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ROI: Mad to Measure

Calculating the return on E-business investments isn't easy, but that doesn't stop companies from trying.

Today, customers can use a wireless device such as a personal digital assistant to retrieve flight information online, access various terminals, and download timetables to help them reschedule canceled flights. SkyMiles medallion members can use wireless devices to check in remotely for US flights. In the future, customers may be able to do much more, including select and change their seat assignments, reserve and pay for tickets, and request standby and upgrade services. Delta is now testing a virtual check-in system in six cities.

Delta prioritizes its Internet projects based almost solely on net present value, strategic value, and risk associated with each project. Project managers first figure a net present value for the initiative and then add a measure for strategic value representing customer service. Those two measures are weighted to arrive at a total value score. That total value is then plotted against risk, which equals the size of the initial investment in the project, whatever resources are required from within the airline to develop and implement it, and an assessment of possible technological hurdles, such as the rate at which the system becomes obsolete.

In the wireless area, Delta assesses ROI in terms of both productivity and cost savings. The productivity metric helps in calculating both net present value and strategic value. For example, the company estimates how many more revenue-producing calls (calls that book tickets) will be handled by reservations agents because, as a direct result of wireless self-service, they don’t need to take as many routine calls dealing with check-in, seat selection, or general inquiries.

Cost savings are the key component of the net present value calculation; savings can come from either materials or personnel. If more customers can access information and conduct transactions via the wireless Web, then Delta can serve a growing customer base without having to staff up significantly. And the airline expects to save on paper because last-minute changes to tickets made over the Web won’t require a new ticket to be printed at the gate. “The system helps us reduce future costs against existing resources,” thus raising ROI, Chirico says.

Delta expects a new revenue stream to further enhance ROI. In a venture with American, United, and Boeing, aircraft will be equipped with broadband Internet connectivity, allowing the airlines to sell in- flight wireless services starting next year. —HR

Portland Trail Blazers

When Microsoft co-founder Paul Allen bought the Portland Trail Blazers basketball team (www.nba.com/blazers/) a few years ago, he decided that a winning team was only part of the total entertainment experience. He and the front-office staff looked for other ways to increase fan involvement. Last season, for example, “we had this wild notion of calling all our ticket holders and asking them to wear red [clothing] to the game, since red is our primary team color,” says Tony Cesarano, director of database and Internet marketing for Trail Blazers Inc. “We called it ‘The Lakers See Red’ night.”


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