SCUOLA SUPERIORE SANT’ANNA
Master MAINS
Management, Innovazione e Ingegneria dei Servizi
Service blueprinting as a technique for service innovation in Air Italy.
Supervisor:
COO, Dott. Rossen Dimitrov
Academic Supervisor:
Prof. Mario Rapaccini
Candidate:
Dott. Nicola Zaccagnino
I
Contents
List of figures. ... II List of tables. ... II
Introduction. ... 1
The company overview. ... 1
From agrarian commodities to the experience economy. ... 5
Customer experience, a concept with many definitions. ... 9
Touchpoints and customer journey. ... 14
The shopping experience: from choosing to booking. ... 19
The airport experience: from check-in queues to in-flight services. ... 24
The post-flight experience & customer retention. ... 26
‘What is beautiful is good’ bias and customer satisfaction. ... 29
Service blueprinting as a technique for service innovation. ... 31
Breaking down the process. ... 35
Service improvement: a bold hypothesis and few considerations. ... 39
Conclusions. ... 42
II
List of figures.
Figure 1: Post-merger group structure (p. 2) Figure 2: Current group structure (p. 4) Figure 3: Brand evolution (p. 5)
Figure 4: Progression of economic value (p. 7)
Figure 5: A broad process model for customer journey (p. 18)
Figure 6: A customer journey in the commercial aviation industry (p. 19)
Figure 7: Flight bookings: Online travel agencies (OTAs) vs Airline Websites (p. 20) Figure 8: Factors affecting the quality of service (p. 29)
Figure 9: Time frame of a sample flight (p. 35) Figure 10: The prepare and Arrival phases (p. 36) Figure 11: Check-in and Boarding phases (p. 37) Figure 12: In-flight and post-flight phase (p. 38)
Figure 13: Two sample screens of the (redesigned) app graphic mock-up. (p. 42)
List of tables.
Table 1: Main definitions of Customer experience (p. 10)
Table 2: Overview of airline examples in customer experience literature (p. 13) Table 3: Problems area in context (p. 22)
Table 4: Satisfaction in the airport experience (p. 25) Table 5: Service blueprint components (p. 33)
1
Introduction.
Creating a superior customer experience has become one of the central objectives in many industries. After all, customer experience has been acknowledged as an important factor affecting positive customer behaviors such as loyalty and recommendation. However, cramped seats and stale peanuts used to be the symbol of most carriers in the commercial aviation field. Things have changed for the better.
The aim of this work is to investigate the current state of the art and advance a proposal in terms of service innovation. I will therefore start with an overview of Air Italy as newly rebranded company. To set the theoretical ground, I will briefly consider the experience economy phenomenon, from agrarian commodities to the very experience economy. Given the lack of a unanimous definition, I will be also reviewing the literature surrounding the concept of customer experience. My focus will then shift to the various touchpoints included in the standard airport customer journey, distinguishing from the shopping and booking phase right to the on-flight and post-flight experience.
Once with a fairly clear picture of the standard customer journey, I will elaborate the service blueprint for Air Italy while advancing on top of it some considerations regarding the service improvement.
The company overview.
The story of Air Italy is the story of a company that kept innovating and reinventing itself for its whole life.
In March 19631 the company was established with the name of Alisarda in Olbia by Aga Khan Prince
Karīm al-Hussaynī2 and with the declared objective to promote tourism in Sardinia. The operations
of the newborn air taxi and charter company began in May 1966 for the first time allowing the route Olbia – Rome Fiumicino.
In 1990, the company was headed by Sergio Peralda and employed approximately one thousand people. At this time, the fleet counted 9 aircraft and more specifically comprised six McDonnell Douglas DC-9-51s and five MD-82s. Regular flights were scheduled to and from Bologna, Cagliari, Genoa, Milan, Naples, Olbia, Pisa, Rome and Verona along with seasonal services to Geneva, Munich, Nice, Paris, Turin and Zurich.
In 1991, Alisarda and the Spanish airline Universair joined together to form Meridiana SpA, a new company with a new logo aimed to reflect the expansion of the airline’s operations. Meridiana
1 Hence, one of the oldest Italian airlines.
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maintained its headquartered in Olbia with its main base at Olbia Costa Smeralda Airport while constantly increasing the array of operated routes. This resulted in 3 million passengers transported in the late 90s that soon became 3,5 in the early 2000s.
Shortly after3, Meridiana bought the 29,95% share of the airline company Eurofly4, therefore acquiring the majority package5. Following this participation, Giovanni Rossi (CEO of Meridiana) became CEO of Eurofly. In the same year, additional decisive investments were made aiming to develop the company, which also closed 2006 with the historical record of 4,6 million transported passengers, resulting approximately in a 15% increase compared to the previous year. Two years later, in January 2008, two capital increases were put in place leading the share owned by Meridiana in Eurofly's capital to grow to 46.1%.
Meridiana and Eurofly eventually merged on 28 February 2010. The merger created the second biggest airline in Italy and Meridiana Fly was thus born - under the new holding company, Meridiana SpA. Meridiana Maintenance SpA, the separated airline maintenance company, was also established.
1 - Post-merger group structure.
3 December 2006.
4 Eurofly was founded in Milan on 26 May 1989 with the objective of selling medium haul flights to tour operators. It was established with a 45% shareholding by Alitalia (following the needs of the flag carrier to expand its presence in the leisure travel market). Along with Alitalia, the original shareholders were Olivetti (45%) and San Paolo Finance (10%).
5 Buyck, Cathy. “Meridiana Buys Stake in Eurofly.” Air Transport World, 24 Dec. 2006, atwonline.com/news/meridiana-buys-stake-eurofly.
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The company expansion continued the following year. Indeed, in October 2011, Meridiana fly fully acquired Air Italy6, a small Italian charter carrier. The merger was completed two years later when,
following a decision of the Board of Directors of Meridiana, all the Meridiana fly ordinary shares held by the former shareholders of Air Italy Holding Srl were bought by Meridiana SpA. Subsequently, Meridiana Fly reverted to its former brand name, Meridiana7.
After the rebranding, the company offered domestic and medium haul flights from the main Italian airports to Sardinia (Olbia, Alghero and Cagliari), Sicily and Naples along with leisure destinations such as the Canary Islands, Greece and the Red Sea. Additionally, also offered long haul destinations such as Maldives, Mauritius, Kenya, Zanzibar, Santo Domingo and Brazil primarily from Milan Malpensa (MXP) and Rome Fiumicino (FCO).
The brand repositioning of Meridiana continued in 2014. New international routes were launched8 reconfirming its leadership position in Sardinia and its strategic focus on Naples, Catania, Milan Linate and Verona airport for national flights.
A major strategic shift for the company was soon to follow in 2017, after Qatar Airways9 acquired the 49% of AQA Holding10, the new parent company of Meridiana. On the other hand, the previous sole shareholder Alisarda11 kept the 51% of the shares. Shortly after, Meridiana rebranded as Air Italy12 and announced its future expansion plans: furtherly develop fleet and destinations to become Italy's new flagship carrier.
6 Air Italy SpA (operating as Air Italy) was established in 2005 and its shares initially owned by BV Asset Management (40%), Giuseppe Gentile (40%) and the Pathfinder Corporation for the remaining part. It started operations in May of the same year with the first flight departing from Turing to Budapest.
7 “Meridiana Starts to Repaint the Air Italy Fleet, Drops the ‘Fly’ from Its Name and Settles on a Color Scheme.” World
Airline News, 14 Apr. 2013,
worldairlinenews.com/2013/04/14/meridiana-starts-to-repaint-the-air-italy-fleet-drops-the-fly-from-its-name-and-settles-on-a-color-scheme/.
8 Specifically, from Naples to Moscow Domodedovo, London Gatwick, Kiev, Tel Aviv and Nice and from Olbia to Brussels, Geneva, London Gatwick, Tel Aviv, Nice, Hamburg, Paris CDG, Moscow Domodedovo and Kiev.
9 For reference, Qatar Airways is the national carrier of the State of Qatar and one of the world’s fastest-growing airline, flying passengers to an extensive network of more than 150 global destinations on board its modern fleet of 200 aircraft. Qatar Airways was also recently named Airline of the Year by the 2017 World Airline Awards, managed by
international air transport rating organization Skytrax. It was as well named World’s Best Business Class, Best Airline in the Middle East, and World’s Best First Class Airline Lounge.
10 “Completion Of The Meridiana Agreement By Qatar Airways And Alisarda.” Qatar Airways, 1 Oct. 2017, www.qatarairways.com/en/press-releases/2017/sep/completion-of-the-meridiana-agreement-by-qatar-airways-and-alisa.html.
11 Currently the Alisarda Group provides services not only in the air transport industry but also in areas such as airport management and tourism.
12 Dron, Alan. “Italys Meridiana to Rebrand as Air Italy.” ATWOnline, 20 Feb. 2018, atwonline.com/airlines/italy-s-meridiana-rebrand-air-italy.
4 2 - Current group structure. Source: AirItaly.com
On March 1, 2018, all official branding and business of the new Air Italy came into effect. The new Air Italy inherited all the Meridiana IATA, ICAO and AOC codes. Also, its online presence was refurbished and the company website rebranded and relaunched.
After the rebranding, the company swiftly started to expand operations successfully launching more routes and services. Indeed Air Italy added new domestic routes from Milan to Rome, Naples, Palermo, Catania, Lamezia Terme scheduled for connection to its newest long-range destinations including New York, Miami, Bangkok, Delhi and Mumbai13.
Currently the company network also comprises direct international flights from Milan Malpensa to Accra, Cairo, Dakar, Lagos, Mombasa, Zanzibar, Bangkok, Delhi, Mumbai. From the Olbia Costa
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Smeralda headquarter, year-round scheduled services to Rome, Milan Linate are provided. In addition, a wide range of domestic and regional destinations is also available.
Before concluding the company overview, it is worth noting that from a more technical point of view, Air Italy’s fleet currently includes eight Boeing 737 NG and three Boeing 767-300. It is planned to be gradually renewed with eight new aircraft three brand new Boeing 737 MAX 8 and five Airbus A330-200 joining during 2018. In the meantime, the B767-300 is scheduled for full retirement within the same year. When it comes to maintenance, Air Italy strives for excellence. Indeed, the company was the first Italian airline14 to get the Maintenance Organization Certificate, approved in accordance with the new European regulations (Joint Aviation Requirements). The pillar principle for the technical management is the one of preventive maintenance.
3 - Brand evolution.
From agrarian commodities to the experience economy.
Before proceeding with a more in-depth analysis, a focus on the experience economy phenomenon – broadly speaking- is unavoidable.
It has been almost 20 years since the first time the experience economy was described as the next emerging wave of economic history15 by B. Joseph Pine and James H. Gilmore16.
14 Not to mention among the first four in Europe.
15 Following the agrarian economy, the industrial economy, and the most recent service economy.
16 Although, for the sake of completeness, there are important antecedents. To name a few: in 1959, sociologist Erving Goffman, with his "The Presentation of Self in Everyday Life"; in 1970, Alvin Toffler wrote about “The experience
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To answer the question of what is the experience economy few considerations should be made. Every economy is defined by its predominant economic offering, that is, what a buyer gets from a seller in exchange for money. In the agrarian economy, when the vast part of the population lived and worked in farms, the main economic offering was –unsurprisingly- agrarian commodities17. Notoriously, those products were exchanged in physical, open-air markets located in the middle of every town or village in the world [Pine & Gilmore 2013]. Fast forward to the late seventeenth century, and people moved off farms and into factories to produce more and more goods, using the money earned to buy commodities (and various other goods) on the market, thanks to the industrial revolution. As goods became the predominant economic offering, it was time to consider the economy as an industrial one. Nonetheless, it is worth noting, services were always present. As Pine and Gilmore [2013] argue
Services – intangible activities performed on behalf of another individual, such as cooking meals, distributing and merchandising goods, repairing tools or equipment, cleaning clothes, cutting hair, performing legal and accounting activities and so forth – were also around during the industrial and agrarian economies, but comprised a relatively small part of each. In fact, it wasn’t until the late 1800s, we believe, that services were even recognized as a distinct economic offering [Pine & Gilmore 2013:25].
Eventually, consumers and companies gradually realized the prospective great value that was being produced by services. As the opportunities to enhance lives and businesses became blatant, services started to being offered more and more frequently. Consequently, people gradually left factories to move into restaurants, retail stores, outsourcing companies, food delivery, hotels, call centers, hair salons, offices and so on. As a result, by the end of the twentieth century a bigger fraction of population was employed in services than in factories as the former started to include a greater portion of GDP than the latter, marking the transition into a service economy. The following commodification of services brought people to “increasingly buy services on price” and hence be able to “spend their hard-earned money – and harder-earned time – on economic offerings of even greater value” [Ivi, 26]. Consumers started to purchase increasingly experiences.
makers”; in 1985, Jay Ogilvy wrote "The experience industry"; in 1992, Gerhard Schulze wrote about the experience society and finally, in the very 1999 Rolf Jensen published "The Dream Society" [Pine & Gilmore 2013].
17 For the sake of completeness,
Commodities are distinguished by being undifferentiated. They are what they are, fungible offerings
interchangeable with other commodities of the same kind (although the process of refining may create different classes of a particular commodity, such as separating apples by quality, rocks by size or oil by purity), and therefore purchased primarily on the basis of price [Pine & Gilmore 2013:25].
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To make a long story short, this entire history of economic progress can be summarized way more prosaically in the four-step evolution of a birthday cake - as actually done in the Harvard Business Review:
As a vestige of the agrarian economy, mothers made birthday cakes from scratch, mixing farm commodities (flour, sugar, butter, and eggs) that together cost mere dimes. As the goods-based industrial economy advanced, moms paid a dollar or two to Betty Crocker for premixed ingredients. Later, when the service economy took hold, busy parents ordered cakes from the bakery or grocery store, which, at $10 or $15, cost ten times as much as the packaged ingredients. Now, in the time-starved 1990s, parents neither make the birthday cake nor even throw the party. Instead, they spend $100 or more to “outsource” the entire event to Chuck E. Cheese’s, the Discovery Zone, the Mining Company, or some other business that stages a memorable event for the kids—and often throws in the cake for free18.
As services, like goods before them, are turned increasingly into commodities, experiences have emerged as the next stage in what is commonly referred as the progression of economic value19. This marked the beginning of an experience economy, where experiences replaced services as the predominant main offering in terms of GDP and employment [Pine and Gilmore 2011].
4 – Progression of economic value. Source: Pine and Gilmore [2011]
Just like services, also experiences20 have always been around. They are not a properly new economic offering. However, according to a study conducted by Harris and sponsored by Eventbrite, the share
18 Pine II, B. Joseph, and James H. Gilmore. “Welcome to the Experience Economy.” Harvard Business Review, 1 Aug. 2014, hbr.org/1998/07/welcome-to-the-experience-economy.
19 See supra note 18.
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of consumer spending on live experiences and events relative to total U.S. spending increased 70% since 198721. According to the study, this is a consequence of a cultural and generational change. It
is observed that
for past generations, owning a first car was a rite of passage. Buying a first home signaled achievement of the American Dream. These life milestones were once important factors for identity-creation22. But millennials aren’t as interested in owning a home or buying a car as previous generations were at their age. True now more than in past generations, for millennials, real value is derived from experiencing, not possessing23.
Concomitant with this new economy are a number of implications that companies should keep in mind as they innovate their business.
First of all, realise that the route up the progression of economic value is mass customization. Customizing turns a good into a service and a service into an experience. Second, as Pine and Gilmore put it, “understand that work is theatre” [Pine and Gilmore 2013:41]. As, “the nature of economic output changes, so must the efforts that go into it” [Ibidem].
Third, “authenticity is the new consumer sensibility” [Ivi, 42]. Indeed, according to Pine and Gilmore, the experience economy represents
a shift in the primary criterion by which people choose what to buy and from whom to buy. No matter the offering – commodity, good, service, experience or transformation – customers will judge it based on whether or not they view it as authentic, whether or not it conforms to their own self-image [Ibidem].
The fourth insight is that the experience is the marketing. Therefore, companies should consider putting “their marketing money into experience places, where people can directly experience who they are” [Ibidem]. Finally, the key economic insight is that in an economy in which experiences are the predominant economic offering, charging admission becomes the economic key.
memorable events that engage each individual in an inherently personal way, such as going to a musical concert, theatrical play or athletic event; visiting a museum, art gallery or far- off destination; playing a game or sport; sipping coffee with friends in a cafe; having a birthday party; and on and on again the list could go [Pine and Gilmore 2013:26].
21 Millenials. Fueling the Experience Economy. Eventbrite, eventbrite-s3.s3.amazonaws.com/marketing/Millennials_Research/Gen_PR_Final.pdf.
22 Quite frankly they still are. To be intellectually honest, rather than not being interested, more realistically millennials cannot simply afford to ‘own’ anymore as result of a trend of continued dispossession and labor precarization coming with late-stage capitalism. However, the result does not change, hence the point made in the Eventbrite report is still valid.
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In conclusion, having considered broadly the complex phenomenon of the experience economy, I will now move to analyze more specifically the concept of customer experience.
Customer experience, a concept with many definitions.
In recent years, as emerged before, managers have become increasingly aware of the need to create value for their customers in the form of experiences. In broad terms, the concept of customer experience was firstly introduced in the mid-1980s24 when, “along with the mainstream literature in consumer behavior that deemed customers as rational decision makers, a new experiential approach offered an original view to consumer behavior” [Gentile et al. 2007:396].
But, before any consideration can be made, what exactly is customer experience and what makes for a great customer experience?
So far there has been no clear and consistent definition of the concept of customer experience. This lends explanation as to why the concept is yet to be embraced by many organizations with only a relatively small number of companies leading the way. According to Gartner, customer experience is defined as “the customer’s perceptions and related feelings caused by the one-off and cumulative effect of interactions with a supplier’s employees, systems, channels or products”25. Forrester
Research defined customer experience as: “How customers perceive their interactions with your company”26.
There are many other definitions of customer experience that stress the interaction aspect while others emphasize the perception element. Both of which constitute the two basic elements of a customer experience. It is fundamental to stress that the customer experience concept goes way beyond simply offering users a product or service. Customer experience includes a series of interactions between the company employees and the customer, also known as customer touchpoints. It cannot be configured as just a one-time transactional experience or a simple linear journey. In fact, the concept has been extended to contain all interactions between user and company -or consumer and brand- comprising as well the pre- and post-consumption stages, while delivering both emotional and functional benefits27.
24 Although, as mentioned before, Pine and Gilmore are considered to be some of the first writers to address broadly the notion of the customer experience with their paper published in 1998 [Johnston & Kong 2011].
25 “Customer Experience - CRM.” Gartner IT Glossary, 16 Oct. 2017, www.gartner.com/it-glossary/customer-experience/.
26 Manning, Harley. “Customer Experience Defined.” Forrester, 23 Nov. 2010, go.forrester.com/blogs/definition-of-customer-experience/.
27 “20:20 Customer Experience. Forget CRM – Long Live the Customer!”
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However, as highlighted in the table 1, the definitions found in literature may vary depending on the conditions and the nature of the research of the authors.
1- Main definitions of Customer experience. Source: Alharbi et. al. [2016:56]
For instance, a comprehensive definition is offered by Gentile et al. [2007]:
The Customer Experience originates from a set of interactions between a customer and a product, a company, or part of its organization, which provoke a reaction. This experience is strictly personal and implies the customer’s involvement at different levels (rational, emotional, sensorial physical and spiritual). Its evaluation depends on the comparison between
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a customer’s expectations and the stimuli coming from the interaction with the company and its offering in correspondence of the different moments of contact or touch-points [Gentile et al. 2007:397].
Or another one is proposed by Laming & Mason [2014]:
Customer experience may be defined as: the physical and emotional experiences occurring through the interactions with the product and/or service offering of a brand from point of first direct, conscious contact, through the total journey to the post-consumption stage [Laming & Mason 2014:15].
However, the “most attractive definition of customer experience” [Alharbi et al. 2016:55] was written by Meyer and Schwager
Customer Experience is the internal and subjective response customers have to any direct or indirect contact with a company. Direct contact generally occurs in the course of purchase, use, and service and is usually initiated by the customer. Indirect contact most often involves unplanned encounters with representatives of a company’s products, service or brands and takes the form of word-of-mouth recommendations or criticisms, advertising, news reports, reviews and so forth28.
As Alharbi et. al. [2016] argue, this definition is attractive because Meyer and Schwager combine and include many definition into one, comprising of “the aspects of customer experience (formal, unformed), the method and timing of the interaction (direct or indirect) and the time it occurred, and its trigger and direction”. Hence, “customer experience is a type of participation and interaction of customers among the organization and their feedback according to this interaction” [Alharbi et. al. 2016:55].
Whatever the definition one decides to adopt29, the aim of customer experience is to drive the success
of a brand through a brand-based customer experience which is -ça va sans dire - differentiated from
its competitors and for which consumers are willing to pay. By providing total satisfaction in its execution, excellent customer experience delivers to the company revenue, profitability and growth with incremental sales and positive word of mouth [Laming & Mason 2014]. On the other hand, bad customer experience can cost a company and will ultimately impacts its bottom line as users are well-aware about the ongoing deals and offer available in the market and switching brands has become
28 Schwager, A., & Meyer, C. (n.d.). Understanding Customer Experience. Retrieved from https://hbr.org/2007/02/understanding-customer-experience
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really easy for the customers in case they are not delighted. Studies suggest that, when customers are truly satisfied they are likely to become loyal to the brand [Curtis et al. 2011; Chen 2012]. The ultimate objective of this journey is to turn loyal customers into company’s advocates, willing to remain loyal to the brand even after poor delivery and to both recommend and defend the brand to others.
There appears to be no generally accepted method for measuring customer experience performance, although customer satisfaction is undoubtedly a key metric [Laming & Mason 2014]. This clearly cannot be considered as one overall satisfaction score. Indeed, customer experience is constituted of a series of steps along a journey, in which each individual user engage with a brand. As a result, an understanding of satisfaction at each distinct phase is critical to develop in order to refine the experience over time.
All this considered, achieving an excellent customer experience at each touchpoint30 would be an important objective of all commercial airlines. This appears not to be necessarily the case. A study produced by British Airways reported a “potential revenue loss of over £26 million through not delivering passengers' required customer experience” [Ivi, 16]. The growing perception of the importance and relevance of customer experience to the airline industry is proven by new structures adopted by some carriers31 (and by a growing literature on the matter, see table 2).
For instance, in 2011, Etihad's structure saw the introduction of a customer experience department, characterized for its focus on customers and differentiation, as opposed to traditional product and service development. A challenging aspect of the airline customer experience is represented by the fact that many of the staff (for instance airports, security, customs and immigration) are not under a carrier’s direct control and furtherly complicate the customer journey management.
30 I’m adopting the definition of touchpoint provided by Dhebar [2013]. A touchpoint is defined as :
points of human, product, service, communication, spatial, and electronic interaction collectively constituting the interface between an enterprise and its customers over the course of customers’ experience cycles. [Dhebar 2013:200].
13 2 – Overview of airline examples in customer experience literature. Source [Laming & Mason 2014:17].
As argued by Laming & Mason [2014], in order to measure customer experience32
in terms of its major purpose – to deliver customer satisfaction to drive loyalty and advocacy – an individual customer satisfaction rating is therefore required at all the touchpoints structured along an airline journey; from booking, to check-in, lounge, boarding, in-flight, transfer, baggage, leaving the airport, etc. The individual elements of the journey can then be measured to ascertain which are the ones which are more closely correlated to driving satisfaction, loyalty and advocacy: critical for delivering customer experience [Ibidem]. Hence it is useful to have customer satisfaction data throughout their experience. Nonetheless, such data is hard to come by for externals and academic researchers in this field.
However, if it is true that relevant data is not easily and immediately retrieved, it should be taken in consideration that a more in-depth analysis of the customer journey to better understand the customer experience is always a fruitful possibility.
32 On a related note, Laming & Mason [2014] in their work tried to provide insight into airline customer satisfaction levels by analysis of a large-scale survey of airline passengers. The results are interesting and suggest that
Middle Eastern and Asian carriers were considered to be delivering a better customer experience than their European counterparts. Middle Eastern airlines delivered a higher score in IFE over Asian carriers, otherwise all measures were equal between the two continents. European carriers scored lower on all measures including IFE, cabin features, inflight food and drink and the perception of value for money. Here, clearly, these airlines need to do more to satisfy their customers [Laming & Mason 2014:24].
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Touchpoints and customer journey.
Fair or not, travelers assess airlines based on a wide range of experiences—many of which under the control of the company, some of which are not. As a Deloitte report highlights, “no one blames a supermarket if the roads on the way to the store are under construction […] but if an airline passenger has an unsatisfying travel experience, there’s just as much chance it’s because of a long line at the airport security checkpoint, icy weather, or a dated terminal building as it is because of a lost bag or an overbooking”33. And this is just one of the reasons why the passenger airline industry is an unusually complex business. Airline companies face a combination of challenges that other industries do not. Those include “employing large, geographically dispersed workforces (often highly unionized) with seniority pay scales, asset intensive operations, virtual networks that include international alliances and domestic codeshare and regional partnerships, continued safety threats, and heavy governmental regulations (e.g., taxes, seat size)”34. Each of these elements contribute to make the efforts to deliver a consistently engaging customer experience more complex.
Moreover, a customer journey includes plenty of things that occur before, during and after the experience of a service (or a product). Journeys can be long, usually lasting days or weeks, stretching across multiple channels and touchpoints. This is specifically the case for the commercial aviation industry multi-touchpoint, multi-channel, always-on and fairly competitive market.
The explosion of potential customer interaction points (across new channels, devices, apps and more) makes consistency of service and experience across channels almost impossible. Unless, as argued in a report by McKinsey & Company, “you are managing the journey, and not simply individual touchpoints”35. After all, internet and social media allow the travelers to share the good and the bad with the broad public. It is also common knowledge that a bad customer experience posted on social networks like Twitter or Facebook or on dedicated forum communities can be very harmful to the brand. It has been estimated that 12 positive experiences are needed to make up for each negative one36 and 91% of unhappy travelers will avoid being costumers of an airline with which they had a bad experience37.
33 Reichheld, Ashley, et al. Through Passengers’ Eyes. Delivering the “Right” Customer Experience. Deloitte Touche Tohmatsu, 2016,
www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-cb-through-passengers-eyes-airline-cx-pov.pdf. 34 Ibidem.
35 Maechler, Nicolas, et al. From Touchpoints to Journeys: Seeing the World as Customers Do. McKinsey & Company, Mar. 2016, www.mckinsey.com/business-functions/marketing-and-sales/our-insights/from-touchpoints-to-journeys-seeing-the-world-as-customers-do.
36 Although the estimate frankly seems quite arbitrary, the underlying point still holds.
37 Dent, Julie. Customer Journey Mapping: A Walk In Customers' Shoes. Sabre Airline Solutions, 2013, www.ascendforairlines.com/2013-issue-no-2/customer-journey-mapping-walk-customers’-shoes.
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To this end, a customer journey mapping strategy enables airlines to identify the desires and expectations of individual customers and provide appropriate products and services at each touchpoint throughout their journey.
If properly used, customer journey mapping can help reveal opportunities to increase the customer satisfaction while improving “the end-to-end travel experience, acting as a strategic tool to ensure every interaction with the customer is as positive as it can be”38. Moreover, learning which touchpoints are decisive to the personas that are critical to the success of the company also allows to determine where the airline should be investing to improve the costumer experience – and where it shouldn’t.
However, a critical step before beginning the process of customer journey mapping, it is important to define customer personas.
Many personas could be identified by an airline. However, the excessive granularity that is encouraged by the ambition of creating relatable personas could bring the risk to miss types of travelers who do not fit precisely. To avoid this, “an airline should create between four and seven different personas”39. Four inclusive macro-personas are commonly found in the commercial aviation industry:
Business travelers. Leisure travelers. Family\group trips. Special needs travelers.
Every persona has clearly its own characteristics and needs. Needs that are to be taken in great consideration by the company in order to offer the best experience possible to each costumer. The customer traveling on business is normally bound by the company travel policy that prescribes the allowed fares and sometimes even the airline. Hence, the most relevant factors are, in the business traveler experience, the easiness of the check-in process and the availability of swift transfers when connecting and options such as in-flight Wi-Fi – to name a few. On the other hand, the leisure travelers focus more on the planning phase, making the very first part of their customer journey particularly critical. Similar needs are shared by travelling families and groups. Although more emphasis is put on the in-flight experience and a hassle-free check-in process. Special needs travelers have also high
38 Ivi, 54 39 Ibidem.
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expectations concerning the in-flight experience along with connections and movements needed to get through the security and the checking-in process.
Taking into account the different needs and expectations is fundamental to understand which touchpoints affects the most the costumer experience for each persona. Thus allowing to identify the relative importance to the customer experience for each persona of each step in the air travel journey. Quite intuitively, once the company recognizes what each of its target customers is concerned about, it is critical to align these needs and expectations with the airline brand.
However, it goes without saying that not all customers are equal40. Some are more profitable than others are and from a business perspective, it is equally important to assign a value41 to each customer42.
Having identified the different personas and their weighted importance it is now possible to focus back on the customer journey.
Conceptually speaking, a customer experience can be divided in three broad phases: pre-purchase, purchase and post-purchase [Verhoef & Lemon 2016:76]. Quite intuitively, the first stage entails all the elements of the traveler’s interaction with the brand, category and environment before a purchase transaction. In practice, “this stage encompasses the customer’s experience from the beginning of the need/goal/impulse recognition to consideration of satisfying that need/goal/impulse with a purchase”43 [Ibidem]. Unsurprisingly, in the next stage – the purchase- are comprised all the customer interactions with the brand during the purchase event itself. The typical behaviours associated with this phase are ordering, booking and payment. In the purchase stage are covered all the post-transaction customer interactions with the company’s brand or product/service itself. Normally, the included behaviours are usage and consumption, post-purchase engagement and service requests. It has been observed44 that, within the customer journey, different customer touchpoints can be found.
Specifically, Verhoef & Lemon [2016] highlight four categories: brand-owned
partner-owned
40 Or if you prefer, all customers are created equal, just some are more equal than others.
41 There are several ways how an airline could determine the costumer value. For example, based on the ancillaries and\or upgrade purchased; on the data that could be obtained; on the likelihood to recommend or power to influence other costumers choices or a combination of these factors.
42 Clearly every customer should be treated in a way that is consistent with the brand promise and reputation, regardless of their profitability.
43 See also Hoyer [1984] Pieters, Baumgartner and Allen [1995]. 44 See Baxendale et al. [2015]
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customer-owned
social/external/independent.
The brand-owned touchpoints are characterized by the fact that are designed and managed by the company and are under the company’s control. This kind of touchpoints include
all owned media (e.g., advertising, websites, loyalty programs) and any brand-controlled elements of the marketing mix (e.g., attributes of product, packaging, service, price, convenience, sales force) [Verhoef & Lemon 2016:76-77].
The partner-owned touchpoints are “customer interactions during the experience that are jointly designed, managed, or controlled by the firm and one or more of its partners” [Ivi, 77], including marketing agencies, multichannel distribution companies, multivendor loyalty program partners and communication agencies.
Customer-owned touchpoints are customer actions that are part of the overall customer experience but over which the company, its partners or others actors do not have influence or control. This kind of interaction is more common at the post-purchase stage. For instance, as Verhoef & Lemon argues,
consider situations in which customers use products in ways not intended by the firm. “IKEA hacking” (www.ikeahackers.net) is one such example; here, customers post innovative ways they have repurposed, or “hacked” IKEA products. Alternatively, consider product instructional videos on YouTube. A recent study by Google (Mogenson 2015) suggests that, in the past year, more than 100 million hours of such videos were watched in North America alone; many of these videos were uploaded by consumers, not firms [Ivi, 78]
Finally, the social/external/independent touchpoints are focused on the roles of others in the customer experience. Indeed, throughout the journey, “customers are surrounded by external touchpoints (e.g., other customers, peer influences, independent information sources45, environments) that may
influence the process” [Ibidem].
All the above-mentioned customer journey elements can be expressed graphically with the model below (see fig. 5).
18 5 – A broad process model for customer journey. Source: Verhoef & Lemon [2016:77]
The figure 5 provides a very broad understanding of the costumer journey. Clearly, a more in-depth look would suggest further and more detailed stages. A common and fairly general structure involves steps such as:
Discovery. Research. Purchase. Delivery. After sales.
However, it is fundamental to note that this list can vary greatly depending on the nature of the service or the product provided. As result, there is no definitely right or wrong way to organize the stages of a customer journey as long as they reasonably reflect the user experience. The underlying idea is to describe the nature of the journeys customers take, from the very customer’s point of view.
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A more industry-specific costumer journey mapping can be seen below. From now on, I will broadly follow the stages and touchpoints identified in figure 6.
6 – A customer journey in the commercial aviation industry. Source: Hexaware (hexaware.com) The shopping experience: from choosing to booking.
In today’s digital age the customer journey begins right from the point the user starts looking for a flight (the choosing or shopping phase). Needless to say that with almost half of the world’s population connected to the internet, the very first touchpoint is easily the company website. According to a report published by Phocuswright46, airlines have been more successful in driving direct online bookings. Indeed, data shows (see figure 7) that more travelers used airline websites or apps opposed to online travel agencies47 (OTAs). It has been observed that consolidated air markets along with strong airline membership programs, allows airline companies to attract a considerable share of direct online bookings. On top of that, carriers have shifted toward offering a wide range of ancillary products and services on their websites48: from the very basic seat selection and upgrades to car hire and chauffeur services.
46 “Channel Surfing: Where Consumers Shop for Travel Online.” Phocuswright, 2 Aug. 2016,
www.phocuswright.com/Free-Travel-Research/Channel-Surfing-Where-Consumers-Shop-for-Travel-Online. 47 With the Chinese notable exception. In the Chinese scenario a still fragmented marketplace favors the online travel agencies.
48 And not only there. After the actual booking has occurred, the purchasing mindset is restored in the two days prior the departure. During this time-span, it has been observed, “there is a significant opportunity for airlines to promote their ancillary services more aggressively by email marketing, app notifications, retargeting, with more than 30% of the travellers likely to buy ancillaries within the 2 day period, according to Travelport” [Avram 2017:57; Booth 2016].
20 7 - Flight bookings: Online travel agencies (OTAs) vs Airline Websites
Therefore, it has become increasingly important for an airline company to create an enjoyable digital experience for their customers. It is arguably common sense, however it is important to stress that
user satisfaction is an important predictor of online consumer behavior and the success of a web-based system. If customers are satisfied with the services received through the online system, it is likely they will keep using the system. On the other hand, if customers get frustrated and dissatisfied with the online system, they would be unlikely to come back for a visit [Al-Kasasbeh et al. 2011:2].
However, it is worth noting that the work actually starts even before the user lands on the company website. Indeed, it begins at the search bar of the user’s search engine of choice49. Hence, it is critical to have a SEO friendly website50.
49 To be even more specific, the behavioral pattern adopted by many online users looks like this: first browsing OTAs to find the best deals and then make the booking directly from the carrier.
50 It is not by chance that there are companies such as AIRbase One offering a full package of website design, development, hosting and search engine optimization tailored specifically for airlines.
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The influence of website design on e-service performance has been studied extensively51. When
it comes to website navigation, the three frequently recognized key factors are: user-friendliness, personalisation and chatbot-enhanced customer care.
All these things are nowadays comprised in an effective User Experience (UX) design - which is not an optional anymore for airlines. Luckily, there is a wide literature and case studies52 on the matter. Although it is beyond the scope of this work to go in-depth in the UX design analysis, few considerations can still be made.
Focusing on the UX of the booking interface is a start to an error-free journey. It is thus important to avoid jargon by maintaining a direct, uncomplicated tone of voice. Large and legible type should be encouraged. Section grouping brings focus, for example, have a clear demarcation between selecting destinations, dates and number of people flying help in quickly comprehending the priority of information needed. Avoid hidden cost and click bait prices. Final booking dates, time and cost should be summarised with clarity before a payment gets initiated53.
This should be of particular concern for airline companies. Optimizing search and navigation (the first step of the booking flow/conversion funnel) should be top priority for travel and aviation sites. Indeed, the most common user problems with airline websites identified in a User Feedback Trends report by Usabilla54 are:
1. Search / Navigation: 37% 2. Manage My Booking: 25% 3. Booking / Payment: 22% 4. Check In: 14%
These pain points clearly, if not tackled effectively, do have repercussion on customer’s satisfaction, sales and ultimately, revenue. As a matter of fact, surprising as it might seem, customers are hardly going to book a journey they cannot find. A user might well search via tablet, book via desktop and check in via mobile. Airlines need to pay attention to this change in user behavior and make sure they invest in the cross-device user experience.
51 For a literature review, refer to Al-Kasasbeh et al. [2011].
52 Many can be found online. However, a special mention is deserved for the case-study published by Fantasy Interactive. Here available, fantasy.co/legacy/fi-airlines/.
53 Gonsalves, Dean. “UX Upgrades for the Airline Industry” UX Collective, 12 June 2018, uxdesign.cc/ux-upgrades-for-the-airline-industry-6b96c66575c3.
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Also in a multi-device analysis, search and navigation remains the top issue (table 3).
3- Problems area in context. Source: User Feedback Trends Report. Usabilla
This also suggests that users are turning to their smartphones and tablets more and more to search for flights and start the booking process on mobile. From this, it can be safely inferred that optimizing the search functionality of the airline mobile site means that users are more likely to progress through the booking flow55, even if it happens over multiple visits across multiple devices. Moreover, it is
worth considering that according to Salesforce, “74% of people are likely to switch brands if they find the purchasing process too difficult”56.
When it comes to personalisation and bots for customer service, currently “14% of aviation enterprises are now using AI-powered chatbots for airlines”57. A percentage that is estimated to be
pushed to 68% by 2020. In addition,
55 The more easily a prospective traveler can find what he or she is looking for, the more likely he or she will be to book it. Really, it's not rocket science.
56 75 Customer Service Stats and Facts You Can't Afford to Ignore. Help Scout, www.helpscout.net/75-customer-service-facts-quotes-statistics/.
57 Shriftman, Jonathan. “Airlines Are Using Chatbots to Streamline the Customer Experience.” Snaps, 5 Feb. 2018, snaps.io/airlines-using-chatbots-streamline-customer-experience/.
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52% of airlines are planning major programs or R&D in AI over the next three years, and in the same period 80% of airlines plan to invest in AI-reliant prediction and warning systems58.
The advantages of introducing artificial intelligence in the customer service are pretty straightforward: the customer service interaction is experienced as natural and personable – opposed to the lifeless feeling of just entering information. In addition, “the airline chatbot tool responds immediately to the customer’s question, thereby offering an even better service experience than a traditional email intake form”59. Indeed, many questions and interactions60 are predictable and, as such, can be easily planned. Intuitively, if it can be planned, it can be also be handled by a bot61. Chatbots are becoming part of daily digital life, as they multiply rapidly on messaging platforms and are launched as digital assistants by the largest technology firms. Customer service leaders are already moving beyond initial chatbot trials into mainstream use. While chatbots for airlines are not able to solve every air travel-related issue, they certainly make a strong improvement to help a flier’s journey go as smoothly as possible and allow to limit human intervention by dealing only with exceptions and non-standard problems. Clearly, in scenarios in which customers are already stressed, such as when making a complaint, trained human agents are better able to express the necessary empathy to help deal with the situation. Natural Language Processing allow well designed systems to identify these cases and divert them to human agents. It has been observed that “customer satisfaction ratings for live chat are often higher than all other support channels, likely because of the speed and conversational nature”62. Indeed, chatbots make it easy and fast for customers to reach a company
using the very same messaging services they use daily. Chat is also an easy medium for most people to use, arguably more so than apps and websites. As an Accenture report highlights, "many people will be familiar with elderly relatives who wouldn’t dream of downloading an app, but who will readily text or message to keep in touch, as it feels a much more natural way to interact"63.
These interactions, along with others, make easier for airline companies to collect data and track customers behaviour, progressively defining a customer profile for each traveler. This, in turn, allows
58 “Finnair Joins 14% of Airlines That Use Chatbots, Expected to Rise to 68% by 2020.” APEX | Airline Passenger
Experience, 12 Sept. 2017, apex.aero/2017/09/08/finnair-airlines-chatbots-rise-2020.
59 Shriftman, Jonathan. “Airlines Are Using Chatbots to Streamline the Customer Experience.” Snaps, 5 Feb. 2018, snaps.io/airlines-using-chatbots-streamline-customer-experience/.
60 Questions such as: what terminal is my flight? What gate do I leave from? How much luggage can I bring? What gate does my connecting flight leave from? Is my flight late?
61 For example, the low-cost Mexican carrier, Volaris launched their airline assistant, Vale. Along with helping travelers book flights, their airline customer service and marketing tool is available 24 hours a day to answer any flight-related issues. As another example, Dutch airline KLM allows to store and access all the customer flight information such as boarding passes, booking and flight information within the app with their airline chatbot.
62 75 Customer Service Stats and Facts You Can't Afford to Ignore. Help Scout, www.helpscout.net/75-customer-service-facts-quotes-statistics/.
63 Chatbot in Customer Service. Accenture Interactive, www.accenture.com/t00010101T000000__w__/br-pt/_acnmedia/PDF-45/Accenture-Chatbots-Customer-Service.pdf.
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to predict with an increasing level of accuracy, what each customer is likely to purchase and -not secondarily- when. Analytics-powered personalisation can also be applied to service recovery situations. Indeed, through the understanding that airlines have developed with their customers, they can easily define the best action to take when something goes wrong such as a delayed flight or a lost baggage. For instance, if a flight is cancelled and there is a high-value customer who happens to be sitting in economy64, an algorithm can identify that customer with a high lifetime value score who can quickly be offered a first-class or business seat. Likewise, analytics technology allows airline companies to identify customers whose defection is likely, based on an incident or history of incidents and proactively make an offer to them to incentivize loyalty. Sure, a more personalized, relevant approach guarantees to catch customer’s attention. However, “airlines will also need to build in the obvious change management—mostly around customer touch points like service desks, reservation offices, contact centers, and on-board crew”65.
The airport experience: from check-in queues to in-flight services.
After the booking and preparing stage has ended, a customer’s current airport experience involves lengthy queues, repetitive and redundant processes compounded, in the worst-case scenario, by a lack of communication and personalization. Hence, in an effort to reduce the impacts of airports’ limited facilities, airlines face the challenge to develop innovative ways to streamline processes, such as baggage and customer check-in, along with further optimizing the traveler’s end-to-end journey. An analytical view of the state of the airport experience is well represented by the table (table 4) elaborated by Bogicevic et al. [2013]. In their research, randomly selected consumer comments posted over a period of three years (2010-2013) on AirlineQuality.com relevant to 33 popular destinations were analyzed66. The following table displays the frequency of word mention in satisfying and dissatisfying context.
64 Again, all customers are equal but some are more equal than others.
65 Bennet, Paul. “How Airlines Are Using Analytics to Personalize Services.” Enterprise Innovation, 29 July 2014, www.enterpriseinnovation.net/article/how-airlines-are-using-analytics-personalize-services-1834727543.
25 4 - Satisfaction in the airport experience. Source: Bogicevic et al. [2013]
The table signals quite intuitively, which are the pain points in the traveler experience.
For starters, given the above-mentioned context, the check in process has been reformed so much over the years. Consider for instance the introduction of the self-service kiosk, remote check-in from the home computer and the development of mobile apps that store the passenger’s boarding pass, allowing them to scan it on arrival to check in.
However, technology improvement does not necessarily mean reaching a perfect experience. Indeed, according to the data gathered in the User Feedback Trends report by Usabilla,
although mobile users were the most satisfied overall by device, 31% of negative mobile feedback directly addressed the check in process. This number was significantly lower for both desktop and tablet users, 13% and 6% respectively67.
This could be a result of more travelers using mobile devices, and thus more margin for error or it could be that even though
airlines are investing in mobile specific apps, there’s still a long way to go with ensuring a seamlessly integrated mobile experience68.
The in-flight stage is the next step in the customer’s journey. It is a key moment for both the traveler and the company. Therefore, improvements are continuously being made, with even low-cost carriers also recognizing that a positive travel experience is likely to lead to long-term loyalty. On the matter, few considerations can be made. According to report by Gogo, “83% of global passengers are interested in airlines having Wi-Fi connectivity in-flight, with 23% willing to pay extra in order to
67 Collinge, Robyn. “Common UX Pain Points for Airline Customers.” Usabilla Blog, 12 Sept. 2017, usabilla.com/blog/common-pain-points-airline-customers/.
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get it”69 giving a clear insight of the customer’s preference. As a result of this, to furtherly improve
the entertainment and the overall in-flight experience, airlines are also inking partnerships with popular streaming services. To name one, Netflix will be available, on partner carriers’ flights with next-generation Wi-Fi access70, on the passenger’s mobile devices or tablets at no extra charge. Non-members can sign up directly on-board for a 30-day free trial. For commercial aviation companies, it has also been claimed that “teaming up with Netflix can result in a brand-halo effect, generating awareness of an airline’s investment in next-generation Wi-Fi and potentially improving customer satisfaction”71.
Another way to improve the in-flight experience lies in offering a wide choice and personalization, as mentioned before.
One way is to offer greater choice when it comes to meals, with some even serving Michelin star food on flights72 or “Book the Cook” services73. Although, as pointed out by a Deloitte report
in today’s competitive restaurant marketplace, successful brands need to do much more than offer good food at a reasonable price. They need to deliver a differentiated customer experience along with their meals74.
Another example of an improved in-flight experience is offered by KLM. The Dutch airline has introduced a ‘Meet & Seat’ feature, allowing people to view and connect to the Facebook or LinkedIn profiles of fellow flyers – along with knowing where their seats will be75.
The post-flight experience & customer retention.
After the landing, in the post-flight stage, losing luggage is most people’s worst nightmare and one of the biggest damages in terms of customer experience. For how excellent the service might have been, the traveler will reasonably consider his or her experience completely andunredeemably ruined if one bag is lost. According to airport information and technology company SITA, “81.2% of mishandled bags were delayed, 15.5% were damaged or pilfered, and 3.3% were either lost or stolen”.
69 Gilliland, Nikki. “How Airline Brands Are Improving Customer Experience in-Flight.” Econsultancy, 12 Sept. 2018, econsultancy.com/how-airline-brands-are-improving-customer-experience-in-flight/.
70 Such as those equipped with Ka-band and Gogo’s 2Ku internet access.
71 Spangler, Todd. Netflix Takes to Skies, Pitching Airlines on In-Flight Streaming Tech. Variety, 25 Sept. 2017, variety.com/2017/digital/news/netflix-airlines-in-flight-streaming-technology-free-wifi-1202569965/.
72 Such as Air France and its partnership with Daniel Boulud.
73 Singapore Airlines has an extensive list of Book the Cook (BTC) selections for passengers flying in premium
economy, business class, and first class. Long-story short, BTC allows passengers to pre-select the meal they would like to have onboard.
74 Langford, Guy, and Adam Weissenberg. 2018 Travel and Hospitality Industry Outlook . Deloitte Touche Tohmatsu, www2.deloitte.com/content/dam/Deloitte/us/Documents/consumer-business/us-cb-2018-travel-hospitality-industry-outlook.pdf.
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Of the reasons listed for why a luggage might be delayed, “transfer mishandling is number one at 45%. Failure to load comes in second at 16%. Ticketing errors, bag switch, security holds, and other factors account for 15% of all delayed bags worldwide”76. Indeed, “each year more than 31 million
passengers and 34 million bags are influenced by baggage mishandling which resulted in loss of $3,300 million to aviation industry” [Sing et al. 2016:466]. On top of that, “a passenger wastes around 1.7 days of his vacation or business trip waiting for the mishandled bag” [Ibidem].
To limit the probability of this occurrence, airports and airlines77 are investing in technological innovations and systems improvements to ensure that fewer bags are mishandled or lost.
An interesting application worth to be summarily shared involves a design of baggage tracing and handling system using smart RFID tags and IoT which is based on cloud server.
From a technical point of view, a secure algorithm is
used for generating tags that are attached to printed baggage label with the details of passenger and airline stored in it. RFID readers in the check-out areas facilitate step tracking of baggage which prevents baggage loss. The baggage's real time position is tracked and stored in a cloud using IoT and unique ID can be retrieved by the passengers wherever and whenever necessary. The same ID can be used while collecting bag at check-out counters. The system provided ensures less consumption of time, security for baggage and is economical hence provides customer satisfaction” [Ibidem].
A confluence of emerging technologies can unlock incredible solutions for airlines, specifically around pain points such as, baggage systems, route optimization, helping consumers navigate busy airports, and mitigating the impact of weather delays and more generally service failure. Recently, also the board of the International Air Transport Association (IATA) voted at its general meeting to develop a standard within one year for using RFID to track bags. The industry body declared aim is to start rolling the technology out globally in 202078.
Finally, customer retention79 is considered to be a critical factor and a competitive component in any business environment nowadays. Studies that have been conducted in this area80 showed that
76 Garcia, Marisa. “3 New Ways Airports Are Using Technology to Better Track Luggage.” Skift, 2 Apr. skift.com/2014/04/02/3-new-ways-airports-are-using-technology-to-better-track-luggage/.
77 For instance, in 2016 Delta Air Lines has announced that it is investing $50 million to deploy Radio Frequency Identification (RFID) baggage tracking technology at 344 stations around the world.
78 Roberti, Mark. Airline Industry Embraces RFID Baggage Tracking. RFID Journal, 2018, www.rfidjournal.com/articles/view?17608.
79 For the sake of completeness, it can be defined as the percentage of remaining customers at the end of a year compared to the beginning [Buchanan and Gillies 1990].
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“a company’s most important asset is its existing customer base” and thus “it is essential for companies to keep current clients and to make sure those customers do not go to competitors” [Climis 2016:51]. Moreover, from a financial point of view, acquiring new customer is not free. In fact it implies new expenses for promotion and advertising. Also, long-time customers tend to be less price-sensitive and to buy more, which in turn generates more profit81 through more cash flow. In addition, they “generate a fall in transaction costs, all of which increases firms sales and profits, which leads to sales referrals” [Alshurideh 2016:382]. According to Bain & Company, increasing customer retention rates by 5% can increase profits anywhere from 25% to 95%82.
Loyalty programs are a common method to retain customers. Although it is a mechanism that is getting weaker as “traveler preferences have shifted and they are choosing airlines based on new metrics, including price, convenience and, most importantly, customer experience”83. Nonetheless, such programs are thought to “encourage repeat buying and thereby improve retention rates by providing incentives for customers to purchase more frequently and in larger volumes” [Lewis 2004:281].
However, it should be noted that
for a frequency program to be effective in increasing loyalty, it must have a structure that motivates customers to view purchases as a sequence of related decisions rather than as independent transactions. That is, the structure must give customers an incentive to adopt a dynamic perspective [Ivi, 282].
Programs consistent with this structure are found to be successful84 in
changing customer behavior and in motivating customers to increase purchasing. In addition to a statistically significant estimate for the loyalty reward parameters, formulations that assume that customers are dynamically oriented fit better than do models that do not include a dynamic structure [Ibidem].
81 Although the causal link between long-time customers and higher profitability is considered to be a controversial topic in literature. Please see also Ranaweera [2007] and Reinartz & Kumar [2000].
82 75 Customer Service Stats and Facts You Can't Afford to Ignore. Help Scout, www.helpscout.net/75-customer-service-facts-quotes-statistics/.
83 “Why Airlines Should Continue Investing in Travelers, despite Fading Loyalty.” Boxever, 13 Mar. 2017, www.boxever.com/airlines-continue-investing-travelers-despite-fading-loyalty/.
84 Of course, exceptions apply. For instance, Climis [2016] found that reward programs have a negative effect on customer loyalty for education travelers. That is, “reward programs do not have any effect on loyalty and do not contribute to increasing the loyalty of students”, likely because “students do not have much interest in the cars or hotels that a company is offering” [Climis 2016:64].
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Loyalty programs aside, customer retention is positively correlated with customer satisfaction85
[Mohsan et al. 2011; Namukasa 2013]. More broadly, the quality of service -encompassing pre, post and in-flight- is crucial in ensuring customer satisfaction as the frequency of bad experiences inevitably influences a customer’s perception on the company.
8 - Factors affecting the quality of service. Source: Nakamusa [2013].
Intuitively, a customer dissatisfied with the service quality is not likely to develop loyalty toward that brand. In a study by Nakamusa [2013], findings indicated that pre-flight, in-flight and post-flight services had a significant impact on passenger satisfaction. Moreover, passenger satisfaction as a mediating variable also had a significant effect on passenger loyalty. In other words, delivering high quality in the airline industry appears to be the most effective means of ensuring customer retention through excellence in service-execution.
‘What is beautiful is good’ bias and customer satisfaction.
To conclude this chapter, worth noting is also another –often overlooked- factor affecting the customer satisfaction of the whole airport experience86 given its many high-touch interactions: the physical attractiveness of the male or female service worker [Till & Bulser 2000; Söderlund & Julander 2009; Luoh & Tsaur 2009]. After all, the physical attractiveness (PA) stereotype also known as the ‘What is beautiful is good’87 stereotype [Dion et al. 1972] has found extensive confirmation in
85 In broad terms, customer satisfaction indicates the fulfillment that customers derive from doing business with a company. Analytically, it would be measured as the average satisfaction score that customers would rate a specific experience they had. In other words, it’s how happy the customers are with their transaction and overall experience with the service or product provided - and as such, is an important metric to use in order to understand the quality of the offered customer experience.
86 Involving every physical touchpoint, technically speaking.
87 Defined as the a tendency to assume that people who are physically attractive also possess other socially desirable personality traits and qualities.
