Tracking bags, personalizing offers, boosting loyalty, and optimizing operations are all goals of a renewed data-driven approach by major airlines.
When a customer checks into a flight with United Airlines UAL -0.87% , there is typically an array of potential add-on offers to navigate through: flight upgrades, access to the airlineâs United Club, and more.
Under Unitedâs old âcollect and analyzeâ approach to data, the airline would use information about customersâ choices about those items, in aggregated fashion to âsee what the most successful products were, and market with those [insights] in mind,â said Scott Wilson, the companyâs vice president of e-commerce and merchandising.
That approach has changed. As of the beginning of this year, âcollect, detect, actâ is Unitedâs new data-focused mantra, and itâs changing the way the airline serves its customers.
âNow we look at who the customer is and his or her propensity to buy certain products,â Wilson explained. More than 150 variables about that customerâprior purchases and previous destinations among themâare now assessed in real timeÂ to determineÂ an individualâs likely actions, rather than an aggregated group of customers.
The result, delivered in aboutÂ 200 milliseconds later,Â is a dynamically generated offer tailoredÂ to the individual.Â ItsÂ terms, on-screenÂ layout, copy, and other elements will vary based on an individualâs collected data. For United, the refined approachÂ led to an increase in year-over-year ancillary revenue of more than 15 percent, he said.
âAirlines evolved big dataâ
Welcome to the big data era in the airline industry, which in many ways was one of its earliest participants.
âAirlines are awash in data, much of it unstructured,â said Bob Mann, an industry analyst with R.W. Mann & Co.Â But only recently have airlines been able to use big-data techniques âto solve, among other objectives, how to recognize and enhance customer value, and how to cultivate high-value customers,â he said.
âAirlines have always been very good at collecting data,Â but they havenât always been good at using it,â Unitedâs Wilson said. Now that the costs of storing and processing data have droppedâeven as airlines collect more and more of itâitâs becoming easier for a company to act on it. At United, roughly a terabyte of customer data is floating around at any given time within itsÂ systems. âWe donât keep it all,â Wilson said. âWe have to be selective about what we grab.â For the data that is selected, a real-time decision engine does the crunching to turn it into something useful.
It starts at the baggage carousel
One area in which theÂ effects of big data technology are visible is in the handling of customersâ luggage.Â âWe have over a number of years invested millions of dollars in baggage tracking,â said Paul Skrbec, a spokesman withDelta Air Lines. âThat was one of those core, behind-the-scenes services for our customers.â
Millions of bags are checked each year with Delta DAL -1.46% âa total of 130 million are projected for 2014, Skrbec saidâand âevery customer has had the experience of boarding a plane after checking their bag and wondering if it was there.â
Through the use of hand-held baggage scanners used at passenger check-in, âweâve had all this tracking data available,â Skrbec said. But âone of the things we realized about two years ago is that customers would benefit from having that information.â
Which is why Delta was the first major airline to launchÂ an application allowing customers to track their bags from their mobile devices, he said. Spanning the iOS, Google Android, BlackBerryÂ and Windows Phone mobileÂ operating systems, the free app has been downloaded more than 11 million times.
In search of new revenue streams
âSouthwest uses aggregated, anonymous customer data to promote products, services, and featured offers to customers on multiple channels, devices, and websites including Southwest.com,â said Dan Landson, a company spokesman. âBy observing and looking into customer behaviors and actions online, we are better suited to offer our travelers the best rates and experiences possible. We also use this data to support the evolving relationships with our customers.â
For example, âwe look at the city pairs that are being searched to help us determine what type of service we should have on a specific route,â Landson said.
The payoff? âOur customer and loyalty segments grow year-over-year,â Landson said. âWe believe that intelligent, data-based targeting has a lot to do with that growth.â
â$1 million per weekâ
The benefits of a data-focused approach may be easy to understand, but execution is another matter entirely.Â For most airlines, the first problem lies inÂ âbringing together all sorts of disparate silos of passenger informationâbooking information from transaction systems, web and mobile behavior (including searches, visits, abandoned carts), email data, customer service info, etc.âto create a single, consolidated view of the customer,â said Allyson Pelletier, vice president of marketing with Boxever, which offers a marketing platform focused on putting big data to work for the travel industry.
âArmed with this information, and the resulting insights, they can then take specific action that helps them convert more visitors on-site, secure more revenue, or increase loyalty across any channel,â Pelletier said.
At Norwegian airline Wideroe, for example, a single customer view âenables agents in the call center to understand the full history of the customerânot just the customer service history, but also their recent visits to the website or promotional emails theyâve opened,â she explained.Â âAfter they solve the customer service issue at hand, theyâre in a powerful position to then recommend the most appropriate ancillary serviceâdriving add-on revenueâor offer a complimentary upgrade, thereby driving loyalty.â
Insights garnered from a single customer view can also drive personalized messaging into various communications channels, and email is a popular starting place, Pelletier noted.
âOne of our largest clients in Europe uses Boxever to understand abandoned carts and then trigger personalized emails to the abandoners,â she said. âThey reported back subsequent bookings of $1 million per week from these communications.â
Boxever also cites a 21 percent reduction in customer-acquisition costs on paid media âby understanding who the customer was, where they came from and whether or not they were already a customer,â saidÂ Dave OâFlanagan, the companyâs chief executive. âThis way they could start to move those customers away from expensive acquisition channels to retention channels, like email, which is much cheaper.âÂ There is alsoÂ potential for a 17 percent uplift in conversion on ancillary cross-sells, such as adding hotel or car to a booking, he added.
âFew companies are really leveraging big dataâ
Exciting though those benefits may be, thereâs an even bigger pool of potential payoffs remaining untouched. âSurprisingly few [airline] companies are really leveraging big data today,â OâFlanagan said.
Indeed, âIâve not seen a single major airline with an integrated âbig dataâ business solution, nor an airline with a plan to integrate such a program,â said Richard Eastman, founder and president of The Eastman Group, which builds travel software.
That depends on how oneÂ defines big data, however. âThe airlines will tell you they âhave it allâ without really knowing or understanding what âbig dataâ really is,â Eastman said.Â âAirline managements remain so focused on selling seats with their existing inventory systems that they have ignored buyer information needs as well as the tools that would enable them to reach out to buyers and travelers to serve those needsâlet alone, reach buyers at decision-making moments.â
Marketing, flight operations and crew operations are all areas of rich opportunity, OâFlanagan said.
âI think thereâs still a huge unmet need in the marketing and customer experience area,â he said. âCompanies like Google are trying to be the ultimate assistant with technologies like Google Now. I think thereâs a huge opportunity for airlines to create a helpful travel assistant that knows what I need before I do by combining data with mobileâhelping people through airports, in-destination, right throughout the whole travel journey.
âImagine a travel application that knows where I am, that Iâm traveling with my family and that the weather is bad on our beach holiday. It could start to offer alternative itineraries close by that are family-friendly and not weather-dependent.Â These are truly valuable things an airline could do for me if they could use big data effectively and join the dots between me, my travel experience and environmental factors affecting that.
Originally posted via “For the airline industry, big data is cleared for take-off”