KLM Koninklijke Luchtvaart Maatschappij

literally means Royal Aviation Company

CRM CASE STUDY

Jason CHICHEOlivia Tayo KIWEWANikki OBIANAGHAEdweena D’ALMEIDATidjane SOW

HISTORY• -Sept 1919 : Queen Wilhelmina grants the epithet “Royal” to KLM.• -Oct 1919 : Foundation of KLM Royal Dutch Airlines • April 1921 : Resumption of services with KLM’s own aircraft and pilots.• Mar1971 : Utilization of current KLM Head Office begins.• Mar1988 : Takeover of NetherLines.• July 1989 : KLM takes step towards being a global airline by acquiring a 20%

share in Northwest Airlines. Sept 1919 : • April 1991 : KLM founds new strong regional airline: KLM Cityhopper,

(NLM Cityhopper and NetherLines).• -Oct 1991 : KLM extends its share in Transavia from 40% to 80%.• -Jan 1996 : KLM acquires 26% share in Kenya Airways.• -Jan 1998 : KLM and Malaysian Airlines System announce commercial

cooperation.• Aug 1998 : KLM repurchases all regular shares from the Dutch state.• May 2004 : KLM and Air France signed for a merger.• 2004 KLM receives In 2004, KLM won the Gartner CRM excellence award• -June 2005 : Air France-KLM combined their loyalty programs and created Flying

Blue.

HISTORY

• In fiscal year 2004/2005, KLM merged with Air France and became a member of the SkyTeam Alliance, a global alliance regrouping European, American and Asian airlines joined forces to make their passengers’ travel experience seamless and convenient across allied carriers.

• The combined entity of KLM and Air France represented the first cross-border merger of major European airlines.

2008 Total operating revenues Air France-KLM €24.114 billionNet profit of €748 million (US$1.18 billion), a net profit decrease of 16 percent

compared to the previous year.

KLM GROUP

KLM before merger formed the core of KLM Group, other members being KLM Cityhopper and Transavia.

KLM Group’s four core activities were: a. passenger transportb.cargo transportc. engineering and maintenanced.charter/low cost flights.

KLM realized that it could differentiate itself from its competitor by offering a superior customer experience at every interaction point.

Every customer interaction = great opportunity + risky break point.

The ultimate aim was to1. infuse CRM by extensive investment in Information Communication Technology2. make the relationship with its customers as intimate as possible.

A first major CRM project was set up in 1997.Primary objectives:• Implementation of better customer identification and recognition capabilities• Improvement of customer data gathering, integration, and use;• Creation of a new strategic ICT platform, well architected

Klm and CRM part one

Klm and CRM part one

Too much for the organization to digest, it broadly scoped, ICT-driven CRM project did not take off due to •the high forecasted technology costs and the lack of support•skepticism about CRM within KLM.

Project abandoned for alliance creation in 1997.The search of partner was not successful.1999 KLM with Alitalia2001 British Airways

In April 2002 Paul Gregorowitsch was appointed Executive VP Commercial.

KLM•operations-driven rather than customer-oriented. •too limited possibilities for personalized service•too many inconsistencies in service delivery.

One of the first change was to make CRM into one of the strategic building blocks (customer, CRM and e-business), of KLM’s future commercial strategy.

In June 2002 a new CRM Department was created and its mission: “to make every customer interaction into an opportunity to enhance the customer’s buying and traveling experience, and to increase and sustain company profitability.”

Overall objective for CRM remained the same: •Differentiate services to customers in an efficient and cost-effective way •Make KLM a truly customer-centric organization•Turn around the negative trend of declining yields.

Klm and CRM REBIRTH

Klm and CRM part one

The project termed CIAO (Customer Insight, Analysis and Opportunities) CIAO was to allow the company “to deliver the right offer to the right customer at the right time and via the right channel.”

More specifically, the CIAO project aimed at what was called “closed loop campaign management” via:

• Identification of customer value segments;• Better understanding of customer needs and preferences;• Creation of targeted marketing and sales campaigns for specific

customer segments;• Monitoring of customer responses;• Applying experiences to future campaigns;• Better steering of customer buying and traveling behavior.

Klm and CRM REBIRTH

INTEGRATED CUSTOMER DATA

CIAO aims

•Move beyond just the sole intention of rewarding customers

•Spend more of their patronage with KLM

•Set out to build a true relationship with most valuable customers

•Central customer data repository was essential.

INTEGRATED CUSTOMER DATA

CRM PROGRAM DRIVE

Campaign management project crucial for further CRM deployment.

CRM projects would move beyond Marketing and the Commercial Division into the whole KLM organization.

In March 2003, concurrently an effort was initiated to work on reconceptualizing CRM, for later management purposes, a program of interrelated projects, covering the entire organization, in which everyone serves a common :

vision of “letting every customer interaction drive profitability” mission of “enabling the optimal customer interaction and profitability by shaping KLM into a customer-centric organization.”

VISION-INTO-ACTION

CRM PROGRAM LIVE

In mid-2003 the CRM Program was ready to be implemented.

The CRM Meeting of September 2003 set out the lines for the next phase of the CRM Program. Four priorities would govern next year’s activities:• To realize the maximum business benefits from the CIAO project. • To stimulate data and insight capture that enriched the single view of the customer. • To increase the availability of customer information for personalization in pre-, in- and post-flight services. The objective was to at least be able to recognize customers and address them by name where possible. • To drive cultural change. Training programs were launched to accompany CRM-driven change projects. Awareness creation initiatives were set up for pre-, in- and post-flight services.

RESULTS

•In 2004 KLM was so successful that they received the Gartner CRM excellence award

•In 2006, KLM became the first airline in Europe to offer transfer kiosks and the first in the world to offer this service for intercontinental flights. •KLM made available online personalized gift cards, redeemable for airfare, which allows customers to add their own photos and text. •In 2007, KLM introduced mobile check-in, which allows passengers to check in using their wireless devices.

RESULTS

• Ranked « highest » in customer satisfaction for large airports in North America

• Named as 2006's "Best Airport for Customer Service in the Americas"

FLYING BLUE

• The Air France and KLM frequent flyer program

• Earn miles when you travel and convert them into rewards.

• Available at Air Europa, Northwest Airlines, Kenya Airways and Air Calin.

• Possibility to award miles at hotels , on car rentals, at your leisure, finance and shopping.

FLY FOR FORTUNE

• 2006 : KLM launched a new on-line game, FLY FOR FORTUNE

• A new and exciting flying game by KLM. Your chance to win free KLM tickets or even a Round-the-World ticket.

Customer’s impression

1. As a Platinum member I now earn 25% less award miles every time I fly. That is not a benefit.

2. As a private traveler I feel dishonored by KLM. No amount of marketing material has yet convinced me that the program has acknowledged my loyalty over the past 10 years.

3. They have lost something very special - almost an

identity that made them special. They have become faceless like all the others and that is not a benefit to me.

how TO IMPROVE

• Today KLM only give compensation for either cancellation, overbooking or delay.

• Missing luggages requests

British Airways(One World)

• More than 240 aircrafts, 150 destinations in 75 countries.

• €16 Billion of revenues in 2007 which is a 12.5% increase. – Both cargo and passengers revenues

• Network assured by its strategy – Code-sharing relationships with other aircraft companies (American Airlines or

Iberia).– Exchange of crucial information about customers and benefit from their CRM

strategies.

British airways“We want to put things right and quickly”

• Constant improvement of the CRM strategies– « Club world » concept designed in 2001 and redesigned to cope

with customer satisfaction.

• From clustering to individualizing customers.• Increased technology and automation in CRM.

– Data storage, personalization, CTI.

• Refunds and discounts on a one-by-one basis

British Arways

• globally intends to regionalize its strategies, good understanding of how important cultural and regional integration is.

• Low Rates allowed by cutting on HR charges.

• Despite the implementation of such strategies, Air France and KLM brought tough competition to them.

• Outranked by the combined Air France-KLM and Lufthansa.

Lufthansa(Star Alliance)

• One of the world’s largest airline company.

• Part of the alliance generating more profits.

• 26 Billion € of revenues in 2007 with a net profit of 1.7 billion€.

• More than 500 aircrafts, 250 destinations.

• Top in flying passengers sector

• Specialized in freight carriers around the world what ensures such performance.

Lufthansa

• Lufthansa’ s strategies were to be implemented over 6 years. Starting 2000.

• CRM strategies of Lufthansa rely on the « Frequent Flyer Miles & More » program.Focusing on three types of customers : Frequent flyer, Senator Silver and S. gold

• Customization of CRM software in search for efficiency.

(PeopleSoft created a unique version of CRM software applied to Lufthansa)

• Creation of their own data warehouse and integration of the data retrieved from their 45 different silos.

Lufthansa

4 points emphasized in CRM strategies

• Save the customer’s time & money with the code-sharing strategy within the group Star Alliance.

• Individualization of their customers.

• Be proactive concerning customer’s demand (response time, refunds)

• Multiplying effectiveness of hotlines. Delocation of call centers.

• They want to have a Global overview of the trends.

Low-Cost Companies

• Real competition in terms of market share.

• Nevertheless most of these companies do not concentrate their efforts on CRM.

• They are cost-orientated rather than customer-focused.

THANK YOU FOR YOUR ATTENTION