Alaska Air Taps Oracle To Build Customer Loyalty

The poor economy and high fuel costs created a difficult year for airlines, and Alaska Airlines was no exception. The airline, which primarily serves the West Coast, had to drop flights in recent months and is in the process of trimming its workforce by 10%, including the layoffs of about 1,000 employees.

Alaska Air has improved its fuel usage in recent months and is looking for ways to get additional revenue from customers, including fees charged for its fledgling in-flight Internet service and other à la carte charges. But Alaska also hopes to build and grow on its reputation for high-quality service with several new customer-focused initiatives, some of which are powered by a recently implemented software platform from Oracle called Siebel Loyalty Management.

"What we're trying to do at Alaska Air is accelerate through the economic downturn," said Steve Jarvis, the company's VP of marketing, sales, and customer experience. That acceleration plan includes gaining more market share from competitors.

Although Jarvis calls Alaska Air's airfares "competitive," the airline isn't going to win market share through cutthroat pricing; it's better known for customer service than low-cost fares. In a JD Powers survey released in June, the airline ranked No. 1 in customer satisfaction among traditional carriers. Alaska knows it must retain and grow its customer base to survive the difficult industry, and it's looking to the new loyalty system as the driver of that effort.

Siebel Loyalty Management replaces the mainframe-based system that ran Alaska's Mileage Plan program, but it's going to do much more than keep track of and dole out customers' earned miles, Jarvis explained. Alaska Air plans to heavily use the system's "triggered events" features, so that it can provide customers with more information and options when service disruptions happen, or offer them promotions based on personal information gleaned from their profiles or travel history. For example, at a future time, this might include offering a promotion tied to an important date, such as a customer's birthday, Jarvis said.

Alaska put the system to its first big test on Dec. 20, when it had to cancel 62 flights because of a surprise snowstorm in Seattle and other weather hazards on the West Coast. The system triggered e-mails to frequent fliers affected by the cancellation that explained what had happened and apologized for the inconvenience. In some cases the system generated free travel awards to inconvenienced customers based on the information it had about them and their specific situations.

"The ability to do more automated and proactive recovery from service failure is a real interest of ours," Jarvis said. For example, if a customer's flight is canceled, Alaska is looking at better utilizing its airport check-in kiosks to let a customer select her way to a new flight via the airline's Web-based reservation system, rather than stand in a long line at the ticket counter.

"We ought to be able to power our back-end system with tools we now have to make that [service disruption] less stressful," Jarvis said. Alaska currently provides e-mail alerts to customers' handheld devices if there's a change or disruption in their scheduled flights, but it's looking at how it can better personalize those messages to provide each customer with more choices in service based on profile information.

It's been a long and time-intensive journey to implementing the Siebel Loyalty system, however. The company first began talking to Siebel about the system in 2005, shortly after it implemented Siebel Analytics and shortly before Siebel was acquired by Oracle. It started the implementation in late 2006 and finished in April 2008, but in the past few months it just finished "stabilizing" the system and will "start to fill out customer profiles on an opt-in basis," Jarvis said. "That was a massive implementation of a very critical transaction system for us." He did not disclose the cost of the software, which runs on an Oracle database.

Jarvis thinks customers will have a much more personalized experience as a result of a system that is less focused on miles redemption and more on an improved traveling experience and promotions specific to a customer's personal interests. A lot of air travelers have become frustrated with trying to redeem earned miles -- with every airline making it more difficult to do so as they try to protect their dwindling revenue -- so airlines need to move beyond the award miles approach.

Said Jarvis: "For our most frequent customers, it's not about the miles, it's about the service we deliver."

The article was edited on 1/5 to clarify a report submitted by JD Powers.