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Digital Transformation: Turnaround at Malaysia Airlines

May 25, 2015

[with co-author Patricia Seybold, CEO Patricia Seybold Group]

Leaders in digital transformation foster a culture of experimentation, customer experience management supported by mature optimization programs, and measurements relevant to their goals. They demonstrate how an integrated platform, skilled people, and mature optimization capabilities are the keys to success.

One such leader is Dean Dacko, SVP of Marketing at Malaysia Airlines, who recognized that the company needed a new digital core and needed to embrace a whole new way to engage with customers.

As a result of his efforts, Malaysia Airlines doubled its Facebook followers, doubled its site visitors, and tripled its online revenues in 14 months.

Then, with the disappearance of Flight 370 on March 8, 2014, the entire airline company, including the marketing team, had to react nimbly to the mysterious tragedy of the missing Boeing 777. And, again when Flight 17 was shot down over Ukraine on July 17, 2014, the marketing team used the same crisis management process to respond. The digital platform that Dean Dacko had put in place was a vital asset.

Recapturing Market via Digital Transformation

In 2011, Malaysia Airlines began its digital marketing transformation. The company was far behind competitors in customer experience, marketing, and profitability, having underinvested in marketing for many years. The loss of customers and revenues and a net loss of two billion ringett (roughly USD 600 million) finally convinced executives that the company faced a crisis, and that incremental improvements to the business would not save the day.

With only two months cash in the bank, it was clear that more spending on TV advertising was not an option. “We needed to embrace a strong digital platform and approach. There is a massive emerging digital environment for how consumers engage and create relationships with brands. We needed a new digital core, and to embrace a whole new way to engage with customers,” observed Dean Dacko, CMO, who joined Malaysia Airlines in October, 2012 from Aimia, a Canadian loyalty marketing company.

Results

As of 2014, Malaysia Airlines had a highly engaged audience, with a million Facebook followers, double that of a year before. It had 2.5 million Enrich loyalty program members. Internet revenues were more than 7 million ringgit (roughly USD 2 million) per day.

Success Goals for Malaysia Airlines’

Digital Transformation in Marketing

Goals Results
Consistent Customer Experience Increase conversion rate RM 1.4 Billion (Malaysian ringgit) incremental sales in 12 months
Revenue/Online Revenue Double conversion rate in 2 years Drive 35% revenue online 3x internet revenues; 40% more passengers; 2x market penetration
Digital Marketing Effectiveness Leverage information; Integrate the loyalty data 2x Facebook followers; 2x site visitors; 3x online revenues

First Challenge: Resources, Skills, Practices

Transformation started with creating a marketing organization and a strategy. Dean Dacko had just come on board and found he had nearly a blank canvas; there was no brand marketing team, and only small teams managing promotions, operations, and loyalty. Their efforts had been tactical, with no overarching plan or vision. He brought these groups together to form his nascent digital marketing organization. Dacko explained in a March 2015 interview with Robin Hicks:

“The reality was that consumers in Asia had rapidly shifted in a world that had gone social and mobile,” “We needed to position ourselves better to take advantage of that, and engage with our audience where they had moved to.”

Dean Dacko, In mUmBRELLA Interview with Robin Hicks

His immediate challenge was to convince the management team to commit resources. Executives were attached to traditional views developed over their quarter century at Malaysia Air, and reluctant to change. They weren’t familiar with the rising importance of marketing, especially digital marketing. They weren’t familiar with benchmarking or modern practices for marketing. In fact, the team didn’t really understand or believe in marketing. Dacko had a big education task, all through the organization. In Dacko’s words, “Marketing was still regarded as witchcraft.” Tellingly, the chairman’s statements to investors in 2012 mentioned branding in terms of the logo on the new A380 fleet.

In order to deliver results rapidly with his new organization, Dacko needed to rely on partners and align with best practices. He turned to Adobe, Google, Facebook, and Linkedin for best practices and resources.

Unified Platform

The new organization’s strategy and business plan required a new operating platform that would encompass all marketing activities with a central focus on Social CRM. Malaysia Airlines has 16 country sites with local language, content, and people, all under one URL.

His immediate challenge was to convince the management team to commit resources. Executives were attached to traditional views developed over their quarter century at Malaysia Air, and reluctant to change. They weren’t familiar with the rising importance of marketing, especially digital marketing. They weren’t familiar with benchmarking or modern practices for marketing. In fact, the team didn’t really understand or believe in marketing. Dacko had a big education task, all through the organization. In Dacko’s words, “Marketing was still regarded as witchcraft.” Tellingly, the chairman’s statements to investors in 2012 mentioned branding in terms of the logo on the new A380 fleet.

In order to deliver results rapidly with his new organization, Dacko needed to rely on partners and align with best practices. He turned to Adobe, Google, Facebook, and Linkedin for best practices and resources.

Unified Platform

The new organization’s strategy and business plan required a new operating platform that would encompass all marketing activities with a central focus on Social CRM. Malaysia Airlines has 16 country sites with local language, content, and people, all under one URL. Adobe Marketing Cloud provides the technology to support all the capabilities and data to support complex campaigns, social efforts, and loyalty programs. It provides the technology to support all the capabilities and data to support complex campaigns, social efforts, and loyalty programs.

Wisdom

Dacko’s view of the critical steps in the digital transformation journey:

  1. Create A Strategy And Business Plan, And Get The Financial Commitment. You need infrastructure and technology to power digital marketing. Moving in a new direction requires substantial resources from the CFO, but the payback can’t be substantiated. The temptation is to invest a little—but this is hugely dangerous. You can trash your brand in 20 minutes by not responding to a Tweet or Facebook post. Keep in mind that this is an on-going effort: you are never done. If you needed $10 million to build your capabilities, you’ll need $5 million to keep up with rapidly changing markets and customers.
  2. Clearly Communicate Objectives, Roadmap, And Results. This is a team effort, not only within the organization, but also with agency and technology partners. You need to constantly review the game plan with the team to answer these questions: where are we, where are we going right now, and are we still on track?
  3. Rely on Partners. Partners have the knowledge and tools to accelerate your progress. You won’t have the resources in house, and it is too hard to find the talent. Partners will bring the talent to cross-pollinate your team.

How Malaysia AirlineS’ Marketing Coped with two Back-to-Back Disasters

[Editor’s Note: This more recent section of our case study is largely in Dean Dacko’s own words, quoted from the mUmBRELLA interview referenced below[1]]:

Flight 370 Disappears

In March 2015, Robin Hicks, the Editor of Mumbrella Asia, caught up with Dean Dacko at the Media Asia industry event. Robin asked:

“Tell us about the time when you first heard the news of the missing MH370 jet and how you briefed your agencies [Ogilvy & Mather is MAS’ creative agency, IPG Mediabrands handles media and Rally does social media]:”

“What happened on 8 March was one of the most widely publicised, dramatic, confusing, mysterious events in recent history. One of the words often used to describe it in the media is ‘unprecedented’. And it was.

Never before had a modern aircraft, a Boeing 777, completely and utterly disappeared. The search that followed was also unprecedented in the scale and length of the operation; 26 different countries using 100 different ships and aircraft. So was the level of public fascination. Almost every day we are in the news, with different conspiracy theories emerging about what happened. Never before has any brand or story captured so many people’s imagination.

We were made aware that flight MH370 had gone missing at 5.30am on a Saturday. By 9am, I’d given the direction to take down every Malaysia Airlines media property worldwide.”

Dean Dacko, CMO, Malaysia Airlines from Robin Hicks’ Interview

How Marketing Reacted to the 370 Disaster

Dean Dacko describes the initial steps taken by his marketing organization and their marketing partners, immediately after the July 8th Flight 370 disappearance:

 “On Monday at 9am, I convened a meeting of all our agency partners and all my team with the objective of how we would rebuild the brand.

Taking everything down was easy. Building it back up was going to be much harder. But we had no choice. When flight cancellations happen and advertising is taken off air, the financial impact is devastating for an airline.

Our job was to restart the commercial engine and find a way to make money – otherwise the company would have collapsed. There was no other way. We had to do it. We had to be successful.

One of the nice things about the process was that, from the first minute, there was universal sense of partnership. As much as it was a blow for us, it was also felt by our partners.

In the meeting, I said to the 50 people in the room: ‘What we do from here and how we manage the recovery from this will measure us and define us as a brand and as individuals. In your career you’ll never see anything like this. But how you deal with this will define you and us for many years to come.’….

Everything happened in an era when people can share information, ask questions and challenge a brand in an instant. As a marketing and communications challenge, it was huge. It was like a mushroom cloud of attention – a bright white like was shone upon us. We were totally exposed. And it did not help that the media was reporting anything, regardless of source or no matter how crazy, just because they had to report something.

“When that sort of thing happens, brands tend to freeze. Whichever way you move, you’ll be criticised; it’s paralysing. But the worst thing you can do is not move.

We used some of the tools we had created in the months prior. One was our web platforms. Before the beginning of 2014, we had one English language website. But we had created 22 different country sites, each with their own currency and own content. This gave us the ability to engage with people, supported by agency teams around the world, in local languages and with content relevant to them.

We took the 22 different sites and colour coded them – red, yellow and green – as part of a process we called “analyse and adjust”. We looked at the comments that were coming through in real time, and gauged what we should do based on that sentiment. If the colour was red, it meant stop all marketing. If it was yellow, we’d slow things down and continue with caution. If it was green, we’d keep going as normal.

We also had a business continuity plan for marketing in four different phases – from blackout to recovery. In the blackout phase, we stopped doing anything commercially linked. In the recovery phase, we had returned to normal.”

Dean Dacko, CMO, Malaysia Airlines from Robin Hicks’ Interview

Lessons Learned from Responding to the Flight 370 Disaster

What did Dean Dacko, his marketing team, and partners learn from coping with the aftermath of the Flight 370 disappearance?

 “The first lesson from MH370 was that, in the digital world, the expectation of the audience is immediacy. They want to know now. In real time.

In traditional crisis management, the opposite is what is desired. Most of the way these plans are articulated is driven by lawyers – what you should say, who would say it and how often is a communications protocol meant to mitigate against civil liability. The overall direction was to say as little as possible as infrequently as possible. The idea was to let time go on, and say at little as possible, so they could not hold you liable for anything you have said during the crisis.”

“But, in a world that wants immediate answers, we realised that was absolutely the wrong thing to do. So we established the capability, after consulting with our legal team, to be able to comment immediately where appropriate. If something was known to be true, could be validated 100 per cent or was already in the public domain, then we could comment on it. Within that context, if someone was expecting an answer from us, we could respond immediately.

We were able to demonstrate that if we managed the situation by being engaged, our ability to manage the story and the brand became so much easier. And it worked.”

Dean Dacko, CMO, Malaysia Airlines from Robin Hicks’ Interview

The Flight 17 Disaster

How did the experience of dealing with the disappearance of Malaysian Airlines’ flight 370 affect the marketing department’s ability to deal with the second tragedy: the shooting down of Flight 17 over the Ukraine four months later? Dean Dacko explained to interviewer, Robin Hicks:

“With MH370, to go from [marketing] blackout to recovery took seven weeks.

With MH17, it took seven days.

This was driven by the fact that those two events were completely different. But also because we had learned so much more about how to deal with a situation of such magnitude the second time around.”

Dean Dacko, CMO, Malaysia Airlines from Robin Hicks’ Interview

Biggest Mistake

What was the biggest mistake that Malaysian Airlines’ marketing team made during that double crisis period? Dean Dacko admits that Malaysia Airlines’ now infamous “Bucket List” promotion was in very bad taste.

“It’s not an excuse. But the reality was that, any word we published would be reacted to in some way.

The bucket list was a promo designed months before MH370 and MH17 and was never meant to be advertised that way. We did not get a single customer who said it was a problem. It was the media that suggested it was an issue.

It’s never the case that everything will go 100 per cent how you expect it to. What is critical is how you deal with it. That’s what I believe we’re measured against. Within minutes of recognising that we made a mistake with the bucket list promotion, we reacted in the best way we could [the promo was removed from MAS’ website]. We were under a global spotlight. Should we have been scrutinised any closer as a brand? Probably. But at same time, it’s pretty hard to be perfect.”

Dean Dacko, CMO, Malaysia Airlines from Robin Hicks’ Interview

Rebuilding Trust in the Brand?

The most common question Malaysian Airlines received after the double-whammy was “how can you survive as a company?,” according to Dean Dacko. He responded this way:

“When MH17 was shot down, the feeling within Malaysia Airlines was universal shock. It was like taking a punch in the stomach. We were completely winded; 20,000 people suffered a big blow.

So, from a marketing perspective, we decided to send a message to ourselves internally – that was #StayStrong. It was intended for our own people, but it went viral.”

“People were posting back to us, saying yes, Malaysia Airlines, stay strong, you didn’t deserve this.

We took that and we moved on to ‘Fly high’ and ‘Keep flying’. It has shaped our new direction. We recognised that it was the vehicle to get our message out, and to do so in an authentic, truthful way that leveraged a shared sense of grief and loss, together with a determination to carry on.

We felt that our customers were saying, I’m still with you, I still trust you. And we said, from a commercial standpoint, we’re going to honour that sentiment and we’re going to offer pricing and promotions to reflect that commitment, with the same Malaysian hospitality that we’re known for.”

Dean Dacko, CMO, Malaysia Airlines from Robin Hicks’ Interview

Or Rebranding?

Dean Dacko’s contract as SVP of marketing is nearing its conclusion, but he feels he still has a big job to do. The company has a new CEO. Since January 2015, Christoph Mueller, who is credited with turning around Aer Lingus has taken over the reins of this government-owned airline. As of the time of his March, 2015 interview with Robin Hicks, Dacko had not yet had a discussion with the new CEO about the need for rebranding and the future marketing direction. When Robin Hicks asked Dean about rebranding, he replied:

“There are two elements to this. First is the awareness of the Malaysia Airlines brand. Prior to MH370, globally Malaysia Airlines’ brand awareness was in the low single digits. But after MH370 and MH17 it is 86 per cent worldwide. The name is now in the range of Coke and Pepsi. That kind of awareness takes decades and billions of dollars in investment to build. To abandon that, from a commercial marketing perspective, would be a tragically bad mistake to make.

Secondly, millions rallied around the brand and embraced the notion of Fly High and Stay Strong. So much so, that if we were to rebrand, we would not be honouring that message, and we would not be leveraging that as a springboard.

And if we rebranded, what would that say about the company? Malaysia Airlines has always been recognised as a premium full-service carrier and a national icon. The prime minister has said that this is something that needs to be preserved, as it is part of the fabric of Malaysian culture and society. What makes us good, what is engrained in our character and our culture, is Malaysian hospitality. It’s one of the only things that makes us genuinely different as an airline. It’s what makes us who we are. And we wouldn’t want to disrupt that promise.”

Dean Dacko, CMO, Malaysia Airlines from Robin Hicks’ Interview

However, in the press release announcing Mueller’s appointment, Malaysian Airlines talks about the creation of “NewCo” by July, 2015. And, in an internal memo in early May, Mueller informed the employees of Malaysia Airlines that he would be cutting the staff by 6,000 (from 20,000). “Sometimes you have to retreat and regroup before growing again. And that is the ultimate target. We want to grow again in the last phase of restructuring,” he said. He also said that Malaysia Airlines is “suffering badly from a heavily damaged brand reputation” in key markets with many people avoiding the carrier because “they are frightened.” This was born out on May 11th, 2015, when an unruly, intoxicated and very large passenger caused such a disturbance on Malaysian Airlines Flight 179 from KL to Columbo that the flight circled and eventually returned to the Kuala Lumpur airport, unable to continue its planned flight. This incident caused a large uproar on Twitter, with tweets like this one from Ayien@nurulazreen: “Let us all take a minute to pray for #MH179. Please give us good news this time. Hope everyone is safe. Land safely.”

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One Comment
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