Moir,
CEO, i2c
© 2014 Aimia Inc. All Rights Reserved.
8 / Final Approach
FROM REVENUE MANAGEMENT TO
CUSTOMER MANAGEMENT
One of the core tenets of loyalty
management advocates treating
customers differently based on
their value and potential. Through
the invention of the modern
frequent flyer program, airlines
pioneered the practice of loyalty
marketing that has now spread across
all consumer sectors and around the
globe. By evaluating every passenger
purely through a bid-price evaluation
threshold, however, many airlines
still treat every passenger equally —
regardless of their value. This legacy
practice leaves significant sources of
unexplored revenue on the table.
The key to finding and unlocking
these additional sources of airline
revenue lies in evolving your revenue
management practices into customer
management practices. Doing so
requires investment in your customer
insight capabilities. By partnering
with an experienced customer
analytics service provider, airlines
can unearth and apply customer
insights in all four key revenue
management activities.
> Demand forecasting. To
predict demand, traditional
revenue management relies on
a combination of historical data
and forward-looking projections.
With improved customer data
insights, revenue managers can
better understand drivers of
customer demand beyond price
and schedule. These insights,
for example, can help determine
whether a customized discount
offer delivered to a specific
customer segment is more
effective than a mass seat
sale easily matched by
the competition.
> Overbooking. Imagine the
possibilities for customer
experience management if
you knew the travel habits of
individual customers. Instead of
© 2014 Aimia Inc. All Rights Reserved.
relying solely on aggregate data,
you could model the likelihood
of passenger no-shows based
on their historical behaviour. On
oversold flights, you could resolve
overbooking conflicts by giving
a seat to a high-value customer,
or to a recently-inconvenienced
passenger at risk of switching
to another airline. Some airlines
already practice a rudimentary
form of customer management
by guaranteeing seats for elite
frequent flyers. But that’s only
scratching the surface — by
delivering such insights into the
hands of your frontline staff, you
can build both long-term value
and enduring loyalty.
> Seat inventory control. In
deciding whether to accept
or reject a particular booking
request, imagine a revenue
management system that could
identify the customer making the
request, and differentiate your
seat inventory control based
on that customer’s profile. For
example, you could fulfill a seat
request from a loyal, high-value
customer over the request of a
one-off flyer. Or you could sell
the seat to a customer with a
high propensity to buy ancillary
services, instead of to a customer
who won’t buy anything but the
seat. Through customer revenue
management, every seat on the
plane potentially becomes
more valuable.
> Pricing. Customer revenue
management also opens up a
world of opportunity for pricing
managers. Armed with greater
knowledge of online shopping
and booking behaviours, as well
as the price sensitivity of different
customer segments on different
routes and during different
times, you can test and learn to
determine discount levels that
stimulate incremental demand
while reducing dilution. You can
target buy-up price points for
cabin classes and upgrades
based on sophisticated
price-sensitivity controls.
To better understand how classic
revenue management practices can
evolve into customer management,
consider the trail blazed by frequent
flyer programs. Traditionally, finding
award-ticket seats has long been
subject to the classic accept-reject
decision. These decisions are driven
by fixed aircraft allotments, or by
assigning monetary award-ticket
values recognized by revenue
management systems. To some
airlines, award travel is an integral
part of the origin-destination fare
control system.
Some more advanced program
operators, however, have realized
the limitations of this approach.
Answering accept-reject questions
based on the fixed value of
redemptions does, they’ve learned,
a disservice to the program. After all,
some program members represent
significantly more value than
others — why shouldn’t these
high-value members receive
differentiated treatment?
In these cases, the program may
overrule the simple accept-reject
logic to provide preferred seat
access — for example, by booking the
high-value flyer in a more expensive
inventory class. Even though the
program may pay more for the seat,
the potential for long-term revenue
easily makes up for incremental
cost to serve. True, frequent flyer
programs benefit from the member
login and identification required prior
to reward redemption. But modern
customer revenue management
technology now makes these
techniques possible across the airline.
Final Approach / 9
THE FOUR PILLARS OF CUSTOMER
REVENUE MANAGEMENT
The key to finding and unlocking additional sources of airline revenue lies in evolving your revenue management
practices into customer management practices. By partnering with an experienced customer analytics service
provider, airlines can unearth and apply customer insights in all of the four key revenue management activities.
Demand Forecasting: With improved customer data insights, revenue
managers can better understand the customer drivers of demand
beyond price and schedule.
Overbooking: By delivering customer insights into the hands of your
frontline staff, you can build both long-term value and long-term
customer loyalty.
Inventory control: By differentiating your seat inventory control based
on individual customer profiles, every seat on the plane potentially
becomes more valuable.
Pricing: Customer insights enable you to test and learn to determine
pricing discount levels that stimulate incremental demand while
reducing dilution.
© 2014 Aimia Inc. All Rights Reserved.
10 / Final Approach
MOVING BEYOND TRADITIONAL REVENUE
As we’ve seen, better use of
customer insights can transform
airline revenue management.
But evolving classic revenue
management is just scratching the
surface of what today’s analytical
tools make possible. Airlines
possess a range of unique assets
that, when combined with customer
insight, can unlock new sources
of value. By applying customer
analytics to existing cross-sell and
ancillary revenue efforts, the most
sophisticated airlines will soon
stand toe-to-toe with the most
advanced retailers.
Running a profitable airline is one of
the more vexing business challenges
of our time. But for all the systemic
limitations and unanticipated
challenges faced by airlines, they do
possess a unique set of assets and
touch points that can provide a firm
foundation for long-term enterprise
value. These assets represent a huge
revenue opportunity for airlines —
when they use customer insights to
drive relationship value. For example:
> Affluent customer segments.
Within their frequent flyer
membership base, airlines already
have relationships with the affluent
consumer segments most coveted
by marketers. Build on these
relationships by leveraging individual
customer profiles across the airline
operation — online, in the airport,
and during the flight.
> Unique customer touch points.
Like retailers, airlines can leverage
customer touch points online,
through mobile devices, and at
points-of-sale within the airports.
But airlines also possess unique
and underleveraged assets such as
airport lounges, check-in desks, and
even the flight itself. Each of these
touch points reinforce relationship
strength and can provide additional
sources of revenue.
Airlines will need to
provide complete transparency
about how they will use customer
data, and ensure that customers see
the value in providing permission to
the airline to share their data with
marketing partners, and demonstrate
that they are trusted guardians
of their customers’ personal data
and preferences.
© 2014 Aimia Inc. All Rights Reserved.
> Access to real-time analytics. By
combining customer data with
real-time analytics throughout the
travel cycle, airlines now have the
ability to jump-start revenues. Such
advanced analytics enables airlines
to leverage the power of real-time,
personalized marketing across
multiple touch points to improve
the travel experience and deliver
highly relevant marketing offers —
at the right time, and through the
right channel.
> Unique cross-sell opportunities.
Ancillary revenue is now a critical
component of most airline balance
sheets. Advanced customer insight
can increase conversion rates at
those moments of truth when
a potential cross-shopper
becomes a high-value customer.
You can increase conversions of
high-margin à la carte products
such as seating, meals, lounge
passes, and more. You can convert
more flyers into purchasers of such
third-party products as hotel
rooms, car rentals, travel insurance,
or duty-free items. You can even
generate new revenues by
cross-selling products on behalf of
a wide range of partners including,
retailers, manufacturers, telcos,
or entertainment companies.
To unlock these opportunities,
airlines must create richer customer
profiles and invest in tools to enable
personalized, relevant marketing.
Most importantly, airlines will need
to provide complete transparency
about how they will use customer
data, and ensure that customers see
the value in providing permission to
the airline to share their data with
marketing partners. Airlines will
need to demonstrate that they are
trusted guardians of their customers’
personal data and preferences. If they
do, airlines can leverage this data to
increase revenues, improve margins,
and provide a better customer
experience. The sky is the limit.
Final Approach / 11
MAXIMUM HEADROOM
Airlines possess a range of unique assets that, when combined with customer insight, can unlock new sources of
value. By applying customer analytics to existing cross-sell and ancillary revenue efforts, the most sophisticated
airlines will soon stand toe-to-toe with the most advance retail analytics operators.
ONLINE OPPORTUNITIES
Conversion opportunities exist both within core airline ancillary and third-party partner products.
FIRST CLASS
Hotel
Partners
Rental Car
Partners
Class
Upgrades
Seat
Upgrades
Partner
Offers
Credit Card
Uptake
AIRPORT OPPORTUNITIES
Advanced analytics drive surprise-and-delight conversion opportunities at the kiosk and at the gate.
FIRST CLASS
Seat
Upgrades
Class
Upgrades
In-airport
Partner Offers
Credit Card
Uptake
Lounge
Membership and
Day-passes
IN-FLIGHT OPPORTUNITIES
Knowing a passenger’s conversion likelihood can drive revenue in the air as well as on the ground.
In-flight
Entertainment
In-flight Food
and Beverage
Duty-free
Shopping
Credit Card
Uptake
Destination
Partner Offers
© 2014 Aimia Inc. All Rights Reserved.
12 / Final Approach
CONCLUSION: FROM THEORY TO PRACTICE
Evolution is the opposite of
revolution: rather than a swift,
overnight change, evolution is
a slow, gradual, and methodic
process in which only the best ideas
survive. Consider, for example, the
evolution of frequent flyer programs
themselves: these programs
began as simple mileage-based
reward programs, but have
evolved through credit-card
partnerships, tier introductions, and
revenue-based reward accruals to
become the massive profit-centers
they are today. The evolution of
customer revenue management
will follow a similar approach.
Take a leap of faith, challenge
the status quo, and shift your
focus to gaining a deep knowledge
of your customers. The journey from
traditional revenue management to
customer management is inevitable:
the only question for the airlines is
whether they will lead, follow, or
be left circling the runway.
The best way to begin the journey
from traditional to customer-revenue
management is to adopt a
test-and-learn approach. Work
with an experienced partner to
integrate new capabilities gradually
into your revenue mix. Some airlines
have already begun to integrate
customer insights into business
management. Most applications
focus on improving the customer
experience. British Airways, for
example, equipped customer service
agents and senior cabin crew with
iPads, enabling them to access
passenger data prior to and during
the flight. In another example,
Virgin Atlantic has tested how
wearable tech such as Google Glass
can enhance the travel experience
and improve efficiency. Meanwhile,
Virgin America has personalized the
inflight entertainment experience
by combining historical data (What
did you buy on the last flight?)
with current data (Where are you
heading? Is your connecting flight
on time?). For those airlines that
have yet to begin this journey, here
are a few suggestions to take those
first steps:
> Break down the information silos.
Airlines must learn to gain a
360 degree customer view
by combining structured and
unstructured data sources. For
airlines lacking an enterprise
data warehouse, this task may
seem daunting. But this lack of a
data warehouse is no longer the
impediment it was; new cloud-based
database technologies are making
such integration easier and faster
than ever.
> Generate customer insights to
improve business decisions. As
we noted in our retail case study,
customer insights must be both
relevant and easily accessible by the
right business owner. Insight reports
are valuable when they’re fast to
generate, available in real time,
and flexible in their applicability.
End-users themselves should be
able to slice and dice data reports
to customize results for specific
business needs.
© 2014 Aimia Inc. All Rights Reserved.
> Apply insights on the front lines.
Customer insights are only useful
when they can be applied swiftly
by front-line staff to cross-sell
ancillary products and improve
the flying experience for best
customers. Fortunately, today’s
automated applications include
campaign management tools and
recommendation engines that create
real-time personalized offers and
differentiated service delivery —
through digital channels as well as
customer service touch points.
> Learn from other industries. Our
Sainsbury’s case study reveals the
most sophisticated retailers have
overtaken airlines in the field of
customer analytics. Other industries,
including the hotel and online travel
agency industries, are likewise
beginning to lap the field. Airlines
should study these industries, tap
the wealth of information and case
studies available, and work with
appropriate partners to adapt these
learnings to their business.
Most importantly, however,
airlines must shed their historically
risk-averse natures and begin to
move boldly into the customer
revenue management future.
Operating a profitable airline is a
notoriously tough job; few airlines,
in fact, manage to generate profits
that cover their cost of capital year
after year. Traditionally, airlines
respond to this challenge by
searching for cost reductions and
economies of scale.
It’s time for bold new approach. Take
a leap of faith, challenge the status
quo of existing revenue management
approaches, and shift your focus
to gaining a deep knowledge of
your customers. Learn to craft
products, services, and marketing
offers tailored to the individual
flyer. The dividends you earn will
more than pay for your investment
in this approach. The journey from
traditional revenue management to
customer management is inevitable:
the only question for the airlines is
whether they will lead, follow, or be
left circling the runway.
Final Approach / 13
ABOUT THE AUTHORS
Evert de Boer, General Manager,
Global Business Development — Travel
As GM for Global Business Development, Travel,
Evert de Boer specializes in identifying, and
implementing investment and partnership
opportunities for Aimia in the global travel
space. He earned a Master of Science degree
in International Business Administration at the
University of Maastricht, the Netherlands and
Universidad Carlos III de Madrid, Spain.
He is also a graduate of the Berkeley-Nanyang
Advanced Management Program from
the Haas School of Business at
University of California at Berkeley,
and Nanyang Business School at Nanyang
Technological University, Singapore.
Evert is also a sought-after guest speaker
at numerous travel industry events and
institutions. He has lived and worked in
Amsterdam, Dubai, and Montreal, and
currently lives with his family in Singapore.
Joanne Ward, Director,
Strategic Development and Innovation
design, and revenue management, where she
earned an Award of Excellence at Air Canada.
As Director, Strategic Development and
Innovation, Joanne Ward brings over 25 years
of experience to the airline loyalty industry.
Her extensive airline management experience
includes frequent flyer program management,
network planning, onboard and airport product
Joanne also led the development and launch
of the Star Alliance Gold and Silver benefit
program, which earned a Freddie Award.
Joanne has a Bachelor of Commerce and
a Marketing Management Certificate from
McGill University in Montreal.
About Aimia
Aimia Inc. (“Aimia”) is a global leader in loyalty management. Employing more than
4,300 people in 20 countries worldwide, Aimia offers clients, partners and members
proven expertise in launching and managing coalition loyalty programs, delivering
proprietary loyalty services, creating value through loyalty analytics and driving
innovation in the emerging digital, mobile and social communications spaces.
Aimia owns and operates Aeroplan, Canada’s premier coalition loyalty program, Nectar,
the United Kingdom’s largest coalition loyalty program, Nectar Italia, Italy’s largest
coalition loyalty program and Smart Button, a leading provider of SaaS loyalty solutions.
In addition, Aimia owns stakes in Air Miles Middle East, Travel Club, Spain’s largest
coalition loyalty program, Club Premier, Mexico’s leading coalition loyalty program,
China Rewards, the first coalition loyalty program in China that enables members to
earn and redeem a common currency, Think Big, the owner and operator of BIG —
AirAsia and Tune Group’s loyalty program, Brazil’s Prismah Fidelidade and i2c, a joint
venture with Sainsbury’s offering insight and data analytics services in the UK to retailers
and suppliers. Aimia also holds a minority position in Cardlytics, a US-based private
company operating in card-linked marketing. Aimia is listed on the Toronto Stock
Exchange (TSX: AIM).
For more information, visit us at www.aimia.com.
© 2014 Aimia Inc. All Rights Reserved.
SAMPLE OUR BRAIN FOOD
Sample some of our loyalty thought leadership in the new thinking section at aimia.com.
THE SWEET SCIENCE:
Best Practices in
Liability Management
By Evert de Boer,
General Manager, Global
Business Development —
Travel, Jon Hendriks, Manager,
Liability Management and
Gillian Mann, General Manager,
Liability Management
FFP PRODUCT SUITE:
Helping Your Frequent Flyer
Program Soar
By Sandra Diem, Vice President,
Global Business Development —
Travel and Evert de Boer,
General Manager, Global
Business Development — Travel
In this brief, we review the
various FFP models available
for low-cost carriers and identify
their potential sources of value.
Liability management is
both a science and an art.
As an element of loyalty
program operations, liability
management often flies
below the radar. This paper
examines successful liability
management best practices.
Flight Plans
For success
Airline Loyalty Program
Case Studies
Sandra Diem, Vice President,
Global Business Development — Travel
FLIGHT PLANS FOR SUCCESS:
Airline Loyalty Program
Case Studies
By Sandra Diem, Vice President,
Global Business Development
— Travel and Evert de Boer,
General Manager, Global
Business Development — Travel
Evert de Boer, General Manager,
Global Business Development — Travel
How Aimia Helped Aeromexico
Optimize Its Loyalty Program
Sandra Diem, Vice President,
Global Business Development — Travel
Evert de Boer, General Manager,
Global Business Development — Travel
Aimia’s roots in the airline
industry run deep — all the way
back to 1984, and our origins
in Aeroplan, the frequent flyer
program of Air Canada. This
paper provides snapshots of
our world-class airline loyalty
resources in action.
© 2014 Aimia Inc. All Rights Reserved.
TAKING CLUB PREMIER
TO NEW HEIGHTS
TAKING CLUB PREMIER
TO NEW HEIGHTS:
How Aimia Helped
Aeromexico Optimize
its Loyalty Program By Sandra Diem, Vice President,
Global Business Development —
Travel and Evert de Boer,
General Manager, Global
Business Development — Travel
This case study showcases
how Aimia helped Aeromexico
optimize its loyalty program.