American Mines Customer's Data to Tailor Special Deals

American Airlines Inc.'s latest slogan, "We know why you fly," says a lot about the carrier's strategy for building customer loyalty.

The Fort Worth-based airline is relying on technology and what it can learn from customer data to sell more airline tickets. And American is getting better at saying it's sorry when things go wrong for passengers.

Although retailers have been mining customer data for years to build better relationships with customers, success at using the tactic has proved elusive for airlines.

Key to American's strategy is a tighter link between American's AAdvantage frequent-flier program and its Web site.

American offers mileage bonuses not only for booking online, but for customers who track or change itineraries, request upgrades or check in for their flights over the Internet.

American also has offered discounts for customers who use its Admirals Clubs, which are popular with the carrier's best customers.

"It makes the program stickier and creates loyalty," said Dan Garton, American's executive vice president of marketing.

Following the data trail is relatively easy with customers who buy tickets online and are AAdvantage members.

American can track how often and where they fly on the airline, how much they typically pay for seats and how they buy their tickets.

Buy something from one of the airline's partners, such as 1-800-Flowers or audio equipment provider Bose Corp., and the airline gets another clue about its customers' interests.

American can even calculate how much profit a customer brings in a given year.

That's increasingly important information as the airline relies more on promotions for certain markets or routes, or even classes of customers, rather than broad-based advertising campaigns, Mr. Garton said.

That doesn't mean the airline is turning its back on blanket campaigns, but "we've found you can get some significant payback through targeted offers," Mr. Garton said.

Some customers chafe at such close attention and frequent offers that clog their in-boxes.

"There's no editor," said Henry Harteveldt, a travel analyst with Forrester Research, noting that airline marketing has become more intense recently. "The challenge is that consumers end up getting bombarded with information and then tune it all out."

Mr. Garton said American is careful to use opt-in features to avoid annoying customers.

Unlike manufacturers of consumer products and retailers, which hire research firms to track sales data from cash register receipts, airlines have had few ways to learn about their customers' buying habits.

The problem isn't that the data don't exist.

Airlines collect all kinds of information from their operations departments, sales teams, credit cards, Web sites and loyalty programs.

The trouble has been tying that information to link habits with actual customers, said Bruce Weiner, a managing director at Novantas, a New York-based consulting firm that focuses on airlines and financial services.

American can tell, for example, if a customer clicks on a banner ad for ski vacations and makes a purchase.

For tickets purchased through travel agents - online or traditional brick-and-mortar agencies - airlines receive the passengers' names and addresses, but tracking customers from one transaction to the next with only that information can prove unreliable, Mr. Weiner said.

"Without the constant feedback loop of whether their marketing is working, the airlines are way behind other industries in terms of being able to use data to drive customer behavior," he said.

Financial struggles during recent years have limited investments in technology throughout the airline industry, Mr. Harteveldt said.

"They have a long way to go, but they're getting better," he said.

In recent months, American has been sending apology letters to customers following major service disruptions. Mr. Garton said improved technology allows American to customize notes for its best customers. Previously, the carrier sent letters manually for only the most severe cases.

An airline can learn the most from a customer who uses the carrier's own Web site, logged in with a frequent-flier number. That way, airlines can track which destinations customers search for and what types of tickets they purchase.

American doesn't disclose the percentage of bookings made through, but the carrier sells 40 percent of its tickets over the Internet through various online services.

"Airlines are doing an exhaustive job to get customers to do every single transaction on the Web site," Mr. Weiner said.

Also, American enjoys broader use of its frequent-flier program. AAdvantage, the original frequent-flier program, attracts about 50 percent of American's customers, compared with 30 percent for the airline industry as a whole.

Dallas-based Southwest Airlines Co., which doesn't post its flights on other Web sites, leads the industry, with 70 percent of its bookings made on

Southwest has also looked for ways to make more targeted promotions. The airline launched "MySouthwest" just over a year ago to encourage customers to keep track of flights, pre-fill personal information for speedier ticket purchases and sign up for e-mailed offers and other information from the carrier.

The discounter's Ding! software asks customers to plug in places of interest, allowing the carrier to make much more targeted offers in an effort to drive sales.

Between January and October of last year, the feature generated $138 million in sales, said Anne Murray, Southwest's senior director of interactive marketing, in a media presentation in November. The company declined to disclose more recent figures.

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