The aviation industry has withstood many challenges in recent decades arising from the pace and momentum of economic, technological, regulatory and Geo-political change. There is an even more daunting challenge: how to use big data as a customer strategy. What is clear is that the established model of customer engagement, employed for decades, is obsolete.
Many of the legacy airline models of customer loyalty are no longer valid. They were based on a combination of flag-carrier status and frequent flier program rewards. These attributes are no longer valued by large numbers of passengers. Existing frequent flier programs, which comprise the sole instrument that most airlines use to engage with customers, are stressed to the breaking point. This comes about by a combination of rising load factors and rising yields. These have the effect of placing intolerable pressures on the supply of upgrades available to qualifying frequent fliers.
Big data will play a role in devising a new customer strategy. For instance, the ratio of active to inactive members of frequent flier programs would likely show a much lower level of customer engagement. And, this despite the total numbers touted by airlines would suggest. The past tendency to spin off these programs may well provide a welcome capital injection to the airline and offer opportunities to preserve these programs. This would enable an expansion of the range of partnerships that provide customers with earn and burn opportunities. But it is difficult to locate in this strategy any means by which the airline is going to build the durable customer relationships. Such a customer strategy is what is required to survive in the emerging competitive landscape.
Our hypothesis is that the global travel sector (airlines, airports, hotels, car hire and other related travel services for the vast majority of personal payment customers to the sector) is evolving at a very fast pace towards a new business model. The evolving business model, big data as a customer strategy, will be controlled by the portals and search engines (e.g. Google, Amazon, Facebook etc. with new players yet to emerge). This will place huge pressure on the incumbents’ business models.
The era and impact of ‘Big Data’ demonstrates the inexorable shift of the majority of consumers to a more personalized, location based and real time marketing ‘Customer Value Proposition’ for brand interactions. This will leave little space for organizations that are not supported by Governments, benefactors and other sources for other more political objectives.
The top end of this market will move to new super executive marketplaces such as ‘Victor’, which is re-inventing the private jet business travel market. The days of ‘principal/agent funded First and Business class travel will be more transparent, shareholder focused and accountable business environment. The justification for the special leather seating, private access lounges and international chef designed cuisines will be a hard sell. And the days of mixing these super executive travelers with the vast middle management travelers will become a rather old fashioned concept, as out of time as the age of the Ocean Liner.
The aviation industry is about to hit the iceberg of data driven and customer segmented business efficiencies that will sink it like the Titanic.