Measuring Customer Management Effectiveness by jolinmilioncherie

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									Managing Customer Value
   in Turbulent Times

        Dominic Purvis
          General Manager,
Cathay Pacific Loyalty Programmes Ltd.
           12th April 2005
Charting A Course Through Stormy Weather



The key passenger sales challenge for Cathay Pacific during
turbulent times is to continue to develop its relationship with key
customers, whether individuals, corporations, SMEs or travel agents



     We need to enhance our proposition for those customers

     We need to improve the efficiency with which we deliver that
      proposition

     We need to continue to earn our customers’ loyalty and
      commitment to our brand

     We need to reform our proposition around our customers




                                                           DPurvis Unisys 12APR05
Operating Metrics Show That Environment Is Already Turbulent

180


160


140


120


100


 80


 60
      1994     1995 1996             1997    1998    1999 2000   2001   2002 2003   2004

                 Revenue               ASKs         Costs   Rev/ASK       Costs/ASK



             Lines are indexed; 1994 = 100                                     DPurvis Unisys 12APR05
 Framing the Challenge for Cathay Pacific

 Many positives on horizon                New challenges coming too
 •   High economic growth in Asia,        •   Increasing competitiveness of
     especially China                         Chinese carriers
 •   Strong aviation demand               •   HKSAR Government opening up
     worldwide, especially Asia and           competition on routes - Open
     China                                    Skies?
 •   Gradual opening of air traffic       •   Chinese carriers incumbents on
     rights worldwide                         key routes
 •   Hong Kong’s political links in to    •   Cross-straits flights beginning
     China                                •   New regional hubs in
 •   Cathay Pacific / Air China /             development
     Dragonair relationship               •   Low cost carriers have arrived




Challenge is to survive and prosper in uncertain and increasingly competitive times



                                                                      DPurvis Unisys 12APR05
   The Cathay Pacific Loyalty Marketing Structure

                                     Cathay Pacific Airways




                                     Cathay Pacific Loyalty
                                    Programmes Ltd (CPLP)
                                                                           CRM                   Cstmr
     Vendors
                                                                           Progr               Info Systs
• Outsourced front office                                             • Use customer         • Understanding
                                                                        value model            and building
  (customer contact,
                                                                         for sales and         customer value
  complaints, telesales)
                                                                        servicing              model
• Outsourced back office
  (data entry,
  mailing etc.)




                       • Loyalty Club of CX      • Travel reward program
                       • Recognition & service   • Miles & rewards
                       • Frequent travellers     • Consumers interested in travel
                                                                                         DPurvis Unisys 12APR05
What Does Loyalty Marketing Mean to Cathay Pacific?

•   Enhance CX revenue by recruiting & retaining most profitable
    customers
     – Enhance CX’s proposition for high-value customers
     – Build up the member base so we can move & generate business

•   Reduce marketing costs
     – Use miles instead of discounts
     – Use email / direct mail instead of mass media

•   Develop customer insight through dialogue & tracking


•   Generate alternative revenue streams


•   Use member base for effective leverage when dealing with other
    loyalty programmes




                                                              DPurvis Unisys 12APR05
Cathay Pacific Member Base Shows Strong Growth

                  Growth in Member Numbers                    MPO/AM Pyramid Is Primary
                                                                    Value Model
                  2500     • ~2.2m members
                                                         Sectors                           Miles
                           • CAGR >25%

                  2000                                                   Dia-
                                                         80              mond           120,000
 Members ('000)




                  1500                                                   Gold
                                                         40                              80,000

                                                                         Silver
                  1000                                   20                              30,000

                                                         $50 or         Green            $50 or
                   500                                   invitn                          invitn


                                                                       Asia Miles
                     0
                         1999 2000 2001 2002 2003 2004
                                                         Free                               Free
                              Total AM Members


                                                                                    DPurvis Unisys 12APR05
Developing The Asia Miles Member Base

CX benefits in many ways...                 … but programme has its challenges

•   Maintain relationship at a lower        •   Cost
    cost than MPO Club                      •   High liabilities
•   Identify potential MPOs and             •   Demand for redemption seats
    develop them
                                            •   Asia Miles objectives not always
•   Identify other behaviours which             clear to CX
    indicate high air travel potential
     –   Hotel spend (amount, location)     •   Demand for new skillsets
     –   Carhire spend (amount, location)        –   Database management
     –   Credit card spend (amount)              –   Database marketing
                                                 –   Self-service
•   Use as leverage in sourcing                  –   Personalised communications etc
    MPOs from partner programmes
•   Develop non-air revenue streams
    to smooth out air revenue
    turbulence




                                                                         DPurvis Unisys 12APR05
Segmentation - Aggregating Customer into Tribes
       •              Data driven approach, using member history and characteristics
                       –   Demographics - age, company size, seniority, industry type, occupation, country
                           of residence
                       –   Travel behaviour - annual sectors, annual F/E sectors, route / products usage
                       –   Revenue - annual net revenue contribution to CX
       •              12 distinct segments (“tribes”) for loyalty marketing initiatives


                                                                    Captains of Industry
eg Sectors flown pa




                                                  Project
                                               Professionals
                                  Young                           Executives
                               Professionals


                                                    South Asia Traders

                                                          North Asia Traders

                                                           Chinese VFR

                                                                                                    eg Age

                                                                                             DPurvis Unisys 12APR05
    Developing Personas to Help Us Know Customers
    eg “Young Professional” Kelvin Wong
Personal Details                             Travel Pattern
•     Chinese male, 32, single               •   10 times pa
•     Annual income US$85k                       - 8 Biz, 2 Leis trips
•     Project Consultant                         - 4 Biz, 1 Leis on CX
•     Lives in SOHO                          •   Biz trips arranged by sec
                                             •   Arranges own leisure trips
                                             •   Silver MPO

Online Channels                          Psychographics & Preferences
•     Heavy broandband user - 2 hrs pd   •       Keen sportsman: diving, tennis,
•     Uses cx.com 3+ a month                     snorkelling, wake-boarding, golf
•     Uses online services               •       Latest restaurants, bars and nightclubs.
•     Visits chl.com                     •       Young & ambitious. High disposable
•     Bought several times on cx.com             income
•     High satisfaction w/ online        •       Experience junkie
      booking, OLCI and notiFLY          •       Travels w/ girlfriend as couple or w/
•     Heavy laptop and PDA user                  friends in a group of 3 to 4
                                         •       Will pay premium sometimes
Media                                    •       Top Biz dest: CN, TWN, US, SEA
•     Yahoo, scmp.com, hsbc.com,         •       Top Lei dest: THA, AUS, EUR, US
      quamnet.com etc
•     Next, Apple Daily, SCMP
                                                                            DPurvis Unisys 12APR05
MPO Club Member Opinions of Cathay Pacific

Perceptions of CX
•   Perceptions of Cathay are positive amongst Elite MPOs
     –   World class technical standards
     –   Considered a very professional airline


CX vs Competition
•   CX is preferred to American carriers
•   CX service is generally preferred to European airlines
•   CX competes head-to-head with SQ in Asia


Perceptions of The Club
•   Very positive towards the Club - recognition, respect and convenience
•   Membership is a key component of Cathay’s image
•   The Club offering is considered less generous than competitors - but CX
    standards are so high that they make up any short-fall in loyalty benefits
•   Generally high satisfaction and a definite sense of loyalty to CX



                                                                        DPurvis Unisys 12APR05
     Satisfaction Is Not Enough; We Need To Generate Commitment

    Airline Choice Is Seen As                                              Measuring Customer Commitment (%)
              Important
                                                                           100+                                              41
                                                                           HIGHLY
“How Important to You Is the Choice                                        COMMITTED
                                                                                                                        38
           of Airline?” (*)
                                                                           70-99                                  33
                                                                           COMMITTED                               34
•   By class
     –   All                        74%
     –   FRCL                       92%                                                          17
     –   JCL                        82%
                                                                           40-69
                                                                           POSSIBLY               18
     –   EYCL                       70%                                    VULNERABLE
•   By affiliation
     –   MPO                        80%                                    10-39            7
     –   Non-MPO                    70%                                    VULNERABLE        8
•   By ethnicity
     –   Chinese                    77%                                                 2
     –   Caucasian                  74%                                     < 10
                                                                           VIRTUALLY    2
                                                                           LOST


                                                                                                             Q1 2004
                                                                                                             Q1 2002




                     (*) Top two box scores (extremely / very important)                               DPurvis Unisys 12APR05
Quantifiable Value of Effective Customer Management

Financial Impact
•   Analysis shows sector yield uplift across all classes

Customer Commitment
•   MPO commitment scores significantly higher than non-MPOs
•   Research shows that they will
     –   Give Cathay a high share of their wallets
     –   Tolerate Cathay’s mistakes
     –   Recommend the brand
     –   Stay with the brand
•   SARS behaviour backs up research findings
     –   MPO member revenue contribution increased 50%

Customer Information
•   Behavioural information is a key component in building predictive models
     –   New destinations & routings
     –   Channel / product offerings
     –   Revenue protection




                                                                   DPurvis Unisys 12APR05
We Need To Reform Around Our Customers

    A               The Processes In The Airline Service Cycle                       B
                   Resv
                            Chec      Loun              Inflig
    Planning       n,                          Gate               Bags      Loyalty
                            k-in      ge                ht
                   Ticket

•       Passenger touchpoints appear right throughout the journey
•       Variety of service types
         –   The traditional bank-style over the counter conversation
         –   The software company call centre
         –   The hotel check-in
         –   The theme park access control
         –   The fine restaurant (and fast food!) model
         –   The concierge concept (for the highest tiers) …
•       The touchpoints include a wide variety of channels
         –   Face-to-face
         –   Telephony
         –   Mail
         –   Email, web & WAP
         –   Self-service kiosks …
•       Service is a matter of perception - and perception is fragile


                                                                         DPurvis Unisys 12APR05
View Of Customer Is Primarily ‘Vertical’ Rather Than ‘Horizontal’
 Web &
 Wireless Voice     ICLP                                                                                                                                                     Baggage
                   Outbound       Inbound        ServiceCustomer                                   -in/
                                                                                                Check                     Ticket                                             Services
 Channels Response                 Email         Centre Relations Res                            Gate                     Office       Lounge                In-flight
                   Mail/Email
                     @             @




                                                                                 Reservations




                                                                                                                                         Lounge Entry
                                                                                                                                         Lounge Entry
                                                                                                                             Refunds
                                                                                                                             Refunds
                                                                                                    Check
                                                                                                    Check




                                                                                                                                                                                   Lost Baggage
                                                                                                                                                                                   Lost Baggage
                                                                                                        -in
                                                                                                        -in
   Web
   Apps




                                                    Contact
                                                    Contact



                                                                  Complaints
                                                                  Complaints
                                   Kana                                                                                                Lounge           FAME/                  World
              IVRS       CLS      Response Scopus               CRMS           CUPID             CUPAC        MAPPER CAPITAL           System           eFlight   REFLEX       Tracer
   iCLS



                                                              Complaints

        –
 See Detail                               Point of Contact                                                  -in
                                                                                                         Check           Ticket               Cabin           Surveys     Lost
 Next Chart      Database                                                                                                Data                 Service                    Baggage
                 Marketing                                                                                        GHRs                        Reports
                               Loyalty Profiles &                              Reservations
          ICLP                    Activity

                      CDMS                   E
                                  CIS        T
                                             L

                                                                                                   Data warehouse feeds                                                    -
                                                                                                                                                                         Online Data Flows
                                                                                                                                                                         Batch Data Flows

                      CIS Users

      Processes need to change from transaction-centric to customer-centric

                                                                                                                                                                   DPurvis Unisys 12APR05
Charting A Course Through Stormy Weather



The key passenger sales challenge for Cathay Pacific during
turbulent times is to continue to develop its relationship with key
customers, whether individuals, corporations, SMEs or travel agents



     We need to enhance our proposition for those customers

     We need to improve the efficiency with which we deliver that
      proposition

     We need to continue to earn our customers’ loyalty and
      commitment to our brand

     We need to reform our proposition around our customers




                                                           DPurvis Unisys 12APR05
Thank You!




             DPurvis Unisys 12APR05

								
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