Operating in a customer-centric way is not “just about being everyone’s best friend” but identifying customers based on their value, the Amadeus Airline Executive Summit was told.
The event, held in Prague last week, heard from Peter Fader, professor of marketing at the Wharton School of the University of Pennsylvania.
He said: “This is an opportunity for airlines to recognise the value of individual customers. It’s not just about being everyone’s best friend. What’s the future value of a customer?
“How much more valuable will a customer you provide great service to today become in the future? We cannot be intimate with everyone. That’s expensive and inefficient.
“We need to find which kind of customer we want to put at the centre of everything we do.
“If we can figure out who that select set of customers are and build a business around them and enhance the value through the regular things that we do, through the regular service we offer, they will gradually share some of that value back with us.
“If we do those things we can make more money than simply obsessing over the products and services that we have.”
Fader said Amazon is prepared to lose money to acquire a customer because it is looking to build customer equity and a long-term value proposition.
“We can do better than just focusing on product all the time,” he said. “You can do that today. It’s not actually not that hard. We have the data for it. This industry has better data on its customers than most other industries do.”
Fader said the aviation industry can be complicated but it is important to keep things simple.
“You do not need to boil the ocean. You can go with relevant, simple behavioural measures.
“You can come up with a remarkably accurate estimate of Customer Lifetime Value (CLV). Ask yourselves, what’s the value of those customers?”
Fader warned against airlines over-focussing on the more valuable premium cabin business travellers saying economy customers are need to “keep the lights on”.
This requires operational efficiency, while the airline might identify sustainable growth potential is in the higher value customers, he added.
Fader said remarkable things can happen when an entire organisation focusses on Customer Lifetime Value and cited games developer EA Sports as a firm that excels in this area.
“EA does not have an ad agency. They come up with their own ads and do it on the basis of CLV.
“Every time they launch a new game instead of gauging it on the number of units sold they base it on how much does is elevate the CLV of the users of that game.
“If you can find a way to elevate that value and bring in new customers with high CLV you are bringing added value to your owners and shareholders.
“In airlines a lot of these activities are happening in a vacuum. It needs to be tied into other activity.
“I really believe that all the elements of extraordinary customer centricity exist in this room. You need to start simple with limited experiments.
“Not only is it in the early stages for airlines, it is in the early stages for all companies.”