In the 1980s, airlines introduced frequent-flyer programs to increase the loyalty of their customers, thereby pioneering a new approach to marketing that has come to be known, more broadly, as customer relationship management. Today, CRM programs are used in a wide variety of industries to identify and retain valuable customers, to encourage fickle ones to spend more, and to cut the cost of serving those who are less valuable. But the pioneers have failed to keep pace with CRM innovation—to their detriment.
A survey of 17 major airlines around the world reveals that even the most sophisticated among them have only a rudimentary understanding of who their most valuable customers are or could be, which factors affect the behavior of these customers, and which CRM levers are most effective in ensuring loyalty.1 Airlines fell behind best practice in CRM because they were complacent, attached little importance to nonoperational and noncritical systems, or didn’t grasp the financial implications of getting things right. The result: today, airlines know only marginally more about the people who fly on their planes than they did ten years ago.
Given the troubled condition of many airlines,2 they urgently need to make better use...