Under the hood of Virgin Australia’s customer and business analytics approach
Building a customer demand-led approach to travel management, predictive personalisation and foresight, not just insight, are all in the sights of Virgin Australia’s analytics chief.
Speaking at this week’s SAS Global Forum, Virgin Australia head of analytics, Paul Tran, spoke on the airline’s growing use of analytics to drive business and customer decisions and provided a peek under the hood of how the airline is working to improve profitability and services as the aviation market starts to cover.
As Tran put it, Virgin’s analytics team is there to help people across the organisation make informed decisions that are good for the business and the customer. “We need to be pragmatic about that. It needs to be a win-win for customer and for the business,” he said.
During Virgin’s administration process and the wider shutdown of airline services in Australia, an immediate area of focus for analytics was on protecting the Virgin Velocity customer loyalty program still very much running.
“One thing we immediately focused on was how to protect that business and make sure customers knew it was still operating and their points are still protected,” Tran said. “We needed to communicate with customers and know who to communicate to first. So we took a one-to-one customer management process. They needed to hear from us, that we’re OK. And we needed to hear they’re OK as well. We re-routed our resources to do that.”
Tran said it the tough time also presented an opportunity to start repositioning analytics on what was needed as business recovered so it could sit at the forefront of driving the business. This included building out tools and models to help teams manage customers it engaged with, but also what flights to launch, capacity required and the profit potentially generated.
“This was ensuring that when borders open and when we started flying again, we had a playbook,” Tran said. “An airline is always focused on the flight plan – so when a pilot gets on a flight, they know exactly what they need to go and what to do. That’s how we need to operate individual business units, too.”
A new offering to emerge from this time was a profitability model at a customer level, something Virgin had not done before, Tran continued.
“In last three months, we built out an activity-based costing model at a customer level. We know who our most valuable passengers are, what demand looks like and to inform opening up routes to maximise capacity and demand that drives the most revenue and profit for us,” he said.
Another priority was deepening insights and analytics for internal stakeholders, Tran said. An example was building portfolio management analytical tools so corporate teams could approach clients armed with insights into what those partners generate for Virgin, and how Virgin can help them get business back.
Tran said such momentum hasn’t stopped now that Virgin is under the new ownership of Bain Capital. In fact, the analytics team was able to bring insights to the table that helped the Bain & Co consultancy business accelerate its knowledge of Virgin and drive the subsequent strategy of the re-emerging business, he said.
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Another area of analytics-led innovation at Virgin has been customer demand planning. “Typically an airline would look at travel demand from market perspective. What we do now is look from a customer demand perspective,” Tran explained.
“We know who our valuable, engaged members or guests are, and where they want to go. We can plan around that, then plan the experience for those trips to ensure it’s a memorable trip when they take it. That’s how we shifted our thinking in terms of managing demand.
“It’s also about managing yield proactively – what is the right proposition or product feature wrapped around the experience so it’s firstly a great experience, but also that it’s a great return on investment for all. That’s where analytics plays a key role.”
Increased personalisation is key, and Tran said Virgin’s analytics and martech capabilities are allowing it to build ever-more audience personalisation.
“My aspiration is to leverage more deep dive data and build an ecosystem around personalisation. That will allow us to be more proactive internally with targeting,” he said. “Rather than group of members, it’s about individual guests. We know what our guests have done in the past, what their preferences are and how they experienced our services in the past. We want to leverage that to personalise at an individual level.”
It’s equally about becoming proactive in predicting their future experiences. Tran said predictive analytics as a group-wide function is a fairly new proposition, and one with huge potential.
“Predominantly as an analytics team we’ve been very much focused on customer and revenue side; we are looking at huge cost side we need to help with,” he said.
This could, for instance, include parts replacement and the decay of parts, scheduling and group and capacity optimisations. “We have done a bit to get a flavour of each and see where case studies exist,” Tran said.
“We have a significant customer in our base very conscious around carbon offsetting, so again creating product and building propositions around that to serve their needs is another key area we need to look at.”
Helping Virgin’s analytics team is growing use of artificial intelligence (AI). Tran said the emphasis has been on optimising next-best offers and customer personalisation, and highlighted an ecosystem approach to track offers, profitability and recommendations.
Tran’s next ambition is to bring AI into decision making through deep dive analysis that can drive recommendations around areas such as capacity planning, pricing or route profitability.
“My first focus is always on using AI to address business problems. It’s not just a fancy algorithm, it’s how to take it and solve a business problem,” Tran added.
Virgin also recently signed up to a three-year deal with SAS to modernise its analytics stack. “The business case is all about being at the forefront of digital transformation, where data is the enabler for all revenue generation, customer experiences and all the hygiene factors,” Tran said.
“Customers expect us to know them, so we need to ensure the speed of data to platform is fast, meaningful and actionable, making it relevant to customers.
“Foresight rather than insight is where we’re heading – it’s not just looking at what we’re doing now but how we plan for the future.”
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