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Author Topic: Company Image Formula  (Read 747 times)

Offline LemonButt

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Company Image Formula
« on: June 16, 2011, 05:52:31 PM »
In dealing with company image, I think the maximum value attainable through marketing alone should be around the 50 mark.  In order to go from 50 to 100, airlines should have to spend money on initiatives to improve the customer's experience.  I have three off the top of my head used in the real world worth considering.  I'm not sure how it would be implemented, but this would make it easier for smaller airlines to attain 100 ratings without breaking the bank since 100 CI airlines are usually the largest in a game world.

Process Improvement/Six Sigma: Customers don't feel averages--they feel variation.  If you have a brand with wild variation in product delivery, your image won't be as high.  Think of it as going to a fast food restaurant.  If the average wait time is 2 minutes to get your food, but varies greatly where it takes 1 minute the first 9 times and 10 minutes the 10th time, you're not going to be too happy with the service as a whole.  Undertaking a Process Improvement/Six Sigma initiative would involve training 1% of the workforce @ ~$10k/person and require the creation of a Process Improvement Department (with 0.1% of overall staff) with added salary expenses.  The net benefit of doing this would be a maximum of +10 CI (+1 per year to a maximum of +10, by reducing variation in products/services offered) and a decrease in operating costs (by increasing efficiency/output of current employees) of 1% per year upto a maximum of 5% in years 5+. (1% in year 1, 2% in year 2, etc)

Revenue Management: This is big in hotel/airline/rental industries as an empty seat or hotel room is gone forever and is a lost opportunity.  This is why you can goto a travel website and see different prices for tickets at different times.  Using this would create a Revenue Management Department with added salary expense (~1 employee per aircraft).  This would increase CI by making sure seats are always available for purchase.  The ideal situation for airlines is to have exactly 1 empty seat on every flight.  If there is more than 1 empty seat, you're charging too much.  If there are 0 empty seats, you're not charging enough.  Having a revenue management department would allow you to focus on 3 different strategies: maximize profit, maximize market share, or both (market share and profit are considered when pricing tickets).  By either having cheaper tickets to sellout flights or making sure a seat is always available for purchase if so desired (even at a higher price--the only thing worse than an expensive ticket is not having any tickets available to buy), CI would increase +1/year to a maximum of +10 after 10 years.  The net result will be happier customers (being able to buy cheap tickets or always having tickets available for purchase) and increased profits for airlines.

Frequent Flyer Program: We all know the bigger (and many smaller) carriers have frequent flyer/loyalty programs.  Airlines could create a Frequent Flyer Program that costs 3% of revenues to maintain (which is the approximate return on airline credit cards) and would pay for the administration of the program as well as frequent flyer lounges/benefits at base airports and major destinations.  This would be the most expensive program to implement and would snowball over time.  The first year would provide a CI boost of +1, year 2 would be +3 (1+2), year 3 would be +6 (1+2+3), year 4 +10 (1+2+3+4), year 5 +15 (1+2+3+4+5), year 6 +20 (15+5), year 7 +25 (15+5+5), year 8 +30 (15+5+5+5) = maximum.

The result of implementing all 3 of these and maxing out the marketing would be a CI of 50 (marketing) + 10 (process improvement) + 10 (revenue management) + 30 (frequent flyer program).  The theory behind this would be that you can't reach 100% of the customer base through pure marketing as some pax care about frequent flyer lounges, some care about getting cheap tickets or having tickets available whenever they want, and some just care about the level of service provided.  Furthermore, reputations are not build over a few years, but over a decade or more.  By making growth to 100 CI slow and painful, it reflects reality much better than the current formula where airlines reach 100 CI in a matter of only a couple years.

I kind of threw this together on a whim, but if you have any ideas to expand on this feel free to add them :)

Offline Wing Commander Chad Studdington

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Re: Company Image Formula
« Reply #1 on: June 16, 2011, 06:57:30 PM »
That would be brilliant.

I would love CI to be more than an arbitrary number that is pushed up by simply paying an arbitrary amount of money on arbitrary processes.

I really really like the second one of all of the them. The idea of an airline being able automatically cut prices to sell seats like that. It would be like adding things like Expedia and Netflights to the game rather than just buying tickets at a set rate direct from the airline.

And of course Frequent Flyer is supported by me, as it is every time it comes up.

Offline BobTheCactus

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Re: Company Image Formula
« Reply #2 on: June 16, 2011, 07:15:34 PM »
I like it kinda.

I don't like the absolutes - I like having options. Like you can decide to spend x amount per month on this particular  improvement. Then, the CI addition will be proprtional.

Also, for FFP, there needs to be an alliance bonus, because AFK, global alliances are a MAJOR decision as to which carrier you will fly when it comes to frequent fliers.
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Offline LemonButt

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Re: Company Image Formula
« Reply #3 on: June 16, 2011, 07:51:40 PM »
I don't like the absolutes - I like having options. Like you can decide to spend x amount per month on this particular  improvement. Then, the CI addition will be proprtional.

The items I mentioned are discrete values versus continuous values--you either have revenue management or you don't.  You can't have "half of revenue management" or "25% of revenue management".  Granted, the frequent flyer program could have scale-able benefits, but really you're talking about the difference between a free plane ticket every 10 flights or every 15 flights--there isn't a huge amount of variation when you're talking about the rewards/costs of it.  If you have a FFP where a customer has to accumulate double the points/miles/etc of a competitor, why even bother having it?

Offline MidlandDeltic

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Re: Company Image Formula
« Reply #4 on: June 17, 2011, 10:59:40 AM »
Certainly I would like to see more detailed "product management" in the sim, for want of a better phrase.  However, I am cautious about some of the ideas above on their own.

To take an example, the locos are seen as generally having poorer customer service than the legacy airlines, with few or non of the perks.  However, they can (often) blow the legacies out of the water by using pricing, both in terms of the fare and managing auxillary revenue.  If CI is one of the major planks of demand distribution in a competitive situation, then there needs to be a greater element of price sensitivity than there is at the moment (in v1.2 at least), or I suspect we well end up with even more ident-kit airlines than now.

There is a wider debate to be had on dynamic demand (hopefully to be emulated in part with the city based demand in 1.3/2.0), and operation (turnarounds being a particular bugbear of mine!) of which the sort of things in this thread form a part.

MD



Offline Daveos

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Re: Company Image Formula
« Reply #5 on: June 18, 2011, 12:15:45 AM »
The overhaul of CI is definitely something I would like to see improved.  I quite agree that investing more money into advertising to produce more CI does seem a little flawed, although it could be argued that this investment currently represents the modelling of schemes other than direct advertising.

As discussed somewhere else, maybe there should be a distinction between CI and 'prestige', but how different from CI this seems hard to define.  Low-cost carriers have a huge CI in reality, but lack any kind of following/loyalty as passengers are attracted by price and schedules rather than reputation and brand.  An airline like Ryanair spent a fair few years languishing in mediocraty before they found a niche to attack and so I think CI should be more of a marathon than a sprint as it takes years for an airline to have any kind of image with the general public.

Customer satisfaction could maybe be a way to represent the frequent flyer scheme, as people don't fly low-cost carriers because they feel a loyalty to the brand - they're just cheap and suit the needs of the individual's situation at that time.  I do think that price management does need to be addressed as a fare even 5 below a competitor would sway many passengers, both business and leisure.  Maybe this would allow a distinction between types of carriers more easily.

Anyway, I'm detracting form some very thoughtful insights from the original post, but I hope that adds something to the prior idea formulated

Dave :)
« Last Edit: June 18, 2011, 12:24:44 AM by Daveos »

 

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