December 19, 2013 Leave a comment
The airline industry has reached the crossroads. Today’s fiercely competitive and efficiency focused economic environment ensures that airlines are struggling to gain market share and sustain profitability. This is partly due to the global turmoil, the economic slowdown in the European region, the volatile demand of air traffic, the increasing number and strength of (lower priced) competitors, fluctuating fuel costs and more diverse and specific passenger needs. As a result, airlines have come to know that cost containment and financial strength are more important than ever.
This forces airlines to develop new manners to manage their customer relationships better in order to optimize customer loyalty and revenues. As proven in the past, airlines’ immediate focus is often on cost reductions in achieving more efficient operations. This reality mainly stems from the fact that fixed costs are enormous in the airline industry. Unfortunately, as is with many airlines, most have failed to recognize that their customers and the relationships they maintain with their organizations, are at the core of their business strategies and KLM Royal Dutch Airlines (KLM from now on) is no exception.
The main problem that KLM faces is that they have a limited view of who their customers truly are. The reason is that customer relationships have so far been primarily of a transactional nature. E.g. A customer searches for a ticket, makes the booking, takes the flight, and once the flight is over, the relationship basically ends. Unless, the customer is member of the frequent flyer program ‘Flying Blue’, but the fact remains that there is no guarantee that KLM will ever see this customer again. Partly due to the lack of relevant customer information and poorly integrated information systems, it is difficult for KLM to allocate marketing resources effectively and make more personalized product or service offerings from a customer’s perspective. Currently, new technologies and The Internet provide customers easy access to huge amounts of information. The customers have been taking advantage of that and are using these technologies to find and compare competing products. Most importantly, customers started to communicate with each other via review sites, blogs, social media, and etcetera. These customers are increasingly avoiding pushy marketers and revert to other customers for information to help them in making their purchase decisions. In this new era of customer engagement, organizations must do more outside their own traditional organizational boundaries. Whether organizations like it or not, customer power is growing. Customers have increased access to information, more alternatives, more simplified and direct transaction, control over contacts and most importantly, increased communication with other customers.
Therefore, this researcher argues that KLM should adopt and implement a different customer strategy, aiming to build mutually beneficial relationships with its customers, based on trust, transparency and openness. As relatively old strategies, customer centricity and customer advocacy can lead KLM to achieve this. These strategies are based on the realization that the path to success and profitability, is helping customers make the best decisions in their purchase decisions. If the organizations truly helps the customer, they will learn about their needs and interests, and can provide honest, open and transparent advice, even if this means to recommend competitive products (e.g. the Auto Choice Advisor of General Motors). In this sense, the organization truly advocates for its customers. In turn, the customers will advocate on the organizations behalf, stimulating customer trust, loyalty, repurchases and most important, positive word of mouth towards other customers. As a result, the organization may enjoy a larger customer base, more satisfied, truly committed and more buying customers.
In line with this reasoning, this research aims to identify and evaluate ways that will help KLM on its possibilities to become more customer centric and turn their customers into advocates. To address the research problem, the general research question is as follows: Can KLM Royal Dutch Airlines migrate from a product oriented towards a customer oriented organization and develop a customer advocacy strategy?