American Airlines and the Dynamic TCE (Total Customer Experience) Model

Surprisingly, it is the lounge experience that has driven John Chisholm (Global CEM International Partner – United States) to fly again and again with American Airlines for 25 years. When we add the importance levels—the third dimension—on top of touch-point experiences and channels, we transform a static TCE Model [1] into a dynamic one.

Figure 1 – Dynamic TCE (Total Customer Experience) Model—Airlines

My KLM Experience
by John Chisholm, Global CEM International Partner – United States

One of the few smart investments I made in my 20’s was buying a lifetime membership in American Airlines’ Admirals Club. For a limited time it was offered at $2500, which was a lot of money back in the 80’s. But I decided to go for it and am glad I did. It’s now 25 years later, and I am still enjoying the purchase.

At the risk of sounding like a paid promotion (this is not), the Admirals Club is a haven in the midst of the hectic. After checking in at the Club, I serve myself tea mixed with orange juice, grab some cookies or fruit; get online with my laptop and work on email, a report or presentation. I like to stretch out in the large comfy chairs. Occasionally the aroma of fresh-baked chocolate chip cookies fills the area. I may take a break from working and read the complimentary New York Times or Wall Street Journal. If I am taking a red-eye from San Francisco to New York, I can shower at the New York club before my day of meetings. Once I took red-eyes on two successive nights, from San Francisco to New York and from New York to London. I hung out at the clubs at all three airports. As you can imagine, I was bleary-eyed when I arrived to London. But the clubs make it possible, even comfortable.

With the everyday interruptions at the office, I may deliberately arrive at the airport several hours before my flight to work without being disturbed. Occasionally I’ll talk with other members at the club and discover we have interests in common. But for the most part, it has not been a place for social networking – maybe I have been missing out by not doing this – but rather a place where I relish anonymity.

As with most of the major US airlines, American’s service has declined in recent years: less legroom, fewer meals, less on-board entertainment. In spite of that, I am still loyal to American Airlines — not because of the airline itself or their frequent flier program, but — because of the Admiral’s Club. I’ll choose American whenever possible just to use the club. My second choice is usually United. At San Francisco (SFO), my home airport, United is next to American, so I can walk a couple of hundred meters and still get to my club.

John made a decision to invest $2,500 25 years ago, and he is still happy with the rewards. Perhaps American Airlines share the feeling since they have benefited from his sustained loyalty. But does American Airlines really know that the Lounge experience has been the most important touch-point experience for John for a quarter of a century? Even if they do know this, how can they quantify the impact for this their target customer segment, the frequent business traveler?

Not All Touch-point Experiences and Channels are Equally Important
Not all customers are equally important to your company. To put forth equal effort for every customer is not only unwise, it is using your limited resources ineffectively. Similarly, not all touch-point experiences are equally important to your company and to your customers. So, there is no question that you should allocate resources unequally among experiences. The real question is: How do you know which touch-point experiences are the most important, which are least, and which are in the middle?

To determine this, we need to transform the static TCE Model with two dimensions – touch-point experiences and channels, into a dynamic model with three dimensions – touch-point experiences, channels, and their respective importance levels. This model allows you to distinguish the important touch-point experiences from the unimportant ones, and therefore, to guide the best use of your resources.

After identifying the most important touch-point experiences among the total customer experience (unlike in John’s case where the ranking is based on “stated importance” by a one-person sample, we normally adopt the “derived importance” based upon surveying a sufficient sample of a target segment), the next step is to map the related channels or functions that deliver the particular touch-point experience. Each airline has a slightly different organizational structure, so let’s assume they are simply “Product”, “Crew”, “Operations”, and external channels like the airport. All may have some responsibility for the lounge experience at American Airlines. It is now crystal clear how to allocate resources among different touch-point experiences and among different channels or functions.

Before we start the journey to derive the importance level of touch-point experiences, there are two things you need to determine: 1) “Who are your target customer segments?” and 2) “What are your target business objectives?”

Think of John, he is a frequent business traveler. The lounge experience that appeals to John may be insignificant or even irrelevant to leisure travelers. Different customer segments always have different critical needs. So, for the first step, make sure you understand whom you want to acquire or retain. Understanding this affects how you will put your limited resources to best use among the numerous touch-point experiences and channels.

Driving sales and repeat sales are obvious target objectives for most firms. But how about driving customer satisfaction, brand differentiation, referrals, or NPS (Net Promoter Score)? Are they also important to you? In theory, they all are. But in reality, you need to make trade-offs and set priorities. Pursuing too many objectives at the same time is not only difficult, it is also unrealistic. So, focus – decide whom your target customer segments are and determine your top priority among your business objectives.

The Dynamic TCE Model
In Figure 1, stars represent the importance level in driving both repeat purchase and referrals, circles represent repeat purchase only, squares referrals only, and triangles are unimportant to both objectives. With this perspective, you can visualize the importance level of each touch-point experience and the importance level of related channels delivering that experience. This is a simplified version of the dynamic TCE Model using airlines as an example.

Ask any CEO how to allocate limited budget among various departments and functions, it is hardly a surprise that there is no agreed-upon method that is both fair and quantifiable. This is especially true given the explosion of new internet-driven channels, such as search engines, social media, and smart phone applications, and further complicated by frozen or downsized budgets nowadays.

Who will get a fair share or even a bigger share out of the limited budget pie? It shouldn’t be those who make the most noise! Yet, maybe making noise is not a bad tactic to get more funding if there is no quantifiable alternative. Actual practice in many companies is either judging arbitrarily or following the industry norm.

Now, you can use the dynamic TCE model to facilitate resource allocation decisions. It refers back to the basic reason you are in business – to acquire, retain, and grow target customers in order to earn profits. The next logical question is: which touch-point experiences are more important than others to achieve these business results? To deliver those particular touch-point experiences, which channels, departments, or functions are most important? By drilling down into these two levels, you find the critical few and can make sharp judgments to maximize the returns of your resource investments.

Facts are always more convincing, and more constructive, than pure talk or noise, especially when communicating with your boss in times of turmoil.

Numbers tell and sell. The TCE Model provides you with one quantifiable and manageable system.