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we're here with Raj Sivakumar who is head of travel technology and strategy at wns Global Services and Peter fader
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who is wharton marketing professor and most recently co-director of the wharton customer analytics initiative welcome to
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both of you great to be thank you so we're here to focus on the airline industry and how customer analytics has
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really changed that industry so can you talk about some of the evolution of the use of analytics in Airlines yeah thanks
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so Debra just to provide some backdrop about the airline industry it has been perhaps one of the most distressed
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industries you know ever since no it started and in then entire airline food chain or the travel food chain the
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airlines make the least amount of profits you know compared to the other players in the ecosystem what they're
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just meant you know putting a positive spin - that is Airlines you know in particular have become the hotbed when
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it comes to innovation technology decision support optimization etc and if you look at any leading sort of a
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decision support system you know it's safe to say that the airlines have led
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the way okay whether it's a frequent flyer program whether it should have any
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management system whether it is a scheduling systems etc and because neccessity is the mother of invention
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now where this all fits in from an analytic standpoint is in the early days of decision support analytics played a
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supporting role okay so as revenue management for example sort of you know got enhanced okay clearly the advanced
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revenue management systems required better data it required more accurate data but there was very little
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personalization it was you know just to talk about airline parlance here it's
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looking at PN RS as opposed to looking at customers it is looking at the travel records as opposed to looking at the
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customers so while the data collection and the data enforcement so to speak has been there right from the beginning what
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we have seen in the last I would say five years or so is more of an emphasis on personalization okay understanding
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the customer more okay understanding the attributes of the customer more talking
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about you know what is it that we can glean you know from the data that we observe not just
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from that customer but also from the class of customers that look like that customer and that evolution is pretty
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market and clearly that evolution has become you know more prominent not only because you know of the advanced
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analytical techniques but also because of that ones need like a drink techniques and the technology that is
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available for us to parse the data now on a highlight would Raj said which is every other industry I was such an
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incredible debt of gratitude to the airline industry as he said they truly led the way they for instance you look
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at loyalty programs today we all take them for granted they're ubiquitous think about how many different programs
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you belong to but every one of those programs in a way is is paying homage to the airline's
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they did at first they did best that it continues to be a major strategic weapon
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there and on a very personal level I spend a lot of my time these days I'm looking at a revenue management or the
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notion of dynamic pricing in fact they just completed a paper where we apply different dynamic pricing techniques to
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a major league baseball club something like that would have been unthinkable 5 10 20 years ago and it really was the
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airlines who not only brought those words into our vocabulary but legitimize them and made it possible that indeed
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different people could pay different prices for the very same product and they made it acceptable and they made it
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profitable and so the and it's incredible that those two things alone loyalty programs and dynamic pricing
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really game-changing for every industry and it's remarkable that they that those
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innovations among many others come from one industry as airlines increasingly adopt data analytics tools what are key
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factors of success data analytics you know is about better decisions at the end of the day and in the airline space
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you know probably more so than any other space the decisions are all about trade-offs okay we are talking about no
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we are talking about customer centricity we are talking about revenue enhancement
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and we are talking about cost reduction and more often than not you know these three objectives are
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conflicting and as opposed to collaborating if I can say that so it is absolutely crucial that the scientists
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and the practitioners in who focus on data analytics understand the trade-offs well because at the end of the day we
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got to sell data analytics program or practice and make it viable in the industry and those airlines and those
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practitioners that are able to understand the trade-offs well are the ones that are going to succeed
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are they another day when Raj says is deceptively simple but actually much more complex to actually implement this
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idea of trade-offs which I completely agree with it sounds simple in fact we've had statistical techniques for
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decades they're gonna let us measure the trade-offs and understand how people
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will will make those and how they'll vary across people and how different kinds of contextual factors such as
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marketing messages might impact those trade-offs so from a pure measurement standpoint it's easy that's a solved
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problem but from implementing from building a business not just to accommodate those trade-offs but to
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build it entirely around those kinds of trade-offs the idea of taking customer centricity instead of saying oh yeah we
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got to be cars into the customer but say no that's the focus of what we do that's what's gonna drive our analytic
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success that's gonna mean much more than just having a bunch of smart people who
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can collect data and crunch numbers it's going to mean changing the corporate
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culture it's gonna mean changing the kinds of metrics that we use to judge the business so instead of just looking
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at things like volume and overall revenue and market share we're going to be looking at metrics such as customer
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lifetime value and customer retention metrics that by their very nature represent some of those trade-offs it's
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going to mean a different structure to the organization so it's it's not enough
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just to say we have to embrace trade-offs this has to come from the top down it has to be the c-level people say
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that is these kinds of trade-offs that is this notion of customer centricity that's gonna be front and center and in
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some sense if you can get that right then the honor the analytical capabilities are going to follow quite
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naturally well Airlines today are making a lot of alliances with outside partners
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such as hotel chains car rental companies and the like but in the process they do encounter
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some challenges can you talk about some of those challenges and how they can potentially overcome them
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sure it's a very interesting problem oh so airlines have stopped looking at themselves in isolation they have
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partnerships with the other airlines and they also have partnerships you know or
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could be having more partnership with other players and the ecosystems you know whether it's a car rental company
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whether it's a large travel intermediary like an OTA you know etc the challenge
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quite simply and from a customer standpoint the customer demands and deserves recognition and the customer
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demands and deserve consistency in the treatment and these two become challenges as you look at how do we deal
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with the customer from a NTD standpoint of the enterprise standpoint and the problem quite simply
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is does every player in the ecosystem would like to own the customer to use the parlance and in the process of
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owning the customer and the way they own the customer for the most part today okay is through the loyalty programs the
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airline frequent flyer programs or the hotel loyalty programs are such and the challenge there is is to be able to have
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an adequate treatment on how information is exchanged how if there is any monetary exchange of a customer that may
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you know but that may travel in a in a certain flight and stay in a certain hotel and take a certain car rental
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company okay who benefits more you know from what treatment okay because one could argue that you know the hotel or
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the airline in two brings bulk of the revenue okay in the car rental company plays a subsidiary role whereas the car
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rental company could could argue the other way you know because of their attributes is why you know a certain
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person is flying or whatever the case may be so the adequate treatment of the cross
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company sort of you know the the benefits and the value that is being transcended to the customer is going to
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be absolutely important you know between this you know between this company being
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able to recognize and reward the customer and then how they divvy up the value I'm not going to say revenue here
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how they divvy up the value you know that the customer brings to the ecosystem amongst themselves is going to
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be crucial they're getting better at it but a lot more work has to be done and
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indeed the idea of partnerships over there was it's it's an idea it's been
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around forever uh and in fact there there were some really bold initiative it's happening long before a lot of
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these operational ideas really came to pass so I'm thinking back 2530 years ago
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I can't remember the name of the entity when United Airlines bought Hertz and
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and Weston and the whole idea is let's get all these things together the problem is those partnerships were way
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ahead of their time and I'm thinking about all the words that the Rogers using over here the idea of customer
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centricity the idea of being able to track individual customers through all those different touch points and then
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allocating their value accordingly to them none of that was possible back when let's stay with that one case study when
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when when United was was buying up certain kinds of hotels and car rental companies at that point there were still
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entirely separate databases for the customers to the extent that were attracting customers at all across those
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three players there was no way to get that holistic view and there was no way on any kind of personalized level to be
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able to serve up differential experiences to customers based on what they were doing with one of the other
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partners so the partnerships ideas has been around forever and that's it's good
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it's nice to see an industry that's willing to take risks like that but we're on the verge right now because of
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this belief in data because of the belief in analytics because of the belief in customer centricity that these
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partnerships are going to start to really bear fruit and they're going to do so in a way that's going to be
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synergistic to all of the partners it's gonna be just tremendous insights arising from it and everyone's gonna be
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better off not only the partners involved but the customers as well so how can hairlines best use social media
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and other customer level data to drive product differentiation to boost sales and provide a superior customer
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experience social media that's that's that that's the great unknown that's
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that's the the world that we're stepping into right now and as always airlines
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have been truly at the leading edge of it and it's interesting cuz they're at
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the leading edge kind of in both ways which is on one hand being the producers being but really a proactive users of
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social media so whether it's you know hiring armies of people to monitor Twitter and every time they tweet about
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your name you know you're you're on it right away or one of the area's I just just love
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about Airlines it seems like every Christmas that's lots of different airlines to
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coming up with some some amazing viral video about how they're doing some surprise and delight weather was WestJet
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in Canada or a KLM over in Europe lots of examples of Airlines kind of began proactively using social media but then
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they're also on the receiving end of it as well because it's an industry that
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that that creates so much passion you're gonna get viral videos like that the
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famous United breaks guitars and and it's a famous example but it's been
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amazing to see how well not just United Airlines but the airlines in general have been doing there's a kind of a judo
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move to take a medium that had that in some ways can be used against them but to turn it around and turn it into a
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real strength now in no way am I suggesting that it's game over and that they figure this thing out but all I'm
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saying is that they are leading the way and I think a lot of industries are looking at the airlines to see in many
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ways they're the canary in the coal mine to see how they're using social media
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and I think in that same way the airlines are being proactive about looking for best practices outside the
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industry as well so just to add to what Peter said social media is incredible you know from a couple of different
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standpoint one is it's a rich set of independent data source right okay compared to the traditional data sources
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that airlines are used to and other companies are used to and secondly they're spontaneous okay and it says
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there's a remarkable level of importance you know that has to be at a attached to
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the spontaneity of the data you know just to kind of put this in context traditionally airlines have you know
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invested you know millions of dollars on contacting service right so whether in-flight survey or service that not
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nowadays come here email you know after the travel has happened hey what do you think about the booking process what do
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you think about the the travel process in-flight food etcetera etcetera okay and typically these services are sent
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you know you know month later or week later or whatever the case may be okay but even if the service or the sent
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spontaneously the response is about a month or two after the process happen you know for example a customer may have
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made the booking you know six months ago and now you're asking you know hey or do
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the booking process though right now with the advent of the social media what what it has done is
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the customer is able to spontaneously respond and in a very uncommon way respond to a certain experience and that
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provides the airlines with a very rich data source okay for them to think about what is the world thinking okay or at
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least a certain class of customers thinking about that particular aspect of the service good or bad and what we are
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doing in W illnesses you know there's a fair amount of investment that is going
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on we have an advanced social media analytics tool okay that captures the footprint social media footprint and
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maps it to certain airline attributes whether it's meals whether it's baggage
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whether it's a check-in process okay that and compares it with a peer group okay so you're able to do all this in a
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very unconstrained way and that makes it incredibly powerful compared to the traditional place because we you know
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just to repeat when you kind of look at the service for example or when you even
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when you look at the complaint data it's only a small fraction of the customers
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that actually take the trouble of complaining the vast majority of the customers just walk with their money to
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some other airline okay now as you capture this in real-time and be able to respond to it in real-time you know that
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puts the airlines in a better light and more importantly increases a loyalty element as well with that customer
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you