Digital Transformation is the Facilitator to Building Customer Loyalty in the Airline Industry

by Balazs Fejes, Co-Head Global Business

Customer satisfaction is no longer the barometer for customers remaining loyal to brands. In an increasingly digitalized world customers are demanding more personalized messages, customized promotions and are increasingly fickle towards the messages they respond to.

The airline industry is a good example of this.

The number of seats offered by low-cost carriers in Europe has increased by an average of 14% per year over the last decade with low-cost carriers collectively adding more than 20 million seats between May 2004 and May 2013, according to OAG, the market leader in aviation intelligence. In such a crowded market European carriers are vying for greater share of the market and are looking at various ways to create loyalty amongst their customer bases.

As with many other consumer retail sectors, airlines are looking to customize and personalize their propositions and user experience to make an easy-to-use, compelling model through which to create brand loyalty. The humble airline ticket, once the domain of a simple transaction between an airline, a travel agent and the consumer is now complex buying process that transcends the initial ticket purchase to include a multitude of pre- and post-flight services such as online check-in, seat allocation, car hire and hotel booking.

Coupled with this, it is thought that the average household owns more than five internet-connected devices while research from Forrester Group shows that users now switch between their devices up to 27 times per hour. The result has been a drastic increase in omnichannel consumer brand engagement that often happens across multiple channels at the same time.

The application of an omnichannel approach, particularly in retail consumer markets, requires a deeper understanding that different customers have different needs and engage with different channels at different stages of the purchasing process. It is about having a greater understanding how customers use different channels to interact with the brands that they buy from and making sure the journey between each delivery channels is seamless. This, however, has been a stumbling block.

While some newer airlines have adapted to the digital revolution with greater ease and have been able to adopt innovative approaches to digital marketing and customer data capture, the majority of airlines are struggling to catch-up. As omnichannel purchasing and app-based services increasingly become the norm in customer buying habits airlines must continue to review their digital strategies to ensure that a seamless – and personalised – buying experience is available irrespective of what device the customer is using.

Historically, airlines have been innovators in maximizing revenue through analytics-based inventory control and price optimization. The industry was also among the first to create loyalty programs. Today, however, the tourism and travel industry is far behind in providing a personalized experience for the customer. Other industries have moved beyond them in their use of advanced data analytics. The passenger experience is often not targeted or distinctive. In the travel industry, there is a huge amount of data collected in relation to airline reservations, hotel stays and car rentals, for example, that is not being effectively used. Big data can be a powerful force in transforming the industry towards the digital revolution and could be one of the most influential initiatives to hit the airline industry since the early days of computerized reservations systems of the 1960s.

Airlines can learn much from innovators in the retail industry, from firms like Apple and Amazon, who have harnessed the power of customer intelligence and data capture to create personalized experiences for their customers. This in turn helps build loyalty to the brand while elevating the firm from a simple seller of products to an all-encompassing service provider that caters for all of the customers needs.

These firms have employed a number technology and data driven techniques to better engage with the customer and create useful intelligence that can be built into the customer interaction and experience. Machine learning algorithms, for example, have been developed to build an extended comprehensive customer profile, while event processing systems allow analyzing a visitors clickstream to determine if a concrete action should be invoked once a particular interest was detected to interact with the customer at the right time. Additionally, use recommendation techniques (collaborative, context filtering and others) have been proven in the retail sector and deeper levels of analysis, such as A/B, multivariate testing is used to measure and improve performance.

However, to create a truly personalized experience for the customer firms must also be able to effectively mine these multiple streams of data from across the organization and be able to integrate, harmonize and interpret that data instantaneously. Information points such as user history, geographical location and recent browsing behavior can all be used to build up a personalized picture of the customer. Digital transformation is the facilitator to mining this data effectively and using that knowledge to create truly personalized and customized messaging and propositions for customers.

Only though strategic investment in technology will airlines be able to move from transactional based relationship with their customers to one driven by user experience, that builds brand loyalty and takes the customer on a multi-channel journey through a range of complimentary services that they need.