Southwest Airlines Co.—the United States’ largest carrier in terms of originating passengers boarded—operates more than 3,500 flights each day and serves 96 destinations in 41 states, the District of Columbia, Puerto Rico, and five near-by international countries.
The airline, which serves more than 100 million customers each year, is well known for its exemplary customer service. But Southwest was not content to rest on its laurels. The company decided to overhaul its highly regarded Rapid Rewards loyalty program to deliver new differentiated value propositions to its customers and to adapt the loyalty program to the airline’s transformation over the last two decades.
To support the program, Southwest worked with Oracle to deploy Oracle’s Siebel Loyalty Manager, Siebel Contact Center, and Oracle Loyalty Analytics—putting a robust IT platform in place to help the airline manage the expected influx of program participants while providing the high level of flexibility and high performance required for ongoing success.
Southwest Airlines had evolved into a different carrier since first creating its Rapid Rewards program in the 1990s. At that time, the airline specialized in regional, short-haul flights, and it allocated its rewards accordingly. The program awarded a free ticket whenever a customer accrued 16 flight segments. But as Southwest expanded its route network, becoming a medium- to long-haul carrier and one of the largest airlines in the US, its managers realized that they needed to revise the airline’s credit-based program to give customers better options for rewards and recognition. In addition, the old program’s simplified credit model did not allow customers to use Southwest credits for hotels, car rentals, and other partner rewards.
As the company began to update its program, it needed to modernize the technology supporting it. Southwest’s old IT platform was homegrown and had been developed with a series of expansions and customizations over the course of two decades. There were also many complex interfaces connecting the rewards platform with Southwest’s other enterprise applications.
“We need to interface with a large number of systems, including financial accounting, customer service applications, reservations, kiosks, Southwest.com, the voice response system, and the mobile devices that customers use,” said Murugesan Paramasivam, senior manager of technology, Southwest Airlines.
Southwest selected and deployed Oracle’s Siebel Loyalty Manager, Siebel Contact Center, and Oracle Loyalty Analytics to provide a global customer repository for the airline’s current loyalty members and those not yet in the program.
“Most third-party loyalty products couldn’t handle the scale that we required,” said Kathleen Wayton, vice president of technology, commercial portfolio, Southwest Airlines. “We also needed flexibility and high performance, without having to make a ton of modifications. We wanted to keep the new solution as standard as possible to simplify future upgrades.”
To make the transition to the new system, Southwest converted approximately 645 million data rows from the legacy system, various internal customer-experience applications, and the flight-reservation system to Siebel Loyalty Manager—guaranteeing data integrity and accuracy. The company was able to switch from the legacy platform to the new solution in just a few hours, ensuring a smooth transition to the All New Rapid Rewards program for customers and staff.
Southwest also developed more than 80, real-time, web services to integrate Siebel Contact Center and Siebel Loyalty Manager with southwest.com and other internal applications. These web services process more than 8 million requests each day.
“We now use web services to connect with the reservation system and to other internal Southwest systems,” Wayton explained.
Southwest increased customer service platform performance by enabling 95% of web services to provide a subsecond response time. In addition, web services help the airline’s personnel integrate the All New Rapid Rewards program with the loyalty program at AirTran Airways, a wholly-owned subsidiary of Southwest. Customers can now book reward tickets on either airline by transferring their loyalty currency between the carriers.
“The infrastructure that we sit on today is vastly more sophisticated than what we had for the old program,” said Joe Migis, senior director of IT, Southwest Airlines. “And just as important, the new infrastructure is an enterprisewide solution that we can build on for the future.”
With the Oracle system as its technology foundation, Southwest’s new rewards program assigns points based on what travelers pay for their fare. The new earnings structure awards travelers three different point levels depending on the value of each fare they purchase. The new program also addresses one of the long-standing complaints travelers have with rewards incentives: restrictions on reward seats. The All New Rapid Rewards program does not include blackout dates and gives redeemers access to any available seat, regardless of price. Southwest program managers have also expanded the company’s branded credit card, awarding a point for every dollar spent and enabling customers to exchange points for international flights, hotel rooms, and other perks available from partners.
Over the past two years, Southwest’s customers have responded enthusiastically to the loyalty-program changes. Marketing managers at Southwest conduct ongoing measurements of both the company’s overall brand health and that of the rewards program. The airline has experienced a 20% increase in new loyalty-program members.
Many of these new members are business travelers, a key market segment that the airline had targeted for growth.
“Now business travelers who fly Southwest a small number of times each year, because of the earnings structure, can accumulate points for a multitude of rewards,” said Jonathan Clarkson, director, Rapid Rewards program, Southwest Airlines. “It’s highly conceivable that a business traveler could fly two round trips and have enough points to redeem for a short round trip.”
Southwest has seen an additional US$300 million in revenue as a result of the modernization. In addition, the company exceeded growth expectations for its Rapid Rewards partners—with total partner revenue increasing by 46%, thanks in part to the expanded reward program features.
“We exceeded all of the metrics we’ve set in place for ourselves in the first year out of the gate,” said Ryan Green, senior director of loyalty and partnerships, Southwest Airlines. “And in the second year, we exceeded expectations as well.”
Southwest now has a solid foundation in place to not only grow the new rewards program but to also create new ways to enhance the customer experience. The central repository enables representatives in contact centers to see the same information that reservation agents and other Southwest staff members see. This mitigates one of the biggest challenges associated with successful customer experience—integrating all the various touch points to make sure consumers always receive consistent information, regardless of how they interact with the company.
“A lot of other airlines don’t have centralized customer information, so we’re ahead of the game in that area,” Wayton said. “The challenge now is to make the customer interactions more personalized. We are examining the entire spectrum—from planning and shopping, to traveling and the post-travel experience—to understand how we can enhance each step for our customers.”
“We selected Oracle because the Siebel suite features best aligned with Southwest Airlines’ vision for its frequent-flyer program and customer service. The solution gave us the integration and analytics capabilities we required, while also enabling us to improve the loyalty program, enhance customer account management, create more targeted customer promotions, and improve the functionality of our contact center,” said Jonathan Clarkson, director, Rapid Rewards program, Southwest Airlines.
Southwest Airlines completed the implementation in two major phases. It deployed Siebel Contact Center in the first phase to support customer e-mail and letter management and to establish a foundation for the phase two Siebel Loyalty Manager implementation.
The second project phase included the launch of Siebel Loyalty Manager, Oracle Loyalty Analytics, and All New Rapid Rewards frequent flyer program. This phase involved a complete loyalty-program redesign and impacted a large number of internal systems—including flight reservations, the enterprise data warehouse, loyalty-program partners, customer service applications, financial accounting systems, campaign management systems, and southwest.com. The company also trained more than 7,000 employees during this period to use the system’s new tools.