Implementing Crm

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Course : Master of Science (M.S.) in Management

Subject : Customer Relationship Management

Assignment : ProjectDue Date : 16 December, 2011

Submitted by: Submitted to:


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Executive Summary

The global marketplace for commercial passenger airlines is very competitive, airlines need to be able to

respond both quickly and more cost effectively to the ever changing demands of customers. Moreover,

revenue growth achieved by attracting new customers and retaining old customers is essential in competing

with market rivals. The problem lies with how to be more efficient on a long term basis and sustain profits

within a competitive market. In the past airlines have focused on cost reductions as a method of having a more

efficient operation. However, many airlines have started focusing more on customer relationship management

to achieve this goal. Unfortunately many airlines have failed to recognize CRM as a holistic strategy, instead of

viewing it the same way as their frequent flyer programs.

This paper will take a closer look on how both CRM and eCRM were implemented within the airline

industry and in particular how American Airlines has developed and managed their customer service program.

The process and type of technology will be discussed, the evaluation of the program and what adjustments

were made to improve the program.

Company Background

American Airways was in fact not an individual airline but was an accumulation of 82 small airlines

through acquisitions and reorganizations in 1929 and is a subsidiary of the AMR Corporation. It operates an

extensive international and domestic network, with scheduled flights in 260 cities throughout North America,

Latin and South America, Europe, Asia/Pacific and the Caribbean. American Airways carries more passengers

between the US and Latin America (12.1 million in 2004) than any other airline. They have a fleet of 655

aircrafts and have a workforce of over 14,000 employees.

CRM Implementation

American Airlines was the first to implement a system that allowed real-time access to flight details at

any onsite location, and the integration and automation of its booking and ticketing processes. The airline

reservation systems (ARS) evolved in 1964 when Sabre (Semi-Automated Business Research Environment)

developed and launched the first computer reservation system (CRS) that improved airline efficiency.

This system interfaces with a global distribution system (GDS) that supports travel agencies or any

reservation distribution channels including the internet to make bookings through a single system. This system

also contains airline schedules, fare tariffs, passenger reservations and ticket records. Initially when it was first

implemented it was an in-house reservation system which was both expensive to obtain and expensive to

maintain and only travel agents that subscribed could access the system.

CRM Technology Used

With the deregulation of the airline industry, airlines needed to improve efficiency to compete in a free

market which made ARS/CRS a vital component to the travel industry. Since 2009 only three major GDS

providers remain which are: Amadeus, Travelport (the merged Worldspan and Galileo systems), and Sabre

Holdings.


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Sabre Holdings grew out of American Airlines and became independent in 2000 and operates three

global distribution systems channels namely travel agencies, airlines, and direct to consumers. American

Airlines makes use of all these channels and consists of the following services:

Inventory managementThis contains the information of all flights and the available seats according to service classes (first,

business or economy class) on the plane. The information is stored on a Fare Quote System and the

different price and booking conditions are accessed in real time.

Fare quote and ticketingThe fares quotes data can consist of fare tariffs, rule sets or restrictions on the ticket such as minimum

stay and advance purchase depending on the zone , routing maps, class of service tables, and some tax

information. The inventory can also be dynamically controlled through the system which can

manipulate how many seats are offered for a particular price by opening and closing particular classes.

Most airlines issue electronic tickets to customers today the information of the ticket is stored in a

database the type of information stored are the ticket number, the fare and tax components of the

ticket price or exchange rate information. Miscellaneous charges order (MCO) a receipt of payment for

additional service fees is still the only paper printing done by airlines that uses electronic ticketing.

Mobile CRMCustomers register with the airline center where they can set their flight status notification preferences

and then automatically receive messages for all their future flights. When an actual booking has been

made the airlines notify them by phone, text message or e-mail. The moment the customer checks in a

2D bar code boarding pass is sent to their mobile phone.

Fig. 1 American Airlines 2D Bar Code Boarding Pass.Image Reference: http://www.mobilemarketer.com/cms/news/database-crm/4634.html

Availability display and reservation (PNR)The availability display contains all offered flights for a particular city-pair with the available seats in

the different booking classes which users can access through the airlines inventory. This will display

flight information of both the airline it was accessed through (usually a one-way flight) and airlines that

operate in a connecting flight (round-trip or circle flight).


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Passenger name record (PNR) is the reservations details for individual passengers or groups which

contains personal information such as name, contact information or special services requests (SSRs).

This information is transferred to flight operations systems, crew management and catering systems at

the time of booking. The SSR is essential to customer service and offers individual attention for

customers which can inform the appropriate employees on customer preferences on things like, types

of meals, medical needs etc.

Evaluation, benefits and pitfalls of CRM and eCRM

Benefits

Research has proven that the most significant benefit CRM and eCRM has for the airline industry would

be cost factor being far less and more efficient through every operation within the airline. The ranges of cost

savings can be between US$ 100 million to US$250 million for large airlines, US$ 25 million to US$60 million for

medium sized airlines and around US$ 15 million to US$50 million for smaller airlines (Aviation Week & Space

Technology/March 6, 2000, p38).

The eCRM system model of an airline provides a comprehensive analytical solution for measuring an

optimizing customer relationship through any channels using the internet which is directly linked to the CRM

system of the airline. Interaction Management is the foundation for evolving customer service into customer

satisfaction by linking all customer data and making it easily accessible through the eCRM. This can also provide

the following benefits:

Customers can make bookings through the internet 24 hours a day, 7 days a week from any locationthat has an internet connection.

Sales costs are far less when done through online bookings compared to travel agents. Both B2B and B2C order processing costs are reduced dramatically. Customers are handled more efficiently and effectively throughout the whole process. CRM applications lower the cost of design, implementation, installation, training, ownership and

administration.

Enhance intelligent call routing through Caller ID. Real-time access to customer information. Possible to determine the value of customers so as to improve retention, increase sales and build

loyalty.

Direct connection between airlines and customers. Information can be updated in real-time which ensure up-to-date information. Evaluate customer behavior and measure results of the marketing strategy. More effective promotions by data integration. Airlines can respond more dynamically and quickly to market demands. Enhance airlines competitive advantages over its rivals. Profitable and sustainable revenue growth.


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Pitfalls

The biggest pitfall of CRM and eCRM is despite the significant investment, many airlines and customers

alike have no access to the internet or electronic devices that can support these procedures. Furthermore

eCRM cant provide a complete view of the customer due to the lack of incomplete data collected through the

system.

CRM applications play a vital role in sales and marketing but cant operate in isolation or independently.

A logical design of the companys system needs to be integrated into every aspect of the business procedures

and operations to ensure cross-functional information sharing and intelligent business management to

optimize customer service.

Conclusion

CRM and eCRM has proved to be an effective tool to manage a business in both a B2B and a B2C

environment for building a long term relationship with customers, brand loyalty which ultimately leads to

customer retention, better cross-selling and up-selling and sustained profitability. Any business faces

competition and risks, the goal is to minimize those factors by implementing systems and strategies

strategically especially in the case of a CRM system. Pilot projects should be tested prior to full implementation

and when the system has proved its efficiency and stability, it is vital to maintain and update it with the

development of technology in the market. Any company should set their goals and objectives accordingly and

must be adaptable to any unforeseen situations to gain or maintain the competitive advantage.


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References:

www.wikipedia.org (2011). Sabre Holdings. Retrieved 05 November, 2011, from

http://en.wikipedia.org/wiki/Sabre_Holdings

www.wikipedia.org (2011). Airline reservations system. Retrieved 23 October, 2011, from

http://en.wikipedia.org/wiki/Airline_reservations_system

www.wikipedia.org (2011). American Airlines. Retrieved 28 October, 2011, from

http://en.wikipedia.org/wiki/American_Airlines

www.ausweb.scu.edu.au (2003). Application of e-CRM to the Airline Industry. Retrieved 30 October, 2011,

from

http://ausweb.scu.edu.au/aw03/papers/jiang/paper.html

www.mobilemarketer.com (2009). American Airlines launches sweepstakes to promote mobile initiatives.

Retrieved 05 November, 2011, from

http://www.mobilemarketer.com/cms/news/database-crm/4634.html

www.gccrm.com (2011). The Sky's the Limit With Airline CRM. Retrieved 05 November, 2011, from

http://www.gccrm.com/eng/content_details.jsp?contentid=1950&subjectid=101

www-05.ibm.com (2002). The future of CRM in the airline industry: A new paradigm for customer

management. Retrieved 05 November, 2011, from

http://www-05.ibm.com/innovation/fi/pdf/highlights/integration/crm_airline.pdf

www.gccrm.com (2011). CRM Implementation in a Shipping Company. Retrieved 05 November, 2011, from

http://www.gccrm.com/eng/content_details.jsp?contentid=1781&subjectid=42
http://en.wikipedia.org/wiki/Sabre_Holdingshttp://en.wikipedia.org/wiki/Sabre_Holdingshttp://en.wikipedia.org/wiki/Airline_reservations_systemhttp://en.wikipedia.org/wiki/Airline_reservations_systemhttp://en.wikipedia.org/wiki/American_Airlineshttp://en.wikipedia.org/wiki/American_Airlineshttp://ausweb.scu.edu.au/aw03/papers/jiang/paper.htmlhttp://ausweb.scu.edu.au/aw03/papers/jiang/paper.htmlhttp://www.mobilemarketer.com/cms/news/database-crm/4634.htmlhttp://www.mobilemarketer.com/cms/news/database-crm/4634.htmlhttp://www.gccrm.com/eng/content_details.jsp?contentid=1950&subjectid=101http://www.gccrm.com/eng/content_details.jsp?contentid=1950&subjectid=101http://www-05.ibm.com/innovation/fi/pdf/highlights/integration/crm_airline.pdfhttp://www-05.ibm.com/innovation/fi/pdf/highlights/integration/crm_airline.pdfhttp://www.gccrm.com/eng/content_details.jsp?contentid=1781&subjectid=42http://www.gccrm.com/eng/content_details.jsp?contentid=1781&subjectid=42http://www.gccrm.com/eng/content_details.jsp?contentid=1781&subjectid=42http://www-05.ibm.com/innovation/fi/pdf/highlights/integration/crm_airline.pdfhttp://www.gccrm.com/eng/content_details.jsp?contentid=1950&subjectid=101http://www.mobilemarketer.com/cms/news/database-crm/4634.htmlhttp://ausweb.scu.edu.au/aw03/papers/jiang/paper.htmlhttp://en.wikipedia.org/wiki/American_Airlineshttp://en.wikipedia.org/wiki/Airline_reservations_systemhttp://en.wikipedia.org/wiki/Sabre_Holdings

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Implementing Crm