Airline customer experience: Time to chart a new course? The Dbriefs Travel, Hospitality & Leisure series Guy Langford, Advisory Partner, Deloitte &

Airline customer experience: Time to chart a new course? The Dbriefs Travel, Hospitality & Leisure series Guy Langford, Advisory Partner, Deloitte & Touche, LLP Candice Irvin, Managing Director, Deloitte Consulting, LLP Ashley Reichheld, Principal, Deloitte Consulting, LLP Stephanie Perrone Goldstein, Senior Manager, Deloitte Consulting LLP March 16, 2017

Agenda Current perceptions of Customer Experience (CX) and implementation challenges Strategies for helping airlines approach CX Aligning CX strategy with passenger needs along the Ambition Spectrum Capabilities and next steps to set the CX journey in flight Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 2

Polling question #1 Based on your recent airline travels, was the airline you traveled with successful in delivering a differentiated customer experience? Yes, the carrier delivered a notably positive experience. No, the airline attempted to do so, though efforts were poorly executed. No, I believe the airline was attempting to compete on price or other factors outside of CX. Don t know/not Applicable Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 4

Passenger satisfaction is generally up among airlines, but the bar remains low, creating potential opportunities for CX investment 66 Many airlines have made investments in recent years to improve customer experience Airline Industry ACSI Score, 2010-2016 1 Average for all industries: 75.4 65 67 69 69 69 2010 2011 2012 2013 2014 2015 2016 72 however, there is likely still a significant opportunity for passenger experience investment within the airline industry The airline industry ranks 37 th of 43 industries in customer satisfaction 1. which puts the industry amongst the likes of wireless telephone providers and health insurance companies 1 Additionally, four airline companies fall within the bottom ten companies of ACSI rankings 2 Source: 1 American Customer Satisfaction Index, ACSI Travel Report, 2016; 2 Fortune, American Customer Satisfaction Index, April 20, 2015 Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 5

This current state of CX in the industry creates a possibility for airlines to be disrupted in a number of ways Existing airlines or new entrants Emerging competition and technology Millennial travelers Regulatory environment Geopolitical risk Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 6

Airlines face their own pressures, specifically related to their operationally complex nature Network breadth Frontline employees Given airlines far reaching networks and partners networks, it is challenging to ensure a consistent and sustained customer experience Airlines have a large workforce of geographically dispersed employees, typically staffed based on seniority, which makes delivering a consistent employee culture and customer experience challenging Focus on operational performance Capital investments Passengers and industry analysts will always value operational excellence (e.g., on-time performance), however airlines should balance operational excellence with the customer experience Airlines are capital-intensive, thus customer experience transformations involve substantial investment of money, time, and resources Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 7

Polling question #2 Which other industry do you believe sets the highest standard for providing customer experience, from which airlines can take guidance? Banking and financial services Hotels, resorts, and cruise lines Restaurants Retail (e-commerce or brick and mortar) Other personal transportation (ride sharing, rental cars, etc.) Don t know/not Applicable Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 9

We know that a differentiated CX can create sustainable advantages by driving real, tangible, and lasting impact... Growth 7 in 10 said they are willing to spend more with companies they believe provide an excellent customer experience 1 81% of companies evaluated as having strong capabilities for delivering CX are outperforming their competition 1 Profitability Companies which make CX a priority can see 12 times the return on sales relative to companies with a low emphasis 2 Increasing customer retention by 5% can increase profits by 25% to 95% 2 Cost to serve Improved CX can help decrease the cost to serve by driving down the number of interactions fielded by the contact center Resolve a complaint in the customer s favor the first time, and they are likely to do business with you again 70% of the time 1 Source: 1 HelpScout, 20 Customer Retention Strategies that Work, June 6, 2016, and 75 Customer Service Facts ; ; 2 Forrester, The Revenue Impact of Customer Experience, August 11, 2015 Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 10

...and that an emotional connection can be driven by effectively addressing changing customer expectations Emotional connection Advocacy Changing airline passenger preferences are driven by a move from simple satisfaction to emotional connection, using an approach we call Passenger-First Satisfaction Engage me Hear me Empower me Delight me Know me Interact with me in an friendly, authentic way Be hospitable and genuine with me, and treat me as a person Demonstrate awareness of the situation and acknowledge my needs Listen to my unique situation Give me realtime and accurate information to make decisions Value my feedback and respond appropriately Create moments that I will remember and share, beyond my expectations Personalize my experience Remember me and my preferences Anticipate my changing needs Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 11

Improvements in CX in other industries have helped raise the bar for CX in the airline industry Taking a Passenger-First Approach Engage me Hear me Empower me Delight me Know me Building loyalty via engagement Nordstrom Personalizing your experience Disney Parks Offering transparency The Home Depot Delivering the experience Ritz-Carlton Recommending the perfect item Amazon Engages customers with handwritten notes Provides personalized service across all channels Capture insightful analytics about their guests Use data to personalize offers and predict needs and concerns Offers smart phone accessible store maps Empowers customers to find desired products Makes customer loyalty their highest priority Trusts associates with a budget to make it right for guests 1 Uses advanced analytics to suggest items Demonstrates ability to know customer needs through data Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 12 Source: 1 Ritz Carlton The Good, The Bad and The Beautiful of Employee Empowerment, 2013.

What does this mean for airlines today? Airlines have the opportunity to create consistent, unique, highly personalized, and caring experiences When A high value customer, Steve, plans to take his wife on a trip to the Caribbean for their 10 th anniversary. Then If Steve can input key dates in his profile so you can help him plan for these occasions. All employees know to recognize Steve during his trip in a variety of ways to make his trip special, thanks to handheld devices that provides real-time passenger information. Systems recognize that Steve has previously called you about check-in problems during a prior trip. Beacon technology is used to track Steve and his wife along their journey through the airport. Empower me and Know Me Know Me and Delight Me Delight Me and Engage Me Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 13

Polling question #3 Which is the #1 factor you believe passengers most commonly use to differentiate among airlines when planning a trip? Network and flight schedules (access to home and desired destinations) Ticket prices and other fees Frequent flyer / loyalty program Airport experience and interactions with agents In-flight experience and interactions with flight attendants Don t know/not Applicable Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 15

Effective CX begins with charting a CX-specific ambition The degree of differentiation and the support for change should define the position of a company in the Ambition Spectrum, yielding a more realistic vision of what CX can and should look like. The place along the Spectrum can drive the implicit and explicit agreements set with customers The CX Ambition Spectrum High Degree to which a product/servic e specifically addresses customer needs Degree of differentiation Visionary enterprise CX is embedded in the culture Optimized enterprise CX is a CEO and cultural priority Responsive enterprise CX governing body is established Agnostic enterprise Low Material/organizational support for change Degree to which an organization is prepared for a customer experience transformation High Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 16

Companies can make clear choices about their CX ambition and the means to achieve it The Ambition Spectrum helps level-set companies on where they aim to realistically take their CX journey. Choose the place on the Spectrum that is best for customers and is in line with what can be realistically delivered: Agnostic enterprises Responsive enterprises Optimized enterprises Visionary enterprises Travel and hospitality Domestic budget motel chain National car rental provider Global, high-end cruise line Disney Other industries National cable provider Government mail delivery service Large insurance company Amazon CX yields to other business priorities CX initiatives undertaken CX is a CEO and cultural priority CX is embedded in the culture Not all companies need to have a visionary CX the right place along the Spectrum is what is right for customers and the expectations set with them Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 17

The CX ambition will impact where and how to invest in developing a CX strategy Approach How the work gets done Organization Units that house the competency Resources Funding and teams who perform work Metrics Targets to guide performance Closer to responsive Limited centralization around a CX ambition Reactive to customer needs CX is often addressed in silos without specific, dedicated owners/teams Limited clear and focused responsibility Sporadic funding granted; limited or no dedicated resources Resources double-hat from various sources for specific projects Limited tracking of customercentric KPIs Limited use of metrics to derive insights; may use financial metrics as a proxy Closer to visionary Focused on a clear CX ambition Develops customer-focused initiatives that proactively anticipate customer needs Empowered CX owners who drive consistent CX efforts across the organization Customer ownership embedded into culture Separate, dedicated funds for CX enhancement initiatives Focused team of CX resources with both operational and customer experience Established process to measure / evaluate CX-specific KPIs both operational and customer-centric Incorporates customer metrics in decision making Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 18

Polling question #4 What do you believe is the biggest hurdle for airlines on the path to providing a better CX? Upgrading technology platforms (e.g., reservations systems, smartphone applications, etc.) Initiating and sustaining culture change to be customer-focused Providing more direct and reliable feedback channels for customers Upgrading airport and gate amenities Improving in-flight service and related offerings Don t know/not Applicable Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 20

How can airlines begin to address and enhance CX? Getting started on enhancing CX can be done quickly without a large financial commitment at the outset Goal Activity Setting a CX ambition Determine where the organization would like to be on the Ambition Spectrum and the CX attributes and values that the airline wants to demonstrate to customers Determining CX governance structure Identify owners of CX across the organization and establish who has responsibility, decision-making authority, and funding Questions for leaders to address How uniquely does your airline address customer needs? What is your level of organizational and material commitment to CX? How does your CX ambition drive your CX initiatives and activities? Who has authority of the CX strategy and ultimate decisionmaking? How are decisions about CX disseminated throughout the organization? How are ideas generated and assessed and used to innovate new CX programs? Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 21

How can airlines begin to address and enhance CX? Getting started on enhancing CX can be done quickly without a large financial commitment at the outset Goal Activity Quantifying potential customer risk Assess potential risks in customer strategy and quantify the impact in order to be able to understand where you should focus attention and how you may be disrupted Measuring the value created for customers and the company Connect CX to quantifiable business value to help amplify bottom line return on CX investments Questions for leaders to address What are the potential disruptions that you face? How might you be susceptible to a negative event like brand or customer data fraud? What in your CX strategy may open you to potential risk? How are you measuring both the value of the CX you provide your customers and the business value? What is the quality/nature of your customers interactions with you? How much do customers spend and what is the cost to serve? Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 22

Longer term, airlines can consider the larger building blocks of positive passenger experience As airlines look to differentiate themselves through their CX, the next step should be to evaluate if they have considered these capabilities Activation of organizational data Quantifiable customer risk analysis Continuous learning Data visualization Data and cyber security Customer engagement Customer loyalty Brand protection Measurement and feedback Technology empowerment Innovation Employee loyalty Revenue management Advanced analytics Customer master data management Customer strategy Customercentric culture Marketing optimization Customer insights Digital enablement Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 23

Join us May 18 at 11 a.m. ET as our Travel, Hospitality & Leisure series presents: Serving up the right CX: Restaurant customer experience strategy and implementation Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 25

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Contact information Guy Langford Vice Chairman US Travel, Hospitality & Leisure Leader Deloitte & Touche LLP glangford@deloitte.com @guy_langford Candice Irvin Managing Director Deloitte Consulting LLP cirvin@deloitte.com Connect with me on LinkedIn Connect with me on LinkedIn Ashley Reichheld Principal Deloitte Consulting LLP areichheld@deloitte.com Connect with me on LinkedIn Stephanie Perrone Goldstein Senior Manager Deloitte Consulting LLP sperronegoldstein@deloitte.com Connect with me on LinkedIn Copyright 2017 Deloitte Development LLC. All rights reserved. Airline customer experience: Time to chart a new course? 27

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