Effective information enables transport to provide individualised activity
When Andrew Studdert, chief information officer at United Airlines, talks about a seamless interface, he's not referring to a new system for running jet engines. He's talking about future competitive advantage in his industry. To Mr Studdert, seamless interface means taking the airline to a new level of customer service.
'What I want is for a customer to check out of a hotel, get on a shuttle bus, and have his bags packed up and sent on to a final destination without him needing to tell anybody or wait in line,' Mr Studdert says.
'And then, at his next stop his bags are automatically sent to his new hotel and the keys to his rental car are waiting for him at the gate. There's no reason airlines cannot do this.' Like Mr Studdert, airline executives these days are spending a lot of time thinking about customer service. The days of 'fare wars' are giving way to a new, equally intense era where competition is based not only on price but also on the ability to develop intimate relationships with customers and provide specialised, home-to-destination customer service.
Throughout the transportation industry - whether airlines, trucking, trains or buses - executives say the biggest concern that keeps them up at night is how to give their service a personal touch. The challenge is to convince customers that the seat they are buying is not the same as a bag of grain, but a valuable relationship that is worth more than the difference in ticket price offered by a rival.
'Going forward, customer service is probably the most important way companies are going to differentiate themselves in the brutally competitive world of passenger and freight transport,' says Dennis Christ, group vice-president of Unisys Worldwide Transportation Market Sector Group.
'In a world with millions of customers, when a company starts treating you specially, you are going to respond.' At leading airlines, railways, and freight companies, finding new ways to use information to improve customer relationships has become the primary driver for insuring profitability in the future.
To do so, these leaders are concentrating on two main areas: developing a pro-customer corporate information asset to build stronger customer relationships.
The first and perhaps most difficult step to take, according to Mr Christ, is to change the organisation's philosophy. Until recently many transportation companies have depended too heavily on simply cutting costs rather than adding revenues, which is more difficult both to accomplish and define. Hence the fare wars that characterised the airline industry in the late 1980s and early 1990s.
It is much easier to see the value of reducing fuel costs by 5 per cent than to assign a dollar value to gaining or retaining customers. 'Focusing on customer service is more of a leap of faith,' Mr Christ says. 'But it's one companies must make for the simple reason that the old cost-cutting answers have not solved the problems of declining revenues, lower margins and increased competition.' The easiest way for executives to make this leap is when cold, hard numbers are staring up from the page.
Consider Ansett Australian Airlines. Ansett carries some 12 million passengers a year, and just over half a million of these - about 4 per cent of the total - are frequent flyer members. However, those frequent flyers generate 30 per cent of the company's total revenue, or about $2 billion a year.
'Those are some very sobering numbers,' said Gary Kingshott, Ansett's director of marketing. 'Clearly, a relatively small number of passengers are extremely valuable to the airline and its imperative that their business be kept.
'These are people worth going out of our way to please in every possible way. We want them to be treated like friends, be referred to by name, be made to feel both welcome and a guest.' To treat frequent flyers with special attention, Ansett launched a new customer loyalty programme in late 1995. The programme will provide every Ansett employee with detailed customer profiles and enable them to anticipate the needs of frequent flyers and give them specialised service whenever they board an Ansett plane.
The challenge of changing the corporate mindset has also faced frequent carriers such as Lufthansa Cargo, the freight subsidiary of the giant German airline.
According to Gerhard Stonner, vice-president of implementation programs for cargo operations, executives there have been mulling what sort of company Lufthansa will be in 10 or 20 years.
Right now it's a transport company, but the rising demands of customers is also making Lufthansa Cargo a logistics company, and as such, it is becoming increasingly dependent on how it collects and analyses information.
'What we've found is that our freight customers not only want to track shipments - they want to rearrange travel destinations en route in order to be more flexible to global demand,' Mr Stonner says.
'We've also found that while in the past we've been part of companies' distribution chains, we're now becoming a key part of companies' production chains as well.' To meet the growing demands of customers to provide sophisticated, end-to-end service on freight, Lufthansa worked with Unisys to install a new cargo tracking system to ensure packages reach their destinations quickly and safely.
The system eventually will allow employees to track packages for customers at the touch of a button - whether the package is on a Lufthansa plane or in the truck of a local freight forwarder.
'Our goal is that in 20 years Lufthansa will steer the entire process of freight delivery rather than just the air travel portion. We want to be the system owner and system manager,' Mr Stonner said.
'In 20 years we'd like a customer to be able to say to us: 'We need this here and here and here, now you do it.' We're not there yet, but we will be.' Beyond developing a pro-customer culture, experts say, transportation companies must enhance their ability to collect and analyse customer information quickly and efficiently and deliver to it to the point of customer contact.
'Getting at the enormous amount of information companies have in their databases is a huge challenge. The problem is, how do you take information and translate it? How do you make it useful?' Mr Christ says.
'Companies must devise ways to take bits of data and transform them into something that drives the business.' Most transportation companies still have multiple databases containing information about customers, and they are rarely integrated on a single platform so that the information can be easily accessed and used to service customers.
'One airline executive I talked to has customer information stored on 23 separate databases, each a self-standing silo of information,' says Efrain Zabala, vice-president of passenger service systems in the Transportation Market Sector Group at Unisys.
'Right now the airline can't even match the number of flights a person has taken and the amount he's spent on those flights. The first step for transportation is to create a facile corporate memory.' Several airlines are already starting to unify divergent databases to provide employees with quick access to customer information. At United Airlines, executives will soon be able to profile every customer using a single information system.
'Our goal is to channel information through pathways rather than rigid blocks,' says Mr Studdert. 'We need to build flexibility.' The same dilemma faces Mr Kingshott at Ansett. 'We're at a point where we're gathering a lot of information but we can't use it,' he says.
Ansett's system is good at providing information about customers at various points of contact, but it does not provide good marketing information - something the company's new customer management system will eventually provide.
'We're gathering a lot of lifestyle information about our customers that want to use more effectively,' Mr Kingshott says. 'I'd like to say to our information system: 'Please give me a list of all the left-handed golfers who took a holiday on the west coast of Australia in the last 12 months because I just cut a deal with some resort, and its suited to left-handers, and I'd like to make an offer to this select group of customers'.' Ansett also expects soon to discontinue using identity numbers for customers. These numbers are often omitted when reservations are made through a travel agent, resulting in a loss of valuable information.
Ansett is not far off from being able to recognise frequent flyers simply through name recognition or voice print, he says.
Mr Zabala envisions even greater flexibility in the area of specialised marketing, one of airlines' top challenges is simply keeping their seats filled on a daily basis. 'What if, for instance, an airline could see that its flights to Chicago are only 60 per cent filled over the next week,' Mr Zabala asks.
'Why not offer a deal to frequent flyers with families in the Chicago area? A mailing would be too late and cumbersome, but in the age of the Internet, an electronic offer could be made instantly to thousands of customers.' To develop a similar level of flexibility for its freight customer, Lufthansa is working to unify the company's database system.
Lufthansa maintains separate databases for freight depending on its point of origin - the United States, Germany, the United Kingdom, and the rest of the world - and cannot share information between the different systems.
For example if a package needs to be sent from Germany to South Africa with a stopover in London, Lufthansa agents need to enter the shipment twice rather than checking if straight through to its final destination.
The new system, which will be operational by the end of 1997, will enable Lufthansa to track each piece of cargo at every stage along the delivery process and use this information to develop specialised services for customers.
'With the new freight management system, we will be able to identify customers that, for example, send 50 crates a week to New York,' Mr Stonner says. 'We can then develop a special program that gives them a discount for using a particular route that we know is going to be running under capacity.
'The goal is to build customer relationships while also promoting operating efficiency.
The next step for Lufthansa will be creating an interface that allows the company to hook into the information systems of its customers to manage their freight for them.
'We want to become part of their network,' Mr Stonner says.