Last week I had an interesting meeting with an airline CEO, whom I had coached into the universe of Customer Experience Leadership (CEL) some time ago. As we were both on vacations, we could afford the luxury to have an inspiring outdoor open-ended breakfast.
We went straight to the key question I knew the CEO was concerned about: how to differentiate his carrier from two fierce competitors that were always prepared to eat his lunch in the same, highly price sensitive markets.
He knew about the principles of Customer Experience Management (CEM), but after a couple of years he had come to the conclusion that customers only wanted cheap tickets and that employees could hardly be motivated to go “the extra mile” in an environment of outsourcing and downward pressure on salaries.
I knew that I could not come up with simplistic solutions. We took a dive in the pool to refresh our minds before starting to discuss his options.
To make a long story short, here are the three most important conclusions we reached:
1) Time has come for true people-CEOs
Decades ago, when safety was no longer an added value and deregulation started to put competitive pressure on the legacy carriers, the time of the “CFO-CEO” had come, replacing many old-school “pilot-CEOs”.
Today, the cost-reduction screw hardly allows any further substantial turns. The “CFO-CEOs” must give way to the “people-CEO”!
Neither pilots nor CFOs will lose their importance, but they are no longer the driving force behind the airlines of the next decades. In today’s “experience economy”, an organization must be able to produce highly specific value propositions for every customer.
However, VP Customer Experience roles are still created typically somewhere in the marketing or customer service limbo, without real power nor a mandate to change the organization.
In consequence, the evolution from Customer Experience Management to Leadership, is crucial. The CEO must be in the center of this Copernican change that puts the people (employees and customers) in the center of the corporate universe. Who else will produce the value, which customers want to buy? Who else will pay our bills?
ACTION AGREED:
My friend agreed to elevate the Customer Experience role to a C-level role under his personal and active sponsorship.
I recommended him to headhunt a very senior yet innovative executive with a high social and emotional IQ, not excessively conditioned by the airline industry’s inherited “truths” (those dogmatizing about what “cannot be done”).
2) Avoid the marketing trap
Marketers have a genetic predisposition to overpromise. Intelligent marketers know that expectations need to be managed actively. However, I shared with the CEO my experience that the best CMOs perform even better once they team up with a “Chief Customer Officer”, e.g. in a matrix organization.
Many “new generation” airlines have become very marketing driven companies. While this frequently provides some temporary relief from the commoditization threat, the value perceived by the customers (=expectation less actual service quality) frequently declines quickly. This is exactly what CEM/ CEL is called to revers by building bi-directional bridges to the customers and to “Operations”.
ACTION AGREED:
To avoid misunderstandings with his current, admittedly brilliant, CMO, we agreed to introduce the changes gradually, creating first a CEO staff position for the new CEL chief, set to be converted in a new C-level department once the CMO buys in. We both understood that CEL will not work if deployed against the traditional power cores of the organization.
3) Reinvent business partner relations
We both agreed that the global airlines of the future would be highly “virtualized” entities that subcontract everything, except their core competencies. These would include customer and investor relations as well as brand management, following the pattern set by other industries (such as the telecoms, which do not even operate their own networks).
However, the CEO complained about the difficulty to deliver a consistent branded experience throughout all touch-points of the customer experience journey as subcontractors, such as handling agents, do not share the same service culture.
ACTION AGREED:
There is no excuse for not managing actively the customer experience related processes and KPIs when working with a partner.
We agreed that this cannot be delegated or the purchase department – it’s CEL that puts everything into a context. We decided that the CEL chief will responsible for delivering all “moments of truth” in accordance to the expectations set for every segment, across all internal or external service providers.
CEL comes at a cost, but there is no such thing as “Return on Nothing”. However, the ROI on CEL can be spectacular: Doing it the right way will allow the airline to collect fare premiums, larger wallet shares and longer customer life cycles, higher ancillary product sales and free marketing through soaring NPS figures.
A final word on Technology:
Surprisingly, there are still few major airline IT systems that have integrated CEM/CEL into their DNA. Obviously, the proposed changes need IT support. CRM must become smarter to provide real-time service touch point support. Reservation systems must be connected more efficiently with loyalty programs to predict what the customer really values (and therefore is prepared to pay for). I am aware that new or improved solutions are not far off and will help the CEL chief to do his or her job.
Conclusion: are you aware of the cost of not making Customer Experience Leadership a driving force behind your corporate leadership and change projects?
A couple of blog entries of my own on this topic:
- Impact of the role of the Chief Customer Officer (http://riander.blogspot.com/2011/03/chief-customer-officer-and-ownership-of.html);
- Hail to the Chief! (http://riander.blogspot.com/2007/06/hail-to-chief.html);
- The Chief Experience Officer (http://riander.blogspot.com/2005/05/chief-experience-officer.html).
@Riander
One more point, I often comment how when I got a business degree, I had 6 Management classes. Not a single one was how to manage people. The change is going to have to start in schools.
I completely agree, Monique, change has to start at all levels: up in the board, and “down” in the education and training arena. I think the Business Schools are starting to “get it”, I took last year a “refresher” (a PMD, sort of Executive MBA) at ESADE Business School, and I must say that the people and organization related classes where spot on.
When I took my original Embry-Riddle MBA in Aviation Management in the 1990s this was definitely not yet the case – nor did anybody expect it 15 years ago…
Rainer,
You are spot on, but I would love to see more meat. How do you measure the ROI for this? Might I make a humble suggestion and a few observations.
Investors like numbers and numbers show directly that the airline industry has made millions of dollars from checked bags. However, I suspect, that those same airlines have not recorded the increased amount of time to turn around a plane and what that quantifiably means to costs. Nor have they calculated how many people defected to Southwest because they don’t have to check their bag and planes are on time because it takes less time to load. As a result, Investors see one number.
This is called the Parking lot theory of measurement. Basically, I’ve lost my keys in a parking lot and I look to only where I can see—underneath the street light (increased fees from bags). But I don’t look in the rest of the parking lot where my keys actually are (defections to Southwest) because I can’t see there.
Social Media, Brand Advertising and true loyalty campaigns have the same issue. None of them are direct marketing and as a result, are perceived not to drive sales. Nothing could be further from the truth. The best companies in the worth measure and push loyalty: loyalty of employees, loyalty of customers, etc. This speaks to what you are saying above.
So, how do you measure it. Since you’ve posted this in the Net Promoter Score Forum, I suspect you know the answer. I’m a huge advocate of using NPS to measure loyalty and loyalty drives evangelism, which drives revenues. I run a Social Media agency and we use a modified NPS, which we call the Social Promoter Value Assessment [SPVA], to measure the value of the communities we create.
Since you have ear of the airline CEO, please share with him that one of the reasons that I think people choose on price….because when they search online, they have few options: time & price. There is no indication of ontime metrics, space in seats or anything else. I doubt they can do something in the distribution systems, but I think they could on their websites and potentially start a trend.
Stephan, you know I thought that first class would have done well, but with the demise of the business-class only airlines, EOS, MaxJet, SilverJet, do you think that’s still true?
There are some interesting methods to manage the ROI of CEM. We are applying them with our clients and once I find the time to structure and summarize what we are doing, be assured that it will be published in this blog and a Practical CEM Guide for airlines and airports we have in the works.
Rainer, you are spot on a million percent!
The airlines have done pretty much everything possible to become no-frills, especially the so-called legacy carriers. When looking at the US, there ois not a single carrier that has a true first class domestic experience anymore. You have cabins in bad shape, hardly any customer oriented business model, nothing premium anymore. One of the main reasons is (in my opinion) immediate upgrades for passengers due to status – obviously you don’tbuy first class anymore, so you cannot expect much anymore.
the first US carrier that will introduce a real exclusive domestic first class again, that you can sit in only if you pay for it (in $ or miles), will be EXTREMELY successfull!
It is time to stop airlines from being run by the finance department and turn them over to customer experience department….. The legacy carriers can only win..!!!!
Thank you for your comment, Stefan. While I agree with most of your thoughts, there are airlines that make true efforts to be different in a positive way. In the US, Virgin America has pooled a lot of Richard Branson’s untraditional approach to organizations into their value proposition: for instance, they are a “new generation” airline with a pretty good, reasonably priced first class – way better than that of the legacy carriers.
My point is that airlines CAN change, if the market forces them to do so – that’s when they start looking seriously at the Customer Experience from a strategic point of view.
I think most airline’s are a long way from these kind actions and that it could be extremely difficult in getting their cultures to change in order to accept what is necessary to achieve Customer Experience Leadership.
This applies especially to the legacy carriers. Newer entrants have a better chance of instilling the necessary structures and core beliefs into their DNA as they grow. Etihad being a prime example, getting great feedback and positive word-of-mouth for it’s product. The challenge is maintaining this as the airline grows.
I very much agree with the comments about customer perception of value being key. Too often in airline marketing, there is implicit and explicit over-promising of what a customer will experience. The customer arrives for the flight and is very disappointed by what they actually experience and they go away unhappy and perhaps feeling cheated.
This is unsustainable and is for me a major reason that airlines, particularly in the US are deemed commodities. Customers are wise enough to know that whatever the website might promise, the reality will be something else and that there is little to differentiate between the options. In this position, what incentive is their to choose on anything other than price?
I firmly believe successful airlines such as Ryanair and Southwest have benefited immensely from their ability to promise an experience and then consistently deliver that experience.
While customers may not love the product or the experience, they get what they were told they would get, which breeds a sense of satisfaction that encourages them to become repeat customers.
Going back, perhaps this was true of all airlines and the focus on costs has robbed airlines of their uniqueness and an authentic experience which they can promise and deliver in such a way that the customer values and is willing to seek out and pay more for.