It is no coincidence; the most customer-focused airlines earn more than two times the industry average.
NB This is a viewpoint by Cormac Corrigan, co-founder of CJ Ignition.
Introduction
Shortly after to embarking on its Always Getting Better customer experience programme, Ryanair’s CEO, Michael O’Leary admitted that its previous customer experience was causing them to lose between 10 to 15 million passengers per annum. Based on company figures at that time, this amounted to between €600m and €900m in lost revenue.
Customer experience is primarily a financial endeavour. In many organisations customer experience is driven by marketing, but we argue that the real driver of customer experience should be the CEO or CFO.
What is Customer Experience (CX)?
Customer experience is the customer’s perceived experience with your brand, and not necessarily your intended experience. Poor experiences adversely impact the bottom line while excellent experiences create positive emotional outcomes for the customer, foster loyalty, increase advocacy, enhance customer lifetime value and so increase revenue and profit.
Why is there a difference between the intended and perceived experience?
In any business there are two clear pillars around which CX is built:
- Brand reputation – the promises a company makes which create expectations in the market and in the minds of customers.
- Business value chain – your organisation’s structure, people, processes and capabilities deliver the actual experience.
Most companies see themselves through the lens of their organisation chart, with lots of different departments or silos that work together (effectively or not) to deliver product and service to customers.
Customers see companies differently - they see the interaction with your business chronologically, or in the form of a journey, and want to have an experience with you that flows and is seamless, with them at the centre.
Gaps generally result from misalignment between these views – the business value chain on one hand and the customer experience of the journey on the other.
Why is there so much focus on CX with travel right now?
There are many and various reasons for the current focus on CX:
- Companies in the travel industry, particularly airlines, consistently rank in the lower levels of customer satisfaction league tables.
- It is now financially demonstrable that brands that excel in CX perform better in terms of profitably and market competitiveness than those that don’t.
- Poor customer experience can result in significant damage to the brand. Social media shifts power to the customer enabling them to hold businesses to a new standard of trust.
- Customer expectations are not static but are changing due, in part, to their experiences with digitally native organisations such as Google, Apple, Facebook, Amazon, Uber, Airbnb, etc.
What are the core ingredients for improving CX?
There are many ingredients critical for achieving excellent CX and they need to be applied in the right order. For example, customers want you to fix the basics before you start getting clever with sophisticated features.
- Vision – when you are a customer-centric organisation, your vision speaks to customers and employees and becomes the beacon that guides employees to do the right thing, regardless of processes, especially when things go wrong. Your vision aligns your company strategy with your identity and culture, treating your customers as assets that will grow in value.
- Integrity – your ability to deliver on your promises throughout your organisation and at all touchpoints on the customer journey. Integrity issues contribute most to poor experiences and this is often where the road to improvement starts.
- Convenience – you value your customers’ time and you are easy to do business with, your products are easy to find, buy, manage and use. You have designed clear, understandable, seamless and frictionless processes that are intuitive and easy to follow. Your products and services are available to customers in their preferred channels and devices, and at touchpoints important to them.
- Personalisation – you know and understand individual customers, their needs and context, and present them with information, assistance and products that are unique and relevant to them at the right place and right time throughout their journey. You are also on the customer’s side and your primary aim with personalisation is improved experience, not badgering your customers with sales prompts.
- Emotion – you are a pleasure to deal with, you make the customer feel good, during and after every transaction and every journey. You recognise, value and empathise with each customer and have their best interests at heart. In return, they reward you with their loyalty.
What are the key emerging trends?Over the past few years there has been a consumer revolution driven by Google, Apple, Facebook, Amazon, Uber, Airbnb etc. that have fundamentally changed consumer behaviours and expectations.
These companies are setting standards for personalization and emotional consumer engagement that travel brands need to match. Focus is shifting from the era of mobile first into an era where their products are being reimagined through the lens of artificial intelligence, machine learning, and augmented and virtual reality.
These innovations will be used to enable proactive assistance based on understanding the context of customers’ daily life, leading to increased personal experiences. Consumers will interact with computing in more natural and immersive ways while searching and shopping will increasingly shift to voice and conversational channels.
The digital giants themselves will penetrate further into the travel value chain to become direct competitors in distribution.
Travel has often been said to be too complex for newcomers, and the likely margins are lower than in their core businesses. But we are already seeing players from Google to Skyscanner moving into direct booking despite this. They are doing this not to chase higher transaction revenue in the short term, but to improve customer experience, thereby retain customers, and their data, on their platform.
In the quest to understand context and personalise the experience for the customer, Google and Facebook have orders of magnitude more customer insight than any travel company. Google’s only fear is the next Google!
What is the value of CX?
The health of the brand - i.e. your ability to deliver against your brand promise - is vital to the financial performance of a business and key metric such as customer lifetime value. A customer experience business case needs to be able to demonstrate how it impacts revenue and profit generated from customers over the timeframe of their relationship with your business.
A 2016 Forrester study showed that positive CX drives increased profit on 3 fronts:
- Retention – customers stay with you longer and purchase again and again.
- Enrichment – customers buy higher value products and more ancillary products
- Advocacy – customers become advocates and bring new customers to your business.
Last month a
Watermark Consulting study (July 2017) analysed the stock returns of US airlines over six years to 2016 and found that “airline customer experience leaders generated a total return which was more than double that of the laggards.”
There are also significant cost side advantages from CX. Quality CX organisations have fewer complaints, more efficient processes and higher productivity, improved employee satisfaction and retention.
The value that derives from an effective CX strategy is defined in "customer lifetime value" (a function of retention, enrichment and advocacy) and is an asset with real and measurable revenue and profit associated with it.
The ability to measure and communicate the value of CX investment internally is one of the most critical elements of the overall strategy. There must be recognition that this is not a one-off exercise but the start of a process for continuous improvement. A CX strategy, within the context of a clearly articulated and realistic brand promise must by supported by the whole organisation and owned and driven from the CEO down.
The purpose is to align the whole organisation, and most importantly, empower your people with the confidence to do the right thing as circumstances demand.
Is the airline industry waking up to CX?
The American Customer Satisfaction Index (ACSI) 2016 reports, that though improving, airline satisfaction levels remain amongst the lowest of any industry sector. In a recent Economist Intelligence Unit (EIU) report that surveyed 100 airline executives and 800 passengers, in all major global markets found that customers have issues with most phases of the journey, but the most concerning ones relate to the airport experience, inflight and baggage handling.
Both ACSI and J.D. Power rank Southwest, JetBlue and Alaska Airlines in their top three for customer satisfaction in their 2017 benchmark studies. It is also no coincidence that these three had the highest net margins in 2016 of 11.6% against an industry average of 4.93%, according to Flight Global.
Whilst there are many factors that contribute to this difference, there is no doubt that CX is increasingly becoming the key differentiator in the competitive landscape.
Since we started with Ryanair, it's only fair we conclude with them. Airline Weekly described Ryanair’s recent set of results as, “just cleaning up”. With net margin for the year to Mar17 at 20% they are an undoubted industry leader. If they can retain their huge cost advantage (30% lower next nearest rival) and at the same time drive the desired outcomes of their customer experience program, they will become an even more formidable force over the next decade.
In a recent Bloomberg interview Michael O’Leary when asked about future expected benefits from their CX program, remarked, “as long as it boosts profitability, there is no limit to my niceness.”
NB1: This is a viewpoint by Cormac Corrigan, co-founder of CJ Ignition and an independent consultant.
NB2:Image by BigStock