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18 Customer Relationship Marketing in The Airline Industry: Reinhold Rapp

This document discusses the history of customer relationship marketing in the airline industry. It describes how airlines were early innovators in marketing strategies and are now adopting relationship marketing. The document outlines important aspects of implementing relationship marketing for airlines like customer strategy, segmentation, dialogue marketing and continuous learning.

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Aparna Singh
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65 views2 pages

18 Customer Relationship Marketing in The Airline Industry: Reinhold Rapp

This document discusses the history of customer relationship marketing in the airline industry. It describes how airlines were early innovators in marketing strategies and are now adopting relationship marketing. The document outlines important aspects of implementing relationship marketing for airlines like customer strategy, segmentation, dialogue marketing and continuous learning.

Uploaded by

Aparna Singh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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I CHAPTER 18

Customer Relationship Marketing in the


Airline Industry

REINHOLD RAPP
CRM Rapp & Partners, Frankfurt/London

The airline industry has always been a major innovator in marketing


strategies, as illustrated in the early introduction of such things as price
management, frequent flyer programs, direct marketing, and yield management.
Airlines are now among the first companies to fully adopt the relationship
marketing concept. This chapter describes the changes necessary in airline
marketing in view of the relationship marketing concept, and highlights the most
important issues: customer strategy, segmentation, dialogue marketing, and
continuous learning in an integrated approach directed towards an airline's most
important assets - its customers. The chapter identifies the decisions and actions
that have to be undertaken in order to implement relationship marketing
successfully and profitably and use it as a tool for achieving long-term advantages
in highly competitive market environments.

1. Customer Orientation in the Airline Industry


The airline industry as such first appeared in the middle of the 1920s - twenty
years after the Wright Brothers' flight at Kitty Hawk - when the early commercial
airlines were carrying barely six thousand passengers a year. The industry has
always been used as a positive (and sometimes also negative) benchmark for
developments in marketing, customer service and, more recently, relationship
marketing. Air travel has constantly found itself in the limelight thanks to its
public dimension and adventurous character. For instance, just think of the
numerous horror stories that have been written about all the terrible things that can
happen to an airline passenger, and consider the major innovations in marketing
and service areas which have stemmed directly from this industry.
In its early days, the industry's main concerns were to establish the right
balance between supply and demand and to provide an excellent service for the
exclusive clientele which had the desire and the financial means to fly within and
outside the boundaries of their home continent. After World War II, the airline
T. Hennig-Thurau et al. (eds.), Relationship Marketing
© Springer-Verlag Berlin Heidelberg 2000
318 REINHOLD RAPP

industry experienced a tremendous boom; not only because air travel for business
purposes was a rapidly growing sector, but also because the idea of travelling for
fun and leisure was also increasing in appeal. A growing number of national
governments set up airlines and private airlines were founded in the US (which
then merged to become even bigger companies). Regardless, the success of the
airline industry was based on operations, i.e. owning a sufficient number of planes
and controlling enough routes to serve major cities, and the development of
"invisible" innovations, such as the computer reservations system (CRS).
In the early 1960s, AMERICAN AIRLINES was the first company to develop a
CRS, called Sabre, whose purpose was to keep track of air fares, seat assignments
and booking structures. This data processing tool would subsequently playa
dominant role in supplying the information that companies needed for the
profitable management of their business. It was also the first tool to collect more
information on a hitherto anonymous entity: the airline customer.
Customers became increasingly important, particularly when the US Congress
passed the so-called deregulation bill in October 1978. From then on, airlines were
in a position to act freely in an open market. No longer ruled and regulated by the
authorities, airlines were now allowed to claim hundreds of "dormant" routes and
to set their prices in line with their strategy. This was the beginning of the fight for
every single passenger (Sturken Peterson & Glab 1994).
In the years of cutthroat competition that followed, the airlines innovated and
developed marketing strategies and tools that represented major breakthroughs.
These were soon copied by other marketing-focused companies and included, for
example, price management as a competitive tool, yield management to control
the daily revenue stream and manage capacity, frequent flyer programs to increase
customer loyalty, and product differentiation in the various service classes. New
management techniques, such as participate leadership at PEOPLE EXPRESS,
employee stock-ownership at UNITED AIRLINES or fun as a business philosophy at
SOUTHWEST AIRLINES, triggered these marketing innovations (Freiberg &
Freiberg 1996; Petzinger 1995).
In Europe, where the same deregulation process started as late as the beginning
of the 1990s, the movement towards a service orientation was set in motion by
companies like BRITISH AIRWAYS and, in particular, SCANDINAVIAN AIRLINE
SYSTEMS, alias SAS (Carlsson 1987).
All the above-mentioned marketing efforts and strategies reveal a new
paradigm: the major key to customer management and marketing in the airline
industry no longer simply lies with transactions, but growing competition and the
changing role of the customer means that airlines have to focus on the entire
relationship with their current and future customers. With its powerful tools and
databases - drawn from the CRS but especially from the frequent flyer programs -
the airline industry is once again in a position to be an innovator and a major
leader in a crucial reorientation of marketing: relationship marketing.

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