The Idic Model Of United Airlines Marketing Essay

This essay deals with the current CRM practices adopted by United Airlines, which are facing serious CRM issues in their day-to-day operations. There have been a lot of trust issues and customer complaints in their CRM practices, which will be further explained below. For example, customers are complaining about issues such as the increase in flight delays and baggage going missing upon arrival. United Airlines also has also not been effectively dealing with their customer complaints, and it could harm them in the long run. Customer complaints over the phone have been widely ignored. Therefore, United Airlines should adopt some acquisition/retention strategies in order to retain/gain customers. Measures such as better training, loyalty marketing and adopting an IVR system to effectively deal with complaints should be implemented in order to tackle the problems they are facing.

Introduction

The organization

United Airlines, founded in 1926, is a U.S. airline that is owned by United Continental Holdings, and the airline’s main base is currently headquartered in Chicago, Illinois. It is the world’s largest airline in terms of the number of destinations travelled worldwide. United Airlines offers flight connections to more than 1000 destinations in more than 170 different countries across the globe.

The Porter’s Five Forces would help us get a better understanding of United Airline’s market environment as shown in Appendix1. It will also help us to identify who the target customers are, the nature of the competition and the competitors such as American Airways/Delta/Southwest.

2.2. Current CRM Practices

The aspects of the IDIC Model implemented by United Airlines have enabled them to carry out their current CRM practices. They have already devised a customer recognition program to identify their frequent travellers. Personalized services would also be offered to their frequent travellers such as the priority check in and the chance to use their airport lounges. Personalization of services can help retain customers, as they would feel like their needs are being valued by the company concerned. United Airlines also try their best to ensure that their customer service is up to a satisfactory level for all customers. For example, notifying customers about flight delays as soon as possible, properly handing passengers baggage, good punctuality of departure/arrival and an interactive error-free online reservation system. Plus, they planned to also do more data driven marketing with personalization.

Literature Review

Defining the chosen CRM Areas

The two CRM concepts discussed below are “Dealing with customer complaints” and “Trust”.

Trust

Trust involves a business living up to their expectations to provide a good product/service to customers. Shaw & Ivens (2002) mention that earning the trust of customers is crucial in both the short and long term, as it would enhance the value of the business. Peppers & Rogers (2011) then claim that by gaining the trust of customers, it could potentially give the business a competitive advantage in the long term. It could strengthen the relationship with the customer, making them buy more of a company’s product/service. According to Landau (2009), when customers stop buying products/services from a business, it is primarily due to a lack of trust. United Airlines is currently facing increased customer complaints, with issues of trust as well. The reasons why will be explained below.

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Dealing with Customer Complaints

According to Peppers & Rogers (2011), listening to the feedback of customer could make relationships with customers much better. Customer complaints can help a business gain a better understanding of how to improve their existing products based on the feedback of the customers. By listening to complaints, businesses should not only be able to avoid negative publicity, but also be able to initiate positive word of mouth about their business. Better customer loyalty can be developed. (Bruhm, 2003).

Social Media is now an important platform when dealing with customer complaints. Customers can share their feelings/experiences of a particular product/service, allowing companies to listen to positive feedback or complaints. United Airlines has a Facebook page which customers can share their experiences. Many customers have expressed dissatisfaction with the Airline on its Facebook page due to their poor customer service.

The IDIC Model of United Airlines

The IDIC Model is used to effectively manage individual customer relationships. The four tasks of creating and managing customer relationships are to identify/differentiate/interact/customize. These activities will help businesses cater/personalize their products/services according to customer’s preferences. This can help sustain a healthy and trustworthy two-way relationship between the buyer and seller

It is important to identify who the target market is. According to Peppers & Rogers (2011), when a business has identified their customers, they can gain a competitive advantage over their competitors, as long as they have superior CRM strategies. The benefit of identifying customers is that a business would be able to build much closer relationships with the target customers, making them trust the business more, and eventually come back again. United Airlines have identified their target customers as the frequent business travellers, with also some help from customer recognition programs.

The second aspect of the IDIC Model is to differentiate customers according to the value they bring to the firm. This would allow businesses to efficiently allocate resources to the customers that would bring the most profits in return. United Airlines must retain their most valuable loyal customers.

The third aspect of the IDIC Model is then to interact with the customers. Businesses should improve their interactions with their different customers in order to provide a good customer experience. In order for United Airlines to effectively deal with complaints, they allow their target customers to express their dissatisfactions through mediums such as email, fax and telephone. (Yahoo Finance, 2009). This will allow the airlines to alter their future course of action in order to provide better customer service. Companies that effectively communicate with their customers regarding complaints could then develop a reputation for being a highly competent service oriented firm.

Lastly, businesses should customize some aspects of their service according to the value a customer brings. For example, according to The United Airlines website, frequent travellers would get more personalized benefits such as priority check-in and baggage handling. This is to hopefully deter their loyal customers from travelling with the rival airlines. This is an example of how businesses retain their “Most Valuable Customers” (MVCs).

Main Body

Analysis

Over the years, many customers have made many complaints against United Airlines. Their current off-flight CRM practices can be improved. Covey & Merrill (2006) mentions that building credibility at a personal level makes up the foundation of building trust. Therefore, a customer could commit to a loyal relationship with a business if they are trustworthy enough. However, in the case of United Airlines, it is being trusted less by customers due to their poor customer service. They could then choose to travel with the rival airlines.

An article on The Guardian (2013) claimed that United Airlines has faced an increase in complaints by 20% by end of 2012. This was due to increased flight delays, ticketing/reservation problems and long phone waiting times, caused by technical glitches in the reservation system. This has then made customers trust United Airlines even less. In addition, in August 2012, United’s entire system crashed, causing about 580 delays in flights.

In March, the number of complaints increased from February 2012 to 260. The total number of complaints more than tripled to 995 in July 2012. Furthermore, there has been an increase in baggage going missing, further losing customer confidence and trust. According to Travel USA (2012), the number of lost/damaged bags have also increased from 3.4 per passengers to 3.66%. These are the reasons why United Airlines are facing serious trust issues, which if left unaddressed, could be detrimental to the business Peppers & Rogers (2011) further mention that the extent to which customers would commit to a loyal long term relationship with a company would depend on their dedication to provide a decent service for the customers. This would help gain their trust.

The recent case of how United Airlines damaged a passenger’s property has created a negative image for the company. According to The Guardian (2009), as United refused to compensate the frustrated customer for his damaged item, he publicly shamed United Airlines online on YouTube, with a song and video. The video became an online hit, publicly embarrassing United Airlines, hence losing the trust of many customers due to the negative experience of one frustrated customer. This clearly supports the statement above where the extent to which customers would trust a business would depend on their ability to provide a decent service for their customers.

In addition to that, United has neglected some customer complaints. They have developed a bad reputation for not dealing with complaints by ignoring calls on their complaint lines. They could lose profitable customers, and lower profits in the future. Customer complaints can be a valuable asset, as businesses can gain valuable information regarding their product deficiencies. Peppers & Rogers (2011) then mention that customers would view firms taking customer complaints into consideration as a friendly service oriented action.

Discussion

Gaining customers trust will be a key foundation to gaining competitive advantage. Covey & Merrill (2006) further evaluate that the extent to which customers would trust businesses would depend on their intent, skills, capabilities and the end product/service of a business.

Recommendations

United Airlines would have to develop a suitable 1 to 1 CRM Scheme in the form of both acquisition/retention strategies. Loyalty marketing can be a suitable 1 to1 CRM scheme in order to retain their customer base and not lose any further customers. This can help combat against the negative publicity against the company. As of recently, United Airlines have tied up with an American Life Insurance company called AllState. According to an article from Reuters (2013), members of United Airlines’s frequent flier program can gain miles/points by purchasing a new auto/homeowners insurance policy from AllState. With the miles/points earned, United Airlines’s frequent travellers can get premium services such as seat upgrades. Therefore, with this partnership, United can now promote this loyalty program in order to increase their customer base and also not lose any further customers to rival airlines.

This can be further enhanced with United Airlines dedicated to making each flight memorable and special for its travellers. Safety, convenience and comfort are also areas that United Airlines can focus on as key areas to work on to upgrade its quality of airline service. The meals provided on United Airlines lack in variety, and the on-flight cabin crew is said to be quite rude. The off-flight services as in the poor handling of baggage and missing luggages is seriously causing concern to its travellers and need urgent attention by United Airlines management. Travellers view the safety of their belongings of paramount importance. In terms of comfort, United Airlines could work towards providing on demand channels of onboard entertainment. Emirates Airlines provides ICE (Information, Communication, Entertainment) channels to all its classes of travellers and has been winning awards for providing this service. (Emirates, N.D.) Travellers get the comfort and convenience of enjoying this facility and United Airlines can certainly benefit from this. A total revamp of the customer service chain and trust issues is necessary in order that United Airlines can achieve its 2-pronged objective of retaining its frequent business travellers and making new travellers want to travel more with the airlines,

Another recommendation would be to adopt an IVR System (Interactive Voice Response). IVR allows customers to communicate with the company’s host system by telephone keypad/speech recognition, after discovering the nature of their complaints following their dialogues. Since United Airlines has a bad reputation for ignoring customer complaints on its telephone line, an IVR system should be implemented. This will not only help United Airlines reduce labour costs, and will also deal with customer complaints in a more efficient manner. A case in point is US Airways, which is the first in the domestic airline industry to launch a new IVR system to provide better services and seamless flight connections to destinations worldwide. (US Airways, 2013). It not only provides personalized travel experience which is fast and friendly, it also helps solve customer complaints/requests such as upgrade status, flight information and account details about Dividend Miles. Besides, the new IVR system has considerably shortened the call times. United Airlines can view this technological investment as a retention and acquisition strategy and over time the benefits reaped can more than outweigh the huge investment outlay.

Conclusion

Competition in the airline industry is intense with the offering of discount fares and United Airlines must differentiate itself from the rest of the players by providing quality on-flight and off-flight services for travellers’ peace of mind Therefore, gaining the trust of customers will be the key to gaining a competitive advantage.

Appendices

Appendix 1 (Porters Five Forces of United Airlines)

Intensity of Existing Competition – High

The competitors of United Airlines include Delta, Southwest, American Airlines and JetBlue Airlines. The competition in the airline industry is highly intense. They compete based on costs, price, customer service, and lastly efficiency/productivity. Most Airline companies would frequently offer discount fares in order to attract more customers, deterring them from travelling with the competitor’s services. Therefore, it is important to identify your target customers, and differentiate the product/service according to the preferences and needs of the customer.

Barriers to Entry – High

Barriers to entry would be considered very high for United Airlines due to factors such as the large capital required and the high congestion of major airports. The airline industry is also a tightly regulated industry. Start-up airline companies are going to face difficult challenges when trying to enter the airline industry. The amount of capital required will be very high because the airline industry is capital intensive, and requires a large amount of investment

Threat of Substitutes – Low

The substitutes of air travel include road and rail transportation. The threat of it is considered low. This is because travel by rail/car/bus would take much longer, and many people would not choose to travel on them especially if the travel distance is very long.

Bargaining Power of Suppliers – High

Fuel plays a main factor in the airline industry. The prices of fuel have also increased over the years due to the increasing oil prices, according to an article from New York Times (2012). Without fuel, the airline industry would fail, and would make a loss. Therefore, this makes the bargaining power of suppliers high. With the prices of fuel increasing, many airlines such as United are currently trying to conserve as much fuel as they can. This is achieved by being careful about the destinations they choose to travel to.

Bargaining Power of Buyers (Customers) – High

The bargaining power of buyers in considered high in the airline industry because of the high intensity of competition between the airline companies in the United States. Customers can easily switch to a rival airline due to factors such as ticket prices, discount fares and positive/negative customer service experience on a particular airline.