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