Time to get realistic with what to expect from NDC in 2015
NDC is not a “magic bullet” that will decipher every problem, but it will help to solve, or allow to be solved, many of the cross-platform issues that we encounter today, writes Ritesh Gupta, Airline Information Correspondent
If there is one harmonious way in which various stakeholders look at airline distribution, then it has to be the same being described as an intricate and interconnected business. But is the industry finally on verge of a major overhaul? A clear answer to this would largely depend upon how IATA’s XML-based data transmission standard (NDC Standard) shapes up in 2015 and beyond.
As IATA recently stated, airlines need to work on APIs that will pave way for dissemination of their distinctive content in a rich and dynamic manner, deploying the offerings that their preferred technology vendors will launch to market – based on the NDC standard. For its part, IATA is also planning to evaluate and enhance the running of the schemas, and craft a standard project roadmap to support airlines and their partners for NDC.
For airlines, each one of them has its own challenges and a lot of what those hurdles are depend on their size and resources, says Ryan M. Harris, e-commerce and ancillary products manager, InselAir and InselAir Aruba.
Citing an example, he says if the entity is a large legacy airline, then there would probably be a large IT staff that has already solved the problem of how to offer ancillaries through all of direct channels and are looking to get full distribution into your third-party channels, such as GDS and interline distribution. On the other hand, if it’s a small regional carrier, you probably don’t even have an IT staff dedicated to your distribution and have to work with your system provider to even make ancillary sales a possibility through the direct channels, and may have excluded even considering the third-party availability at this time.
When it comes to the internal management of the ancillary products and services, there is no question that it must be centralized to coordinate the product mix and ensure consistent message and expectations to the passenger.
“In most airlines, the organizational structure to support this product line is already in place, at least from a high-level,” says Harris. It then requires the business and technology processes to support the end-to-end product lifecycle to be implemented. For those companies without a current ancillary program in place, the biggest difficulty is likely the transition in thinking of a product, such as seat selection, as an intangible product to placing a tangible value and life-cycle management approach to it.
NDC and indirect distribution
So what do airlines need to take into consideration as they focus on utilizing an XML path for distributing ancillaries in the agency channel?
Firstly it’s important to recognize that XML is a coding language, not a technology. It just happens to be an open language that is very useful at achieving some of the goals that we as an industry are looking to solve by allowing different systems that speak in different languages to speak in the same language. As Harris points out, it also helps that it is not limited to proprietary communication methods, which opens up connection options such as TCP/IP, or Internet, as opposed to the legacy point-to-point communication lines, such as leased lines.
“It is not a “magic bullet” that will solve every problem, but it will help to solve, or allow to be solved, many of the cross-platform issues that we encounter today,” says Harris. “That being said, I can’t imagine considering any core system that does not at least hold the capability, whether standard or optional, to allow bi-directional XML interfacing.”
The openness of the Open Travel Alliance XML standard is a multi-functional standard that will not only become a powerful tool in helping to resolve the cross-platform and cross-channel issues we are talking about today, but also becomes a development asset for internal access to the core systems, such as confirmations, loyalty program, check-in and even extending to more integrated e-commerce functions, asserted Harris.
Since it is a standard, it also opens up the availability of third-party applications to these interfaces without the heavy customization that is required today.
The availability of XML interfaces should expand the potential client pool of companies that develop these front-end interfaces, which should in turn result in driving innovation into the industry while minimizing cost to both the developers and the airlines while increasing the lifecycle of current airline host systems.
Being in control
Airlines would have the freedom to decide to what extent they are going to utilize NDC. It would be a function of the way their business is being done or their IT competence.
According to IATA, a carrier may deploy NDC processes end-to-end, managing offers, ticketing and settling straight with the agency. Alternatively, a carrier may deploy, perhaps as a supporting step, only the NDC-shopping route and carry on with all their fare-filing, fulfilment and integrity procedure.
Some carriers may opt at some point to run all their indirect sales using NDC based channels. On the other hand, carriers may decide, if only during a transition period, to use a combination of NDC based and non-NDC based processes.
The NDC Standard is agnostic as to whether a set up is structured entirely on NDC processes or NDC based processes used in conjunction with some other processes. It’s for airlines to decide to choose which offering would be most suitable for their operations.
Guest Editorial by Jay Sorensen, President, IdeaWorksCompany
Michael O’Leary, the CEO of Ryanair, recently admitted “If I had known being nicer to our customers was going to work so well, I would have done it years ago.” As notable as O’Leary’s epiphany is to the airline industry, it’s worth pointing out that the proven value of empathy, competency, and kindness precedes his recent directives to be nice to customers. The Latest Report from IdeaWorksCompany explores how airline management teams can work together for the greater good of their customers, employees, and investors.
Call it a back-to-basics mantra, but sometimes in a technology riddled world, we all can benefit from a few therapeutic reminders to reset our moral compasses. By using the inherently human qualities of empathy, competence, and kindness, the report offers advice to airline management teams to boost ancillary revenue:
• Understand the perspective of other departments before adding a la carte services.
• Front line employees provide a vital source of intelligence; talk to them before adding anything.
• Empathy is a crucial tool of diplomacy, and ancillary revenue leadership requires diplomatic skills.
• Enlightened airlines should have employees book and buy tickets like their clients.
• Competence has a natural enemy, and that’s complexity; improve existing a la carte items.
• Don’t invite regulators to become involved in your business by failing to fix systemic problems.
• Untangle consumer confusion by dedicating corporate resources to simplifying self-service.
Boosting Ancillary Revenue will also be on the agendas of the Mega Event Asia-Pacific (01 & 02 September 2015, Singapore) and the global Mega Event (04 & 05 November 2015, San Diego.) You will find details and registration for these events at: www.AiConnects.us
Guest Editorial by Jay Sorensen, President, IdeaWorksCompany
American, Etihad, Qantas and 20 other Airlines offer Wild Rewards
The latest report from IdeaWorksComany is now available. We recently reviewed the frequent flier programs of 160 airlines around the world to gather examples of alternative rewards such as unique experiences, event tickets, and retail goods. Beyond the benefit of reducing reward liability, alternative rewards can encourage members to interact more frequently and deeply with the program. The following are a few examples from the 25 alternative rewards compiled by the report, ranging from the extravagant to everyday comforts:
Airlines Woo Members with Wild, Weird and Wonderful Rewards was released as a free 17-page report and is available here:
Guest Editorial from Sinead Finn, Director, affinnity & Chairman of Ancillary Merchandising Conference 2015
We have seen a positive shift in the last 18 months with the innovator airlines in how they market and sell ancillaries. There is a much keener focus on offering what the customer wants or needs rather than the “Bazaar Effect”.
Why this change? Conversion of ancillary sales and consequently revenue is never at optimum levels. The issue is not that the customer does not want to be offered ancillary products, but it is that they do not want to be coerced into purchasing the ancillary products. In pressurising the customer, he is less like to purchase even a product that he may want. The Customer is so besieged with the vast products on offer, most of which are irrelevant to him and his recent flight purchase, that ticking the “no” box becomes routine.
However, if an airline changes its purchase points, it is not enough. Airlines need to look at industry leaders on ecommerce to build their digital footprint and not to other airlines. What about Ebay & Amazon, how do they treat their “guests” on the customer journey? What about customer recommendations within the booking flow based on historical data and purchases? What about personalising all the touch points to ensure that the customer is offered what he wants and is more likely to purchase, thereby increasing revenue? What about live social proofing and customer ratings such as those used by Booking.com and CarTrawler? E.g. “10 people are looking at this hotel now” or “15 people gave this car supplier 8 out of 10”. How challenging can this be, after all airlines are in possession of the richest travel data in the world?
Taking customer service delivery a step further, let’s take a look at the online retailer Zappos.com. They send customers to their competitors if they cannot help, the result being that 75% of their customers are repeat buyers and the 2nd purchase is 100% higher than the first.
What is preventing these shifts? It is difficult to understand why only a select number of airlines use technology partners to personalise. There is a greed and fear factor, whether that is sharing data or sharing revenue or both. So long as this fear factor remains, the airline’s focus is not on the customer in order to deliver the right ancillary and consequently ancillary revenue will never reach optimum levels. As long as this continues more and more of the airline’s share of ancillary product sales will be gobbled up by other savvy on-line sellers who offer products which the airline’s customers actually want when they are planning a holiday. Seems such a loss for something which is so simple.
Trying to sharpen your personalisation and cart recovery efforts? Analytics is key. Are you focusing on omni-channel data integration? If you aren’t, then you are missing out on chances to convert would-be buyers into confirmed flyers as confirmed by Ritesh Gupta, Airline Information Correspondent.
“Never miss an opportunity to re-embrace your relationship with the unfaithful”. This statement, made during the recently held Mega Event 2014 in New Orleans, reflects the opportunity for remarketing in the travel sector.
An abandoned cart creates an opportunity for airlines to re-engage with the undecided or uncommitted traveler.
Remarketing through “follow-me” display ads has been in use for years with the goal of enticing the would-be traveler back to complete his or her purchase. With omni-channel data integration, airlines can have an even broader view of their customer, and use this insight to engage with them across virtually any channel, with the goal of converting would-be buyers in to confirmed flyers. This is where the promise of analytics comes in.
But analytics are only as good as the available dataset.
Solutions exist today that bring together both anonymous visitor information and customer details from multiple databases found within an airline: web, email, mobile, loyalty, booking, and more. The information can be augmented with third-party information such as social. This rich profile provides a foundation for better understanding how visitors and customers will respond to re-engagement efforts when they abandon.
“Airlines are opting for real-time personalisation initiatives driven by a deep understanding of each individual and smart analytics. Web, email, mobile, call center…airlines aren’t leaving anything to chance,” says Boxever’s VP – Sales, Ultan O Brien.
Airlines can create an interaction timeline for each visitor and customer from the instance they visit a website. Once they have an “identifying” event (e.g., registration, booking, or the like) then all of the rich anonymous behavior is incorporated into the “known” profile. In either case, using analytics and predictive marketing, known and unknown site visitors can be served dynamic content based on who they are and what their current context is, say as per the chosen routing. (See the screen shot below.)
Single View of the Customer
Travellers don’t just use the web from one device – they move across desktop and mobile, across channels like web, social, mobile, email, creating a messy web of digital information about their intentions. Specialists can combine this multi-channel data into the single view of the customer, and from this rich profile, develop customer segments.
So with such detail, airlines then are in a position to act upon “event triggers”. Event triggers signal customer behavior and result in a responding action. For example, when a customer leaves a product in their cart before purchasing. This trigger sets off a chain of analysis – who is the customer, what is their profile, what product have they abandoned, what content should be communicated to them about this product, and when should the email be sent. In predictive marketing solutions, this enables every abandoned cart email to be specifically targeted for that individual, with the probability of a transaction much higher as the customer gets back into the booking flow.
This intelligence can be applied into the myriad of touchpoints an airline has with a passenger throughout their lifecycle, from discovery to booking to post trip.
Airlines today are defining their objective with precision. For instance, Singapore-based Tigerair, in one of our conferences this year, shared what it had set out for as far as personalisation is concerned:
• Reduce shopping cart and abandonment and increase online conversion rates
• Improve attach rate for add-ons and ancillary products
• Upsell other destinations based on past purchase history
• Leverage previous shopping behavior to customize experience on the website site
• Increase repeat purchase rate
The airline created a single view of the customer, and worked on an online profile to support Tigerair.com. With web personalisation efforts timed throughout the customer web journey, the airline witnessed 3-4% uplift in the conversion rate.
Similarly, airlines can achieve a host of other goals. It could be reducing cart abandonment, better email targeting, or contact center experience optimization.
It’s time airlines now consider retargeting or personalisation to be a dynamic exercise, one which depends upon the intent of the customer. Or specifically one which gets in touch with customers with a recommendation that augments a flyer’s decision-making. If your marketing platform isn’t helping you do all this, then you aren’t moving in the right direction.
Go for a single view of the customer one that spans across all channels - online, offline and 3rd party. And then act on it in real-time.
Airlines must up the ante as they strive to optimize indirect distribution. Airlines expect to be in better control of their own distribution when industry technology standards are implemented. But, they also need to optimize results now, as Airline Information’s Ritesh Gupta finds out.
How airlines intend to sell and how travellers plan to buy is something that has garnered attention over the years. Let’s say a carrier intends to yield-manage priority boarding on 50 routes, but only intends to offer a chauffeur service on 25 routes, then how efficiently and quickly can this be done? While airlines and service providers/GDS companies are ready to collaborate, are airlines in complete control? It seems to be a work in progress.
The industry is in a transition phase as various stakeholders attempt to facilitate greater transparency and choice for consumers in comparison shopping. Even today airlines are concerned about consistency in brand messaging and customer experience across all indirect channels.
Consistent brand promotion and messaging is always a challenge when dealing with indirect distribution channels because of your reliance on a third-party to interpret and communicate the message correctly and effectively, says Fort Lauderdale, Florida-based Ryan M. Harris, CISA, E-Commerce and Ancillary Products Manager, InselAir and InselAir Aruba.
Being in control
When a passenger chooses to use the direct channels, such as the airline website, ticket offices or contact centers, airlines fully control the message that the passenger receives.
“When passengers choose the indirect channels, especially in the leisure segments, everything generally comes down to pricing and schedule, unless you have previously built enough brand awareness and brand loyalty to drive passengers to your product,” says Harris.
He further explains: most global distribution systems (GDS) offer some sort of a marketing package through their specific GDS that will help to deliver marketing materials and messages to their end users, which does provide some continuity. However, the biggest issue with that approach is that the audience shifts from the passenger to the travel agent, at least in brick-and-mortar travel agencies and corporate travel offices. “Going through to the online travel agencies does provide some additional capabilities to pass through the marketing and fare differentiators to the end passenger but then requires further agreements outside of GDS agreements to distribute those messages to the passenger,” he says.
As observed over the past year or so, the single biggest development in message continuity is still forthcoming in the IATA New Distribution Capability project, or NDC.
“This project, if successful, will allow the airlines to directly and consistently pass their brand message and product information to the agents and, eventually, the passengers themselves. Control of the message is important, and direct communication is always best. NDC will allow the airline to directly control the content and delivery, providing that consistent brand identity that is essential to building loyalty,” explains Harris.
Answering GDS’ concern
For their part, GDS players or travel commerce facilitators stress that a hurdle in maximizing a multi-channel, multi-device merchandising strategy is the discrepancy in how carriers distribute their ancillary content. Harris agrees and says for the most part, this is absolutely true. He explained that the biggest part of this issue is that offering ancillary products is a reversal of the business strategy that the industry had been using for decades, which all of the hosting and GDS systems were designed for.
He added: When unbundling first came onto the marketplace in the early 2000’s, e-commerce was still a minority channel for most airlines and the e-ticket was just becoming the global standard. When unbundling began, the majority of technology systems, which are really the backbone of any airline’s sales process, just didn’t know how to handle these new non-ticket products. “The situation required developments by several airlines at the same time and very few of them were coordinated, leading to a patchwork of different technical abilities and methods, some of which didn’t play well with others. The commonality in all of these development projects were the GDSs themselves. No matter how an airline solved the problem, it had to be able to distribute through the GDS,” said Harris.
Even today, the distribution problem still exists. “There are products that simply cannot be properly marketed, or sometimes offered at all, through a GDS or other third-party distribution channels. The root of the problem is the lack of a standard,” he said. Harris sees this as a need for IATA to address on behalf of the industry and is doing so through the NDC project.
And the IATA has shown the way in the past.
“I know there are some people who are against IATA “dictating” the way that technology standards are defined; however, IATA does have a good track record of successfully implementing these types of projects. The IATA Simplifying the Business (StB) program was the driver for the global implementation of the e-ticket and the Electronic Miscellaneous Document (EMD) initiatives, without which the future of ancillary product distribution would remain cloudy. The StB program also brought about the 2D bar code standards, which has become ubiquitous in today’s airports and has allowed the development of mobile applications that work in almost any airport in the world,” reasoned Harris.
Is this an airline problem? “Absolutely, and I think it is clear to all of us that a solution needs to be developed,” said Harris. He recommends that there is a need to develop one solution as an industry through IATA, instead of having “180 different solutions” to the same problem.
Way to go
Airlines need to evaluate all options as they disseminate their content to several indirect channel partners and gear up for the NDC era. Airlines can evaluate the promise of speed-to-market via one standardized XML API. As rolled out recently by Farelogix, such solutions are worth assessing. Airlines should evaluate PSS-agnostic offerings, reduced PSS/hosting costs etc. as they incur new expenditure.
Today airlines are being given an option to set up a connection to the airline host system, chart out their pricing and merchandising engines to their offerings, and eventually distribute their desired content to travel sellers via XML API.
There is also a need to adjust, both internally and externally when it comes to dealing with IT specialists, as far as the NDC is concerned. The focus should be on aligning internal business and technology systems in order to meet objectives pertaining to how to target a specific audience via a specific channel. This way airlines would be able to optimize their indirect distribution mix in a desired manner.
Many of the latest developments pertaining to NDC will be dicussed at Airline Information's Mega Event Asia-Pacific (01 & 02 September 2015, Singapore) and the global Mega Event (04 & 05 November 2015, San Diego.) You will find details and registration for these events at: www.AiConnects.us
Guest Editorial by Ornagh Hoban, VP Strategy & Marketing, Datalex
In the eyes of the consumer, e-commerce and retail are now one. Airlines need to address this reality as the new battleground for a sustainable and competitive business. The millennial generation, already the core of the trillion dollar digital travel demographic, will in a few years surpass baby boomers in travel spend. They face ever-increasing pressure on their time, hence their desire for a compelling digital travel marketplace that delivers a seamless experience.
Already using 10.4 sources of online information before buying, 83% of millennials sleep with their smartphone by the bed and 57% update social media every day while traveling. The window of opportunity to connect, serve, and manage their needs is closing fast.
A certain digital future
We are entering a period of the most rapid technology transformation ever. Social, mobility, application, cloud; big data and the Internet of things will forever change how we view, measure and serve products, assets, and people.
Our digital future is certain. We will continue to see rapid innovation in predictive and prescriptive analytics based on decision-enabling data. This will mean we will become increasingly selective and loyal to brands, authorities, and groups that we can trust with our data and time. Our digital ecosystem will be the epicentre of our lives as we are increasingly empowered to be the smartest in our decisions.
Amazon, Google, and eBay are playing the long game, ploughing billions of dollars to deliver the next wave in customer experience for all. Yet the best travel retail innovations can still come from the airline world if they can match the pace, investment and innovation required.
Datalex recently conducted a survey with Atmosphere Research of global airline marketing, distribution, and merchandizing professionals. The results recognize that airlines are not moving at the pace required to succeed. Over 97% view competition for the consumer as very competitive, with more than 73% admitting they cannot rely on brand loyalty and 67% admitting to being extremely or somewhat ineffective at targeting or personalizing the retail offer.
Data is just data unless…
The business and technology components are there and some innovative airlines are investing heavily to unify retail infrastructures, experimenting in new revenue optimization models, and monetizing large volumes of behavioural data, which can result in profitable value based offers and a differentiated guest experience.
But omni-channel engagement and a 360 degree view of the customer remains out of reach for many airline retailers with competing and siloed transactional and data technology platforms. Big data is just data unless it can deliver one single point of truth, unless it’s synchronized, omni-present and actionable.
This will be the true retail challenge and will require a much larger price/revenue optimization framework, one that dynamically predicts customer choice, demand, and value to control offers optimized for market conditions, channel, and device/media. It will also require a much deeper understanding of the digital customer experience.
Major digital marketplaces will deepen the retail ecosystem, driving captive demand. We will continue to see a levelling of the travel retail playing field. Commitment to the supplier model may become more prominent, if we consider Google’s recent step up in efforts to serve captive demand to travel suppliers or TripAdvisor’s move to become an extension of the travel brand. It would take little to imagine Amazon or other major digital marketplaces as a core digital ecosystem for travel suppliers.
Yet with the speed of innovation in the digital space accelerating daily, the risk of misalignment in customer engagement increases exponentially. There is no silver bullet and the airline as a business must engender a culture of innovation and experimentation to continuously test and learn in the pursuit of measurable value in this certain digital future.
Our pace will dictate our survival. If, however, our emphasis is to incrementally improve the efficiency of an existing business model, we can only expect to accelerate our demise.
The Datalex team participated in Airline Information's Mega Event 2014 held in New Orleans in November, 2014.
Airline Information recently completed an extensive survey with Boxever of airlines and Online Travel Agencies from around the world on Big Data. The results of this research are now available. You can download the "Who are you? - Using Big Data to Better Understand Travellers" Report here: http://bit.ly/BIgDataStudy
Airlines’ retail infrastructure must enable one single view of the customer if they intend to assiduously address the retail opportunity across a traveller’s journey. An interview of Datalex by Ritesh Gupta, Airline Information Correspondent
How strong are retailing and ancillary merchandising capabilities of an airline?
This is one question that airline distribution, e-commerce and revenue management executives can’t evade today. Airlines have drifted away from rudimentary upsell practices and rather now dwell on passengers’ main objective when coming to an airline website; understanding their intent and offering what they require in the quickest time, with as seamless experience as possible. No doubt, airlines today are savvy enough to drive profitable revenue growth in this arena. And this means there is a way to meet the expectations of a shopper in the multi-channel, multi-device environment.
“In the eyes of the consumer, e-commerce and retail are now one. Airlines need to address this reality as the new battleground for a sustainable and competitive business,” says Ornagh Hoban, VP - Strategy and Marketing at travel e-commerce software specialist Datalex.
As Hoban points out, there is no silver bullet and the airline as a business must engender a culture of innovation and experimentation to continuously test and learn in the pursuit of measurable value.
Here we explore what can impact merchandising initiatives:
Hoban explains airlines are investing heavily to unify their retail infrastructure and exploring new revenue optimization models. “For example, dynamic bundling and pricing within fare families have already driven hundreds of millions to the bottom line for some of our customers,” said Hoban.
It’s just not enough if airlines are solely focusing on keeping fare families simple. Rather such initiatives should complement the profile of the target audience, and enable the segment to easily evaluate the advantage of buying up to the bundle in comparison with buying the items separately.
Hoban adds, “Omni-channel engagement and a 360-view of customer remains out of reach for many airline retailers with competing and silo’d transactional and data technology platforms. Big data is just data unless it can deliver one single point of truth, unless it’s synchronized, omni present and actionable.” She adds, “This will be the true retail challenge and will require a much larger price/ revenue optimisation framework. One which dynamically predicts customer choice, demand and value optimized for market conditions, channel, device/ media.”
Datalex stresses that the time has come when organisations need to intuitively identify customer intent and tailor offer as per the persona of the shopper. The team recommends that airlines should be spot on when it comes to knowing the customer and optimising each interaction across various touchpoints, and focus on real time predictions of implicit interest and relevant content that customer values.
Also, according to specialists, airlines also need to consolidate information to create an online profile on the site, and create single customer view. Importantly, the need of the hour is to work out personalisation by channel, by use case. Airlines are successfully leveraging personalisation for tracking past shopping behavior in order to customize experience on the website. A single view of the customer is reflecting in the manner in which channels/ platforms including the web, email and mobile are being targeted. For instance, in case of email personalisation, a visitor who hasn’t completed a booking is being targeted after closed web session, and the focus is on streamlining path back into booking.
Other than direct channels, airlines also need to continuously strengthen their ties with indirect distribution partners. As Ailsa Brown, senior commercial director, Global Distribution Sales And Services, South Asia & Pacific, Travelport, mentioned recently (during Airline Information’s Loyalty, Ancillary & Co-Brand Conferences - Mega Event Asia-Pacific 2014 in Singapore),”...We need to understand ways to best use the intermediary channels, trying to take direct channel experience and apply into the indirect channel – we need to understand an agent’s workflow. Our goal is to connect how people want to sell with how they want to buy.” On the positive side, one is witnessing increasing acceptance of ATPCO OC and IATA EMD for ancillaries.
For instance, Delta Air Lines, in its Q2 2014 Earnings Call, termed its merchandising initiatives as one of its commercial successes. The airline considers its seat merchandising as a growing revenue stream, increasing by $45 million over last year. In order to achieve this, airlines also need to answer critical questions – if we are going to work out our revenue model around branded fares, then what sort of attributes are relevant to our passengers? Also, there is a need to avoid errors like losing out on up-sell volume if the families feature a substantial price difference.
Optimizing ancillary revenues and fare families demands coordinated changes to multiple interdependent systems. These include inventory systems, point of sale locations, revenue accounting etc. But airlines can’t slow down, as a lot is at stake today.
As Hoban says, the merchandising framework should provide the tools that encapsulate the customer characteristics at all specific journey interactions, which infer preferences, intent, needs and which enable a real-time retail decision.
Datalex recently spoke at the Ancillary Merchandising Conference, a part of Airline Information’s Loyalty, Ancillary & Co-Brand Conferences- Mega Event Worldwide held in New Orleans (18 – 19 November, 2014).
Guest Editorial by Jim Davidson, CEO, Farelogix
Just a few short years ago, merchandising was new to the airline industry. “New Revenue!” was the mantra, and bags were the proverbial low-hanging fruit. Fortunately—from both airline and traveler perspectives—airlines are fast moving beyond this nascent phase and embracing a more strategic view that focuses on giving travelers choice and the best possible travel experience.
Without a doubt, the single biggest driver of new merchandising initiatives is personalization. Competition is no longer based solely on price, but rather on the airline’s ability to compete for traveler business on each and every transaction and across all touch points. 78% of airlines are focused on personalizing what they offer*, whether it be for-sale optional services, earned traveler rewards, premium white-glove service, or real-time “customer recovery” after a trip disruption. The ability to personalize is king. IATA’s New Distribution Capability is yet another example of this momentum. Its stated objectives focused on transforming airlines from commodity sellers to dynamic retailers capable of delivering customized travel experiences and Amazon-like levels of personalization and engagement.
New merchandising technology makes this new level of personalization possible. As such, a growing number of airlines are investing in centralized merchandising solutions that can internally serve the needs of marketing, revenue management, loyalty, and distribution, and externally feed multiple sales channels. This is no small feat for many airlines as they must cross internal “silos” and adopt new technologies, faster and more effectively than their competitors, as the industry races toward personalization and competitive engagement with the customer.
The broad scope of these efforts is reflected in the 7R’s of Merchandising: Relationship, Revenue, Retention/Rewards, Retail, Redemption, Recovery, and Regulatory. Practically speaking, the 7R’s teach us that, if done well, merchandising not only drives revenue, but also builds loyalty, stimulates repeat business, improves rewards programs, creates new retail opportunities, assists with regulatory compliance, and, through real-time recovery, grows traveler trust that even when things occasionally go wrong, the airline will make it right.
Naturally, no airline’s merchandising strategy is alike, and how the airline tackles the 7R’s will vary based on target market, brand identity, culture, and more. But the common thread for all is that merchandising strategy now sits at the heart of the airline–customer relationship and is the driver of today’s competitive landscape.
The world of commoditization is ending. Technology to achieve the 7 R’s and put the airline in control of personalized offers across channels exists today. The competitive playing field is set. Are you ready?
*Airline IT Trends Survey 2012