Business Intelligence: A Key Ingredient to ‘Happy Customers’ and Ancillary Revenue
Airline conferences discussing the new world of airline merchandising reveal that airline executives are going through a total ‘out-of-the box re-think’ about what an airline offers to its customers and how it’s products and services are sold. The central question for airlines is how to ensure a “multi-channel strategy with an intense focus on driving higher yield and better volumes. The answer is IATA’s New Distribution Capability (NDC) which is defining the way to reach all distribution channels with versatile offers and differentiated content. It is the enabler that the industry has chosen to evolve airline reservation systems from legacy order taking systems, to flexible air retailing platforms where the customer experience and not the seat is at the heart of the sale.
Most airline execs agree this merchandising revolution can’t come soon enough as part of a sustained profitability drive. Fuel prices will not be low for ever, so now is the time to invest in the processes and technology to make NDC a reality.
Digital technology has created new channels, choices and consumer expectations. Beyond comparing fares, schedules and availability, passengers are becoming more receptive to offers and bundles that meet their individual travel patterns and preferences. Travellers are open to added value and convenience. It’s no longer about buying a seat at the cheapest price from point-to-point, it’s about selecting and paying for a package of services that the traveller values most and is prepared to pay for — from an aisle seat, to faster security lines, priority boarding, in-flight meals, frequent flyer rewards, or in-flight Wi-Fi connectivity. The list will get longer and more sophisticated as the selling of these value items becomes easier.
At a recent ‘Masterclass’ hosted by Farelogix, a leader in the new breed of merchandising platforms, I was fortunate to hear how two of Farelogix’s customers are already using today’s new technologies to advance their merchandising capabilities and better connect with their customers. Air Canada and United Airlines are innovating with Farelogix to put the technology jigsaw pieces in place to rapidly turn their ancillary merchandising ambitions into reality.
Full Service Carriers, like these two airlines, have long recognised the constraints of legacy technology and have embarked on core system transformations to achieve better control of their content to third parties and connect with customers while striving for higher yields and ancillary revenue streams. The one size fits all approach traditionally offered by the Global Distribution Systems (GDS) is no longer adequate.
By using new merchandising technology and communication standards based on XML, airlines like Air Canada and United are transforming themselves into versatile retailers. They can offer the customer a richer travel experience, but also position themselves as providers of value. By doing so, they can go beyond the traditional role of flight providers. They can become retailers of a strong and growing portfolio of high-margin ancillary products and services.
Specifically, IATA’s NDC helps carriers to:
– Benefit from more efficient multi-channel distribution
– Increase ancillary revenues and improve profitability
– Move from stored fares to dynamic offerings
– Regain customer ownership and personalise the customer experience
– Improved upselling and cross-selling to deliver customer convenience and value
– Develop flexible loyalty programmes going beyond mileage rewards.
But even in the NDC-enabled world, the primary job of airlines remains the same. That is to sell their inventory at the right time and at the right price to their customers. This means making sure that their seats and value added ancillaries can be easily booked by the customers and payments collected efficiently.
Seat selling is usually accompanied by rigorous analytics and yield management, something airlines became quite good at early on. But in the new NDC-enabled merchandising world success is dependent on considerable alignment of pricing, distribution channels or other operational and network decisions. Increasingly the sales and distribution teams not only need clear insights into how seats are selling (bookings) but also what is being searched for by travellers. In a fast paced environment, being able to fine tune the distribution mix alongside the other commercial and operating levers is critical. This requires the flexibility to change fare matrix and inventory allocations in time to make a difference based on near real-time search and booking insights.
Ancillaries can have different appeal to different travellers at different times. When securing a place on a flight, meal choices, lounge passes or even arrival collection or car hire services may not be on the ‘must-have’ list, but as the time of the trip gets closer the traveller may well be responsive to associated trip offers. The flexibility to include add-ons and upsells after initial booking is essential in enhancing the customer journey and to achieve sustained business success. Becoming direct re-sellers for partners in the travel ecosystem can also lead to increased revenue streams in such areas as:
– Flight-related services
– Pre-ordered services
– Airport convenience services
– Destination related services
To meet the demands of today’s passengers, airlines need to have insights into their changing habits and preferences. To be competitive they also need to be able to launch new innovative service concepts relatively quickly without the hindrance and constraints of booking systems.
NDC delivers a great XML standards based communication framework for selling airline products. XML analytics in near real-time can decipher and measure inbound and outbound message flow to reveal deep insights into what products are being searched for, how these searches are being met and translated into bookings. Such business intelligence a critically important tool that enables airlines to better understand their customers, the markets they operate in, the performance of their distribution partners, or measure the efficiency of their own internal web services infrastructure. Such understanding yields innovative products, better customer targeting, improved pricing, and superior growth in both revenue and profits.
