This is part two (part one here) of a talk I gave at the 2017 Travel Tech Con in San Francisco. I am very humbled to have had a chance to join the discussion alongside with some of the greatest industry leaders, such as Travelport, Amadeus, Skyscanner, JetBlue Ventures, Hipmunk and many more.
Now, I started out by saying that this wasn’t going to be a tribute to bad airline service, but maybe I lied a bit. I love it when airlines screw up. We built ClaimCompass as a platform to enable passengers to get some money when their flights are delayed, canceled or overbooked. We’ve had tens of thousands of passengers turn to us for help, and so far in 2017 alone, we’ve had claims for over $3M. Note that our clients are in a sense somebody else’s clients – they turn to us after an unpleasant experience with the airline, which most of the time won’t even talk to them. This has taught us a lot about the importance of customer service and what we can do with it.
Airline service used to be the benchmark for all service. You were treated nicely, always got a meal, never had to pay to pick your seat and people even used to dress up for their flights. So essentially, airline service did this:
For those of you, who are not familiar with this image – this is a passenger, who got dragged down the aisle, after United overbooked the flight. Now, you may say that this was an isolated event that just saw some light because of social media. Okay. Let me just flip through a few headlines here, all from the past month alone.
and my favourite
A simple sentiment analysis of tweets to major US airlines shows that negative sentiment outweighs both – neutral and positive sentiment, by almost twice as much. For those of you who follow the airline industry closely, you may have read that consumer satisfaction in the airline industry has hit an all-time high. That’s true. Last year, the American Consumer Satisfaction Index for the airline industry was up 4.2%. However, it still ranks at the bottom one third when compared with all other industries. People were more satisfied with the service levels at banks, data roaming services and hospitals than with airlines.
So there’s some work to be done here, and I think that’s the first high-impact challenge.
The second is marketing and user acquisition. How do you grow, how do you scale in an extremely uncertain environment? And that’s not only a challenge for startups, but for most businesses today. This is a graph by James Currier, which illustrates two things: first, new marketing channels are appearing at a much faster pace, and second – they are also decaying at a much faster pace.
What used to work 2 or 3 months ago, doesn’t necessarily work today. In fact, I’m almost sure it doesn’t work. And that’s particularly brutal in the travel space, where not only Expedia and Priceline – who together have something like 60 million in ad spend per year – but virtually everyone is after your audience: they have the money to travel, they are big spenders and are well connected. That’s the second challenge.
So, with all that I’ve said so far, there are just two simple points that I’d like to make:
- The dichotomy between service and marketing does not exist
- Success depends on the establishment and execution of customer-centric growth process
There’s an unexplainable division between Customer Service and Marketing departments. When I used to work for a large airline, not only did Customer Service and Marketing not communicate with each other, they had no idea what each was doing, and were located in two separate buildings, 20km from each other. To me that’s wrong. If marketing’s goal is to acquire customers and grow revenue, how is customer service not an essential part of it? What about customer retention, customer insights, referrals? How about identifying who your most profitable customers are? It’s as if Marketing’s ROI is easier to measure than that of customer service, hence, it gets a different treatment.
Look at the marketing funnel: as soon as a customer is acquired, the service and overall experience she receives is what determines how she will convert, how many times will she come back, will she tell her friends and family to sign up, etc.
It is 6 to 7 times more expensive to acquire new customers than it is to keep existing ones. Instead, concentrating on the customers who are of highest value and already in the funnel provides a number of opportunities, like upselling and driving referrals. All this increases the overall LTV of your customers.
McKinsey reports that 70% of purchases are done based on how the customer FEELS they’re being treated.
And as we’ve seen with United, bad customer service reaches twice as many people as the praise for good service. So your effort essentially has to be twice as much on exceeding customer expectations than on simply meeting them.
Consumers are already telling us that they’re looking for a greater experience: American Express Surveys reveal that 3 in 5 Americans said that they would try a new brand if the experience is better. That’s 59%, not-so-loyal customers.
What does all this mean to travel? It means that experience is of crucial importance to the success of your business. And I’m not talking about patching up your funnel — I’m talking about building a customer-centric culture and experience in your brand, product, and service.
The next thing is setting up and aligning your interaction and reputation channels. Simply put, interaction channels are the ones where your clients talk to you and come in contact with your brand. Those could be email, social media, face to face, phone, your website. Reputation channels are the ones where customers share their experiences with the rest of the world — Trustpilot, review boards, facebook, twitter, bloggers, vloggers, etc. Are all these channels aligned in consistently maintaining the same message? Consider this in the context of travel and how powerful it could be.
What many of us tend to forget is that travel is still a big deal for most people. They are often excited, curious, nervous, anxious — they actively look for information, read reviews and request guidance. And after their trip, and going back to my earlier point of travel being experiential — they want to share it, show it to their friends, write reviews, etc.
The customer experience also has a direct impact on your sales model: the poorer the experience, the more effort, and resources you’ll have to spend on your outbound sales, the more expensive your acquisition costs. Versus, a positive brand experience, where your reputation does a lot of the heavy lifting for you. There are companies, which rely almost entirely on an inbound sales model. Sure, we often hear of things like inbound marketing, but this could also be reputation and customer service driven.
At ClaimCompass, we built an API which we offer for free to our partners to monitor their flights so we can proactively notify their passengers when their flights are delayed or canceled, so they can get some money. We’re currently talking to a major industry player who was an inbound lead. When we first spoke on the phone, he said: “I’ve heard a lot of good things about you guys, so let’s talk business”. Note that we’re not the first company out there, we’re not the largest or the best funded, but in this case, our reputation outweighed everything else.
If we fast-forward and assume you’ve achieved something like a PMF — what’s your next goal? To scale. The point is to come up with a growth system, and stick to it. Something interesting happens when you do that: all of the sudden, you no longer look at Customer Service as a troubleshooting device. All of the sudden, the care for your customer is also about growth. It’s about retention, it’s about feedback, it’s about customer development, even.
So whether or not we make it, will depend on how well our growth system is set up and how well we’re executing it. And I’m sure it’s no secret to anyone in the room what that is: identifying high-impact areas, designing experiments, validating what works and what doesn’t, running these experiments as fast as possible and sharing the learning with everyone in your organization. I can’t stress how important that last point is — keeping everyone on the same page. Have you ever wondered why when you speak to some of the people at the car rental company or the airline sound like they hate their jobs, and they hate you even more? Well, that’s because it’s probably true: most of the time their jobs really do suck: nobody cares about them, nobody talks to them, they are completely disengaged from the rest of the company and feel like they have no contribution. But that’s not what a customer-centric company does. That’s not what Amazon, Zappos, Apple, Virgin Atlantic, WestJet or Southwest do.
“If we can arrange things in such a way that our interests are aligned with our customers, then in the long term that will work out really well for customers and it will work out really well for Amazon.”
This paradigm shift will also have a direct impact on your KPIs and the metrics you track. Take online travel, for example. Traditionally, conversions are measured on a look-to-book ratio, which is coast-centric. One alternative could be measuring conversions on a revenue-per-search (post-conversion), which is much more retention oriented and gives a better insight into the value of the customers vs. simply their volume.
So, we’ve moved through these slides and we’ve moved through time, from the age of manufacturing, the age of distribution, the age of information and we’re now (I believe) in the age of the customer. The customer is ever so empowered and informed, which calls for a new set of customer-centric principles for growth:
providing remarkable experiences, responding to change, being conscious of individuals and interactions, being data-driven, running experiments, collaborating with customers, being transparent, rapidly iterating, gathering and implementing feedback and breaking out of silos.
Note how many of these are directly impacted by the quality and involvement of your service efforts.
Now, some of you may have recognized this set of principles as something called Agile Marketing, but that, I’ll leave to you.