Case Study: Continental Airline's Tech Strategy Takes Off - ' First to Favorite ' (
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First to Favorite
By the end of the decade, Continental had significantly improved its reputation, though the carrier still hadn't addressed the technology issues that limited its ability to learn more about its customers. A big part of the problem was the company's clunky old IBM mainframe system, called TPF (Transaction Processing Facility). "TPF is an old 1960s system that all the airlines are married to," says Mike Natale, Continental's staff vice president and CTO. "It's a very inflexible system, and it wasn't designed for customer service." Under the second phase of Bethune's strategy, "First to Favorite," launched in 2002, the IT team set about sidelining the old mainframe. It began by consolidating the airline's disparate CRM systems into one, saving roughly $6 million annually in operating costs and eradicating the cost of those fraudulent claims. Then it partnered with data-management vendor Teradata (a division of NCR Corp.) to create a cross-enterprise data warehouse that is fed by more than 25 enterprise systems; it includes schedules, reservations, customer profiles and demographics, airline maintenance, employee and crew payroll, and customer care.
The consolidated warehouse provides a single, 360-degree view of each customer, including the 31 million customers who are members of Continental's OnePass or Elite frequent-flier programs. The database has allowed company executives to establish what they call the CVM (customer value metric). "The CVM takes into account the amount of money a customer spends with us, how much it costs us to fly that passenger, and all the things we can get out of the data warehouse to associate with the customer," says Anderson-Lehman. "From that, we determine each customer's value to our business." The CVM is calculated each month on a scale of 1 to 100, effectively stratifying frequent fliers into tiers of profitability.
But the CVM means nothing if it isn't put to good use. "When you can feed that into your day-to-day systems, you can accommodate high-value customers appropriately," says Anderson-Lehman. "It's about building that relationship with the customers so they'll fly Continental every time."
How does it work? "One example is that if an airplane is more than 90 minutes late, we'll send an automated e-mail to our top customers on that flight apologizing for the delay," says Mike Gorman, senior director of customer relations. "Our best customers get rewards, like frequent-flier miles, for that inconvenience." Turns out that the people who get those e-mails increase their business with Continental by 8 percent, a significant figure when you consider that those customers pay top dollar for their fares—fares that are currently going up. Customers with high CVMs are also granted special privileges to ensure they'll keep flying Continental, including access to private lounges, head-of-line boarding, first-off-the-carousel baggage handling, and attempts to honor seat preferences. "Loyalty is obviously very important to us," Gorman says. It's also important to Continental's Elite members, whose defection rates are as low as 2 percent, he says.
The attention devoted to high-value customers has paid off. "Frequent fliers will tell you it's a day-and-night difference between Continental and the other airlines," says Tom Parsons, founder of BestFares.com, an online travel booking site. "Continental makes sure their frequent fliers walk away feeling very good." And it keeps the planes full. In a recent filing with the SEC, Continental reported that its passenger loads are on the rise. "They're smart," says Parsons. "When other airlines do airfare sale blowouts, Continental waits it out. Then they're the only ones left with capacity, and they still end up selling out."
Story Guide:
Continental Airline's Tech Strategy Takes Off
Worst to First
First to Favorite
Luring New Customers
Final Destination
Sidebar:
Continental's Wireless Plan on the Wing
Next page: Luring New Customers
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