Bringing Science and Control to Airline Retail
What’s the magic in great digital retailing for airlines? The truth is there is no magic. It is the combination of art and science to create a simple, yet relevant and frictionless customer experience. Behind great retailing is a flexible, continuous process of data collection, testing, automation and offer optimization — all to deliver a seamless customer experience from start to finish.
In the next decade we should expect the disruption of the airline industry to continue to accelerate; however, it is the digital-first carriers that will lead the market. These airlines will be proficient in their daily operations, optimizing all functions to fly passengers safer, faster and better, while providing a great flight experience. But they will be retailers who fly airplanes and know their passengers well. And they will build strong brands through coordinated, relevant communication across all touchpoints by leveraging AI and the latest technology.
To make this happen, airlines need to transform both their organizations and their digital channels to deliver a seamless end-to-end customer experience. Whether for business or leisure, carriers have the chance to build brand trust throughout all customer touchpoints from inspiration to post-trip, and enable true travel retail across web, mobile or direct sales channels. What is stopping them?
On one hand it is the digital barrier. Airlines were at the forefront of online sales. However, they seem to lag in the digital shopping experience with less than 15% reporting to be satisfied with their booking engine1. There is a disconnect between offer optimization that carriers do in the background and bringing it to life across airlines’ digital storefronts in a smart and flexible way. The inability to deliver personalized and revenue-optimal offers affects both the user experience and the bottom line.
On the other hand, it is about merchandising techniques. The art of ancillary upsell is not something airlines are pros at. It is part of digital retail techniques that I see airlines beginning to experiment with. Low cost carriers are growing airline ancillary revenue faster, with greater capabilities in dynamic bundling with hotels and cars and also offering a-la-carte products and services. In fact, the ancillary leaders among them generate between $30 and $50 revenue per passenger on top of the fare sold2. Quite a figure compared to the average industry profit of $6.123.
So, how does your airline achieve the best of digital retail?
The Full Airline Offer
Many airlines struggle with how much of their offer they can actually design – like which ancillaries to include or exclude from branded fares, at what price should they be offered and under what conditions. A true airline retailer needs to be able to design and manage to the lowest level a comprehensive catalog of ancillary products, whether standalone or ATPCO-based. For example, differentiation across seat pricing based on row and column and based on distribution channel unlocks untapped revenue potential. Assigned seating has earned a strong 2nd or 3rd place in ancillary revenue pies, and this holds true for both LCCs and traditional airlines4.
On top of ancillary catalog management there is a list of additional flexibility airlines seek. This includes the limitless options to use rich media and showcase all the airline investments behind new fleet, attractive cabins, menus, lounges, etc. In addition, the ability for tailored ancillary offers for frequent flyers could drive higher customer spend from loyal passengers. Carriers can enhance digital shopping with miles and cash or push special ancillary bundles of most often purchased products.
These are only a few steps from a successful merchandising strategy for airline ancillary upsell.
Customer Journey Mapping
The Customer – it starts and ends with the individual who will eventually choose your airline brand to fly. The airline business is about air travelers – they are at the heart of your digital transformation. Make digital innovation about them and how you want them to easily find, use and love your brand. What is the experience you want to deliver when shopping, booking, pre-trip or post-trip? A deep dive into the complete customer journey allows airlines to identify the gaps where they could potentially influence a customer to drive revenue and improve their experience with your brand. A touchpoint that your carrier is not yet addressing could significantly impact revenues and improve customer satisfaction. For example, making it possible to book through Alexa, offer push upgrades with a few clicks on mobile, or integrate with destination activities — all opportunities to transform the shopping journey.
Technology is there to help you deliver on this. Don’t allow the complexity and limitations of legacy technology slow you down; rather, discover the new digital models you need in place and find out how to bridge the gap with traditional systems.
Testing and Automation
Agility is crucial for improving user experience and optimizing conversion. Many carriers we speak to are looking to move away from the rigid year(s)-long process of digital transformations and move to a more flexible state of rapid innovation and experimentation in airline eCommerce. From airlines to providers, everyone has a strong focus on data and records. Whether it is schedule data, fares data, inventory, PNRs, ancillaries and EMDs, data exists in many places. This makes it difficult to have that single view of the offer and the passenger, so you can be flexible with sales and marketing strategies. But if you marry your current complex infrastructure with the digital UX your travelers seek, you can gain agility and quickly pivot to new market opportunities. In the digital economy, offer management is the moneymaker: data-driven, customer-oriented and highly configurable offer creation and distribution.
Identifying the gaps and friction points is one side of the coin. The other is about being able to experiment using data and science to drive more conversion of passengers and ancillary revenue. It could be a promotional UI for the holiday period or a differentiated product bundle, but the ability to quickly test and automate better-performing offer components is key to staying relevant and competitive on the market.
Science and Offer Optimization
Science. The airline community is accelerating toward offer optimization at different rates. The most progressive airlines see the value for their retail future as the ability to create personalized individual or group offers across seat, fare and associated ancillaries based on insights and science. And that means being in control to not only design the right offer but to also deliver it through an optimized digital user experience for passengers.
Thanks to artificial intelligence, you can automate all the heavy lifting and gain precision and value from the processed data with meaningful insights and prescriptive guidance infused into your airline’s commercial systems. Soon, it would not be surprising to see data scientists become essential members of the revenue and pricing team, to accelerate AI-driven growth across an airline’s eCommerce and revenue optimization initiatives.
Marrying the customer journey to science and offer optimization while ensuring your airline’s ability to be agile is key to airline retail.
1 Diggin Travel, 2018 Digital Merchandising Survey 2,4 CarTrawler/IdeaWorks Company 3 IATA