Consumer Power Takes to the Skies
Innovations have amounted to nothing short of a consumer revolution, putting customers in control of the relationship.
In the past decade there has been a dramatic shift of business power from the airlines to the customer. Airlines must recognize this fundamental customer revolution and realign their businesses to the new world order.
Airlines are classic legacy businesses. The industry in general has little tolerance for operational error or risk taking. The mission statements of most airlines contain a commitment to safety. Indeed, arriving at your destination safely is paramount, yet once these basic needs are satisfied, customers still demand something more in their travel experience: They expect to be treated as guests. Most airlines recognize this but find it hard to meet these needs as organizations that are largely designed around operations and process compliance.
Another barrier to change is legacy infrastructure. Both the standard passenger and ticketing systems, created in the 1960s, are based on a declassified missile launching system used in the Cold War. These systems are rigid, hierarchical, and were designed for a top-down flow of information distributed from the core mainframe through a few limited channels. In the past, travelers had to rely on what travel agents or the airline told them.
Now, innovations have amounted to nothing short of a consumer revolution, putting customers in control of the information and the relationship. It started with e-commerce in the 1990s, where websites like Travelocity, Expedia, and Orbitz allowed the customer to shop multiple airlines and compare each one based on price and schedule. And new innovations now allow customers even better information than the airlines have themselves: websites that analyze pricing history and predict the best time to buy tickets; meta-search engines that trawl the Web for the best deals; side-by-side comparisons of flight delay statistics; and social media groups that discuss the latest service failure.
The number of channels and touchpoints the airlines must operate in has also grown. Airline websites, mobile and Web check-in, online travel agencies, and enhanced loyalty systems all contribute to the stress on the legacy infrastructure and processes. And larger airlines, which previously had control over distribution channels, now compete with low-cost carriers. Today's technology-enabled consumer has very high expectations for seamless customer service and very little tolerance for failure to coordinate across systems and organizations. As a result, airlines consistently rate at the bottom of customer satisfaction relative to other industries.
Change means opportunity
The changing landscape should be considered an opportunity, not a threat. Customers are willing to engage with airlines and have shown an increasing willingness to share their personal information and aspirations. These are opportunities to stimulate new experiences, create lasting bonds, and develop products and services tied to unique needs.
Startup and low-cost carriers have a distinct advantage because they don't have the installed legacy infrastructure and culture to deal with. New technologies like service-oriented architecture allow airlines to overcome many of the legacy technology limitations of the past. However, it requires a long-term customer strategy and significant investment at a time when airline losses are at a historic high and technology budgets are being slashed.
With few costs left to remove, airlines must focus on revenue and customers to compete. By taking a totally different view—Return on Customer—instead of the traditional return on investment approach, airlines can transform how they organize their enterprise around the empowered customer, and new investments will be more clearly justifiable. Return on Customer measures a business's success based on the change in current and future customer equity, putting customer centricity into financial terms.
Customer-focused airlines would invest in initiatives and training that increase customer satisfaction, such as proactive problem resolution during flight cancellations or delays. They would offer simplified pricing and clearly demonstrable value for price paid, rather than the current complex pricing models. And employees would have incentives and be empowered to provide warm and caring service that is responsive to customer needs.
Not only will such moves build customer loyalty, but they may lead to a one-to-one relationship, inspire new journeys, and lead to new innovative products and services. The sky's the limit.