AirlineCRM-SiebelSystems-9 30 05

Jason Salfen
Customer Relationship Director, Product Marketing

Management in the Airline September 30, 2005
Industry
Agenda
Why CRM Applies to the Travel Industry
What is “Customer Relationship Management”
© 2005 Siebel Systems, Inc. Confidential.

2
Travel Market Analysis
Even though the market is expanding, carriers are still

experiencing pressure from all sides.
Decreased
Increased
Demand for Full-
Competition &
Service, Hub-and-
Price Pressure
Spoke Carriers
Consolidation & Decreased Loyalty

Bankruptcy
Reduced Product Changing Channel

Differentiation Dynamics

3
Carriers’ Strategic Imperatives
Carriers strategic priorities are geared toward ensuring

their near-term survival and laying the groundwork for a
medium- and long-term revival.
Industry
Industry Issues
Issues Strategic
Strategic Imperatives
Imperatives
• Decreased demand Increase Identify and

Operational Acquire
• Increased Efficiency Profitable
(Decrease
competition Costs)
Customers
• Price pressure
• Consolidation
• Decreased loyalty Maximize Optimize
Customer Sales
• Decreased product Loyalty Performance
differentiation
4
The Effect of the Internet
The Internet has increased the importance of building a

strong brand and valued customer relationships.
If the customer only sees your name, logo and price, why will they
choose your carrier?
5
Service Differentiation Stops Commoditization
“While consumers agree that price is important,

they’d choose a slightly higher rate for added service”
Forrester, April 2002
83% of travelers say that

Product Differentiation
personalized service and
attention to their needs
Service Differentiation provides value. Value,
rather than price, defines a
good deal for customers1
Service differentiation is
BRAND the foundation of brand
EQUITY equity
Brand is a source of
sustainable competitive
advantage
time
6
Carriers’ Strategic IT Investments
The two IT investment areas that encompass the four

strategic priorities previously defined are the two highest
priority IT investments that carries plan to make.
Investment priorities for future IT projects
High Priority Low Priority
Short Term Projects with 54% 32% 12% 1%
1%
Proven cost savings
Customer Services or 44% 26% 21% 5%2%
2%
marketing advantage
Simplifying internal
23% 33% 29% 13% 2%
processes
Running existing 20% 33% 32% 7% 2%6%
infrastructure
Medium Term Projects 19% 48% 26% 6%1%
to cut costs
Long Term Strategic 17% 24% 40% 12% 3%4%
infrastructure upgrades
Integration with 11% 23% 22% 16% 16% 12%
alliance partners
'1' '2' '3' '4' '5' No answer
Source: 2
Cost savings – 76% rate it priority 1 or 2
Improved Service or Marketing – 70% rate it priority 1 or 2
7
Carriers’ CRM Focus
CRM’s importance and priority is increasing within

passenger airlines.
Expected demand for IT skills over next 2 years

Web/open systems
applications development 80% 12% 8%
CRM/Customer Services 64% 26% 4% 6%
IT Strategy 62% 33% 1%

4%
Infrastructure/network 60% 30% 6% 4%
Business Analysts 60% 34% 5%

1%
Supplier & Partner
Management 43% 51% 5%
1%
Legacy systems support
(Coding TPF etc) 4% 42% 46% 8%
Rise Same Fall No answer
64% of carriers anticipate a rise in the demand for CRM / Customer

Service-related IT skills over the next two years. 2, 3

8
Hosted Loyalty
Carriers increasingly are looking for a hosted Loyalty

solution.
IT functions already moved/planning to move to ASP mode

(Base: All respondents to SITA/Airline Business “Airline IT Trends Survey, 2004”)
Reservations 58% 10% 19% 13%
Departure control
56% 9% 22% 13%
/ check in
Cargo reservations 31% 23% 27% 19%
Frequent flyer
27% 17% 36% 20%
application
Revenue
15% 9% 56% 20%
management
Airline operations 14% 5% 56% 25%
planning
Financial Systems 12% 9% 55% 24%
Engineering/MRO 11% 10% 54% 25%
Purchasing 11% 9% 52% 28%
Already moved to Plan to move Keep in house No answer
Source: 2

9
Agenda
Why CRM Applies to the Travel Industry
What is “Customer Relationship Management”

10
Airline CRM Definition
CRM ≠ Frequent Flyer Program
Loyalty Program ≠ Frequent Flyer Program
A comprehensive customer loyalty

management (or CRM) strategy and
solution manages all customers
interactions in a consistent and value-
oriented manner
11
Can you tell the two airline loyalty programs apart?
#1 #2 #1 #2
Number of tiers based upon Purchase miles Yes Yes
4 4
recent travel
Transfer miles Yes Yes
Tiers based upon lifetime travel Yes Yes
Electronic upgrades Yes Yes
Tier bonuses Yes Yes
Family membership No No
Accrued points vary by tix class Yes Yes
Not with Not with Web site
Miles expire
activity activity
Transaction history Yes Yes
Blackout dates for reward travel No Varies
Point total Yes Yes
Points for domestic ticket 25k / 40k 25k / 40k
Update profile Limited Yes
40k / 60k
Points for Europe & NA 50k / 80k
/ 100k Process point redemptions Yes Yes
60k / 50k / 65k
Points for Asia & NA Enroll in promotions Yes Yes
100k / 125k
Redeem points with partners Yes Yes Request missing credit Yes Yes
Number of partners 100+ 100+ Example Promotions
Credit card Yes Yes Booking online bonus Yes Yes
Hotel Yes Yes Fixed point bonus for targeted

Yes Yes
segments
Air Yes Yes Percentage bonus for targeted
Yes No
segments
Car rental Yes Yes
Redemption discounts No Yes
Financial services Yes Yes
12 Source: 4
Break The “Parity Deadlock”
Loyalty programs are losing their ability to provide

competitive advantage – no longer a brand differentiator.
Loyalty programs have reached “parity deadlock”
Minimal switching costs between programs
Current Loyalty Programs' Ability to Influence

Customers' Behavior "A Lot"
% of Members Influenced
30%
25%
20%
15%
10%
5%
0%
Grocery Department Specialty Discount Pharmacies
Stores Stores Retailers Retailers
Less than 25% of retail shoppers say that loyalty programs have a major
impact on their decision to shop at a particular store
13
Why Are People Loyal?
“Loyalty is a positive belief, generated over the

course of multiple interactions, in the value
that a company and/or its products and
services, which leads to continued interaction
and purchases over time.”
Multiple Provide
Belief Interactions Value;
“win-win”

14
Customer Expectations
Frequent travelers expect:
Allow me to contact you through the channel of my choice

Recognise and reward my value
Use the information you have about me
Treat me as an individual
Treat me consistently
Solve my problems first time
Make amends when things go wrong
Siebel and IBM

June 2005

15
Travel Customer Management Continuum
CRM in passenger airlines extends beyond traditional

sales, service, marketing and loyalty to include all of
the touch points in a passenger’s travel experience.
• Personalized Service
• On board sale •B
a
io
n • Arrival service Inf gga
• L orm ge
n d rtat • Connections
• T ost atio
u o
ro nsp y ran Ba n
• G Tra urit sfe gga
g
e c ck n g r to e
• S Che rdi e Pa
rt
oa rad ne
• B pg r
• R • Sa Sale n
•U
• C rve rson
re- atio
es les s
• S -Pe
lai ys
•I
e- itli ion
• P form
u
Flight
ms
n
• R Wa rvat
nd g
• R Boo st
efu kin
n
•I
Baggage
e
Check-In
Service
Sales & On Customer
• Inform ation
Board
• Rese
Reservation
• Upgr
Feedback
• Awar
pany
• eMa s
g
t
• Mailin
• Direc
Pre Post
il
• Com
rv
Marketing
ades
Pub
ation
ds
Communication Rewards
Travel Customer Management Continuum

16
Carriers’ CRM Challenges
Carriers face several key challenges in the context of

using CRM to carry out their strategic priorities: 5
Decreasing cost of serving customers
Moving away from expensive, custom built systems to cheaper pre-packaged apps
Cost-effectively integrating multiple systems and improving cross-channel service
Unified view of the customer
Integrating multiple processes that cut across in-house and 3rd party systems
Customer knowledge
Identifying the most and least valuable customers
Loyalty program effectiveness
Decrease costs
Retain most valuable members
Increase members’ expenditures and purchase of distressed inventory
Differentiating the product
Using service to differentiate their product and, thus, justify a higher price
Raising customers’ switching costs
Create a unique offering that competitors cannot easily duplicate
17
CRM Architecture
Contact
Touchpoints Mail/
Sales Centres Travel Outbound
and Airport s In-Flight Web Kiosk SMS Fulfilment
Force (phone/ fax/ Centres Email
Channels email) House
Multi-Channel Connectivity
CRM Complaints
Loyalty Sales Interaction Cabin Service Campaign
Applications Lost & Found Handling/ Others
Administration Automation Mgt Reporting Management
Case Mgt
Application Integration
Operational Customer Database
Core Airline Baggage Reservations Departure • Customer Profiles • Marketing Offers

Systems Tracing Control • Preferences • Prompts & Alerts
• Loyalty Activity • Product Info
• Case Mgt
Analytical Models
Data Warehouse
• Segmentation
Reporting and • Customer Profiles • Lifetime Value
• Transaction History • Predictive Modelling
Analytics
Other Data • Contact History Reporting & Analysis
Warehouse • Derived/External Info • Operational
Sources • Analytical
Siebel and IBM
• Executive
June 2005

18
Integrated Loyalty Management Solution
Analytics
Loyalty (FFP) Measure
Promotion’s
Process Results and Manage
Members’ Effectiveness Flexible
Transactions Loyalty
and Accruals Program
Loyalty (FFP)
Respond to Track
Customer Loyalty Comprehensive
Questions Marketing Member
Call about
Promotion
Lifecycle Profiles
Center &
Identify
Web Create and Members for
Execute Targeted
Marketing Promotion
Campaign Create Loyalty
Promotion
Analytics
Marketing
Loyalty (FFP)
19
Understand and Act Upon Customer Value
Profit by Customer Segment Profit by Customer Longevity
Price Premium
Referrals
Lower distribution
Costs
Extra Sales
Base Profit
Least Most 1 2 3 4 5 6
Profitable Profitable Years
Source: 6
Full-service airlines must:

Identify and understand high-value customers
Manage them through their lifecycle to maximise share of wallet
Deliver on their wants and needs
Siebel and IBM
June 2005

20
Iberia’s Customer Experience Functionality
Iberia uses Siebel to manage most customer touchpoints.
On-line 360º Customer Personalize Flight Incident

VIP Lounge
Membership to Information Flight Compensation
Room
Iberia+ at Every Access & Reservations in Management in
Management
Touchpoint Management Call Centers Airports
SMS With Lost Baggage Claims Upgrading &

Cancellations to Request Requests in Lounge Access
Siebel and IBM High Value Management in Airports & Iberia Campaigns to
June 2005
Customers Airport Offices High Value Clients
21
CRM Benefits
Decreased servicing costs

Reduced brand marketing
spend
Increased revenue from
target customers
Expect 2.5% increase in revenue
$5bn passenger revenue, 40%
from tracked customers, equates
to $50m per year6
Source: 7
Siebel and IBM

June 2005

22
Contact Information
Jason Salfen
Director, Product Marketing
Siebel Systems
San Mateo, CA USA
(650) 477-2511
Jason.salfen@siebel.com

23
24
Appendix
Appendix
Appendix

25
Application Loyalty Reservations Airport City Airport Mobile
Users Partners Loyalty Customer Service Contact Ticket Ticket Service Airport Baggage Relationship
Portal Admin Relations Centre Centre Office Office In-Flight Desk Staff Lounge Services Marketing
Phone Booking Enquiry
Documen Transactions: Redemption Bookings Reservations

t • Applications
• Profile Changes COMPLAINTS CUSTOMER SERVICE Profile Extract
Scanning • Redemption Bookings
• Retro Claims
HANDLING Interaction
Interaction Management
Management Lost
Lost &
& Found
Found Baggage
Baggage Postings
Financials
Fax
• Queries
• Complaints Flight Activity
Complaints
Complaints Handling
Handling Departure
Email • Campaign Loyalty
Loyalty Service
Service Cabin
Cabin Service
Service Reporting
Reporting Profile Extract Control
Registrations
• Case Tracking
Web Payment
Credit Card Authorisations
Forms Gateway
LOYALTY CAMPAIGN
MANAGEMENT Content & Contact Details
Email Server
Fulfilmen Undelivered Email
t Mail
Programme
Programme Management
Management Operational Campaign
Campaign Planning
Planning
Customer Customer Scores Customer
Email Transactions: Database Analytics
• Membership Kits Membership
Membership Management
Management Campaign
Campaign Design
Design
Phone • Statements Campaign Details
Dialler • Offers
Accrual
Accrual Management
Management Campaign
Campaign Execution
Execution Data Warehouse
• Replies Extract Data
• Information Complaints Investigation Warehouse
Fax
Redemption
Redemption Management
Management Measurement
Measurement &
& Analysis
Analysis
Pro-Active Recovery List
SMS
Case Tracking
Campaign Registrations Web

Inbound &
Outbound
Channels Internal
Retro Claims Responses Interfaces
External Partner Accrual Files
Prospect Lists External
Interfaces Partner Enrolment files
Lists
Loyalty Partner Profile Exchange Siebel and IBM
Partners Partner Accrual Confirmations June 2005
Partner Profile Exchange Content & Contact Details Mail
Retro Claims Requests
Undelivered Email House
26
Siebel Loyalty Management
Carrier Partners
Members
Loyalty Manager Loyalty Member Portal Loyalty Partner Portal

• View complete member • Join program • Enroll members
profile
• Keep profile up to date • Send transactions to the
• Define tiers host organization
• Conduct web transactions
• Enroll members • Approve joint loyalty
• Enroll in loyalty promotions
promotions
• Reward behavior
• Redeem rewards
• Manage service requests
• Create targeted promotions
• Refer friends
• Approve transactions
• Define accrual and
• View statements
redemption rules • Manage products
• Create Service Requests
• Service a member’s request • Collaborate on servicing the
• Set contact preferences customer
Loyalty Engine
Rules Rewards Tiers Member Profiles Eligibility Promotions Transactions Point Expiration
Enterprise Analytics and Data Integration Platform

27
Customers Using Siebel in Their Loyalty Programs
For years companies in multiple industries have been

using Siebel to help manage their loyalty programs.

28
Siebel Loyalty @ Work in Passenger Airlines
“With Siebel Loyalty, we will be able to ensure that the right customers receive the right promotions that
increase customer lifetime value while delivering a superior customer experience at a much lower cost."
Company Objectives / Issues Solution
One of the world's oldest Objectives Complete Loyalty

operating airlines, was management solution
Improve relationship with from Siebel that will
established on 1st
customers and partners generate significant cost,
November, 1923.
Increase sale of expiring revenue and customer
Finnair's route network inventory via real-time, satisfaction benefits
covers about 50 int’l targeted promotions 5% improvement in top-
destinations and it carriers Provide complete loyalty tier loyalty promotion
over 7 million passengers management solution response rates
each year Decrease system costs 72% reduction in time
Finnair's major shareholder required to create
is the Finnish government Issues complex promotions
with a 58.4 per cent holding 13% improvement in mid-
Outdated, expensive tier and lower tier loyalty
9,000 employees worldwide loyalty application promotion response rates
1.7 billion Euro in revenues Inflexible rules that could 42% reduction in system
not adapt to changing costs
customer needs and
© 2005 Siebel Systems, Inc. Confidential. competitive landscape
29
Siebel at Iberia
Siebel and IBM

June 2005

30
Sources
1. StrategyOne Survey commissioned by Wyndham International,

May 2002
2. SITA / Airline Business IT Trends Survey, 2004
3. “The European Passenger Airline Market – A High-Level
Assessment of How Siebel Can Profit”, Siebel Systems, June
2004
4. Company FFP Web sites and calls to customer services
5. “CST Airline Industry Summary”, Siebel Systems, 9/30/2004
6. IBM Travel industry reports and analysis (not published)
7. McKinsey, CRM in the Air, 2002

31

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Jason Salfen

Customer Relationship Director, Product Marketing

Why CRM Applies to the Travel Industry

What is “Customer Relationship Management”

© 2005 Siebel Systems, Inc. Confidential.

Even though the market is expanding, carriers are still

Consolidation & Decreased Loyalty

Reduced Product Changing Channel

© 2005 Siebel Systems, Inc. Confidential.

Carriers strategic priorities are geared toward ensuring

• Decreased demand Increase Identify and

The Internet has increased the importance of building a

“While consumers agree that price is important,

 83% of travelers say that

The two IT investment areas that encompass the four

CRM’s importance and priority is increasing within

Expected demand for IT skills over next 2 years

CRM/Customer Services 64% 26% 4% 6%

IT Strategy 62% 33% 1%

Infrastructure/network 60% 30% 6% 4%

Business Analysts 60% 34% 5%

Rise Same Fall No answer

64% of carriers anticipate a rise in the demand for CRM / Customer

© 2005 Siebel Systems, Inc. Confidential.

Carriers increasingly are looking for a hosted Loyalty

IT functions already moved/planning to move to ASP mode

Reservations 58% 10% 19% 13%

Cargo reservations 31% 23% 27% 19%

Financial Systems 12% 9% 55% 24%

Engineering/MRO 11% 10% 54% 25%

Purchasing 11% 9% 52% 28%

Already moved to Plan to move Keep in house No answer

© 2005 Siebel Systems, Inc. Confidential.

Why CRM Applies to the Travel Industry

What is “Customer Relationship Management”

© 2005 Siebel Systems, Inc. Confidential.

CRM ≠ Frequent Flyer Program

Loyalty Program ≠ Frequent Flyer Program

A comprehensive customer loyalty

Number of partners 100+ 100+ Example Promotions

Credit card Yes Yes Booking online bonus Yes Yes

Hotel Yes Yes Fixed point bonus for targeted

Loyalty programs are losing their ability to provide

Current Loyalty Programs' Ability to Influence

“Loyalty is a positive belief, generated over the

© 2005 Siebel Systems, Inc. Confidential.

Frequent travelers expect:

 Allow me to contact you through the channel of my choice

Siebel and IBM

© 2005 Siebel Systems, Inc. Confidential.

CRM in passenger airlines extends beyond traditional

Sales & On Customer

Travel Customer Management Continuum

Carriers face several key challenges in the context of

Operational Customer Database

Core Airline Baggage Reservations Departure • Customer Profiles • Marketing Offers

© 2005 Siebel Systems, Inc. Confidential.

Profit by Customer Segment Profit by Customer Longevity

Full-service airlines must:

© 2005 Siebel Systems, Inc. Confidential.

Iberia uses Siebel to manage most customer touchpoints.

On-line 360º Customer Personalize Flight Incident

83% of travelers say that

Allow me to contact you through the channel of my choice

Decreased servicing costs

One of the world's oldest Objectives Complete Loyalty