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Flying High Above Commoditization

Using “Big Data” To Shape The

Passenger Experience

David Hoppin, Diio

Peeter Kivestu, Teradata

Chris Amenechi, United Airlines

1

Agenda

• Some facts of life in the airline business

• Defining new points of differentiation

• How airlines are using Big Data to shape the customer experience

• The highest-payoff investments in Big Data

• Overcoming the challenges of using Big Data

• Recap & conclusions

• The airline perspective

2 Fact #1: Most airlines need to achieve

revenue premiums in order to make money

Stage Length-Adjusted Cost per Available Seat Mile (CASM) Twelve Months Ended 3Q2010; US Cents per ASM

Note: Assumes 1,000 mile stage length, 174 block minutes, 150 seats, load factor of 85%, and fuel price of $2.50 per gallon.

Source: DoT Form 41; Barclays Capital

EXAMPLE

9.39.810.210.410.411.4

12.812.913.113.4

15.615.917.0

17.7

16.1-34%

NK B6 G4 FL WN LCCs VX HA AS US DL Legacy Carriers

CO AA UA

3 Fact #2: Essentially, there are only two kinds

of airline passengers

… and the rest Those who care only

about price…

The battle is for the rest The battle is for the rest

The battle is increasingly digital

4 Fact #3: The digital revolution is profoundly

changing the airline business

• New business models and new firms are transforming the industry – for example:

> Google acquisition of ITA

> New ways of delivering airline-related services (GateGuru, SeatGuru, FlightCaster)

> Social media influence

• Digitization makes it increasingly viable to serve ‖the long tail‖ of consumer purchases (low-volume products)

• Digitization also raises the competitive bar – e.g., some customers won’t book airlines with ―clunky‖ websites

Every airline needs a comprehensive digital strategy

5

Post-Travel &

Sentiments

Travel

Booking &

Ticketing

Planning &

Shopping

Every phase of the travel cycle now has a significant digital component

Planning &

Shopping

Booking &

Ticketing Travel

Post-Travel &

Sentiments

Low

Airline Understanding

High

• The further out in time, the fuzzier the picture

• The closer in time, the less time to influence

• Combine all event data to improve early actionability

Initial Purchase Decision

Goal is to maximize the selling window

Final Purchase Decision

6 The digital revolution is unleashing a flood of

―Big Data‖…

What Is “Big Data”?

• Traditionally, the term ―big data‖ has been used to describe the massive volumes of data analyzed by huge organizations like Google or research science projects at NASA.

• For most businesses, it’s a relative term: ―Big‖ depends on an organization’s size.

• The point is more about finding new value within and outside conventional data sources – often by making data accessible to the people who can use it.

> Two-thirds of the firms Tech Target surveyed are keeping more than a year’s worth of data online—43% have more than three years’ worth.

7 The digital revolution is unleashing a flood of

―Big Data‖…

• ―We currently store approximately 540 Terabytes of data … but we plan to add another 300 Terabytes soon. [Our solution] is expected to help Air France in managing the growth of big data volumes,‖ says Francoise Montaut, an IT Storage Engineer at Air France

• ―We have so much data today, and we don’t really use it effectively,‖ says Bob Kupbens, Delta’s vice president for eCommerce and former vice president of Target.com for Target. ―It’s something retail has done very well and airlines are just getting there.‖

Capturing “big data” is not enough -- you must also integrate datasets in order to see the entire

travel cycle and thus influence consumer decisions

8 Airlines are using Big Data to shape the

customer experience in several ways

Improve • Improve quality

Differentiate

• Differentiate the experience for individual customers

Communicate

• Communicate more effectively with customers

9 Airlines are using Big Data to improve

quality…

• Historically, airlines used operational data and customer-complaint rates to measure quality

> For example, flight delays and cancellations, denied boardings, mishandled bags, etc.

• Today, airlines are able to capture progressively more and better data about the customer’s experience

> Low-cost internet surveys provide numbers on previously hard-to-quantify aspects such as the attitude of flight attendants or the cleanliness of the seat (e.g., UA surveys)

> Monitoring Twitter helps carriers identify problem areas (e.g., JetBlue scans Twitter to spot malfunctioning IFE)

You can only manage something once you measure it

10

… to communicate more effectively with customers …

• The internet and mobile telephony enhance airlines’ ability to communicate accurate, pertinent and timely information to passengers

> Example: Delta’s real-time baggage-tracking service

> Example: British Airways’ use of Twitter to communicate flight status to customers during major irrops

• Equally, social media enable customers to communicate with airlines – if they’re listening

> Example: Vueling monitors Twitter for negative comments

> Example: Delta and Northwest used multiple social media to track consumer sentiment during merger process

Better communication improves customer experience even if no change in actual service quality

11

… and to differentiate the experience for individual customers

• Big Data, coupled with automation, gives airlines the ability to calibrate offers and service levels to specific individual passengers

> Example: target opt-in services (e.g., seat upgrades) based on the individual’s characteristics and past buying history

> Example: waive fees and grant free upgrades based not only on fare basis and FFP status, but also on whether the individual has suffered recent service failures on carrier

> Example: automated kiosks can efficiently give each individual customer a better understanding of options and more control over entire travel experience

Big Data represents an opportunity to serve customers on their terms

12

Exciting Differentiation comes from strategic investments in Big Data

• Differentiation -> personalization based on customer valuation

• Personalization is not necessarily a technology play…

• …although technology has an increasing role to play

―empathetic employees that care‖

Technology enabled recognition

Web or mobile web integrated service propositions

13

1. Warm, empathetic employees that care overcoming the disadvantage of continuous irregularity

• Technology has a huge role to play in personalization

―empathetic employees that care‖

Technology enabled recognition

Web enabled integrated service delivery “Our industry suffers from the

disadvantage of continuous

irregularity...As a consequence, things

that seem like a crisis to the customer

often strike airline employees as routine.

“Resolving that dilemma…is key to

motivating airline people to provide the

kind of interface customers want and

expect.”

Robert Crandall, IATA CSS 2010

Larry Kellner, COO Continental Airlines

“Real-time business

intelligence is critical

to our business

strategy and has

created significant

business benefits.”

Anne Marie Reynolds, DWH Director, Continental Airlines

“Misconnecting passengers became a

big concern of our executives…

everyone knew the number was wrong;

“…we’ve figured it out …and people do

trust it now, and we’re able to ask

people to be measured against the

number and work to get it down.”

14

2. Technology Enabled Recognition instead of seeing this…

KQ73VR

$1530

M7QQ3Z

£122 B27MNP

€727

LP69BJ

TL 455 AMS05P

¥14550

15

2. Technology Enabled Recognition …see customers in high definition

re-earned

platinum on

this trip

booked

online for

first time

typically business

traveller, but

leisure flier today

upset she had

to pay change

fee

has now taken this

flight every Monday

for 4 weeks

Big Data enables a step-function increase in airlines’ understanding of their relationships with individual

customers, not just the current transaction

16

3. Integrated Web Service Propositions Real-time Merchandising

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Fare Watcher

SFO

$83 to San Diego

$198 to Dallas

Taken 3 Cruises

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Active itinerary to DFW with Air & Car

17

Challenges to leveraging Big Data Multiple data types/sources, limited integration

Bookings Travel Tickets

• Revenue managers depend on advance bookings and trends by flight and by days before departure

• Sales & marketing are concerned about sold revenues

• Network specialists analyze flown revenues

time

18

Significant challenge to personalization

Bookings Travel Tickets

Try this exercise on your corporate data: ―Which customers flew exactly as they were booked on the morning of their departure?‖

time

19

Web introduces yet new personalization data

Bookings

Shopping: •Schedules •Prices •Campaigns

Planning Travel Tickets

time

Post travel &

sentiments

Social media

Web search

Paid

Visitor

behavior

20

The Point of Integration is where profits are…

The power to capture attractive profits will shift in the value chain to those activities where ...

...complex, interdependent integration occurs

Clayton Christensen, Author, Innovator’s Dilemma1

Quoted from his article: Skate to Where the Money Will Be

1 A longitudinal study of tens of industries, showing how profits moved around in the business ecosystem in

these industries

21

Recap and Conclusions

• Differentiation is critical for airlines that are not low-cost producers

• The digital revolution is unleashing a flood of Big Data

• Airlines are already using Big Data to differentiate themselves in several ways

• Personalization can offer substantial value, through deeper understanding of most valuable customers, but…

• Personalization cannot be accomplished without integration…

• … but integration also promises to unlock benefits way beyond personalization

22

The Airline Perspective

Airline Perspective

Thank you.

Questions?